Lump Sums

[Gary]

A plan computes lump sum using the gatt basis.

The plan uses the greater lump sum amount under gatt or a basis that uses 6% for lump sums under 3,500.

If that is the case should the over 3,500 lump sums also mandate that the amount be compared to the 6% basis since it is done for lump sums under 3,500?

Any thoughts?

Gary

[Mike Preston]

Should is a funny word to use in this context. I would certainly use "normally", though. I guess it would depend on whether the IRS approved language that allowed use of GATT rates as the plan's rates for all distributions where the lump sum exceeds $3,500.

By the way, the current threshold is $5,000, not $3,500. It may therefore be that something you are looking at is a bit out of date.

[Guest Harry O]

There is nothing inherently wrong with this approach, assuming the 6% alternative was never extended to lump sums in excess of $3,500 in the past (and then improperly amended out of the plan).