Cost of living on the annutiy purchase rate

[Guest shronesz]

I am looking for ocde and/or regs to justify the use of a cola on the maturity value when calculating the PV of the benefit. We are looking to fund the maximum contribution possible using the least amount of compensation.

Thanks, Sue

[david rigby]

Uh, more information please. Or excuse my ignorance.

The actuary should value the actual terms of the plan document, within reason for trivial items. Does the plan include a cola?

BTW, how many participants in this plan?

[Guest shronesz]

Pax,

The plaln document is in the works and will include a cola if needed. This is a one participant plan.

[david rigby]

A one-person plan has tremendous flexibility. Some documents are amended every December 31 to accomodate the plan sponsor's financial situation. (Just one reason that it pays to use the last day of the plan year as the valuation date in such circumstances.) But careful design by the actuary can serve to minimze this need, although probably not eliminate it.

[Guest dsyrett]

You can have a COLA but you are still limited to the 415b rules:

Lesser of:

projected 100% high 3 pay (future annual salary increase assumption permitted)

$160,000, etc.

Your projected benefit with the COLA would have to be limited to no greater the above on an actuarial equivalence basis.

For example a $160,000 benefit with a COLA would not be permitted.