PVAB death benefit

[Guest guppy]

If my plan pays a death benefit equal to the PVAB, do I have to apply the GATT minimum to calculate the lump sum?

My instinct is "yes", but consider this:

* The plan is already paying more than the lump sum value on a GATT basis of the required REA death benefit (value of 50% survivor benefit)

* I can pay any addtional death benefit I want in addition to the QPSA, like a flat dollar amount

* Why can't I just define my death benefit to be PVAB based on plan equivalence without regard to 417(e) since is already more than the required QPSA value?

Thoughts?

[MGB]

It is my understanding that "present value", as used in the following question was meant to include reference to 417(e) rates.

Gray Book\2003 -- Q&A-26

Other DB Issues: Cashout of preretirement survivor annuity

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QUESTION 26

Other DB Issues: Cashout of preretirement survivor annuity

A plan has calculated a statutory minimum QPSA for a participant of $1,000 monthly, and an actual QPSA of $1,500 monthly, based on plan provisions that are more generous than the statutory minimum. The sponsor wants to permit the surviving spouse to elect a lump sum in lieu of the QPSA.

(a) Can that lump sum payment be less than the present value of $1,000 monthly?

(b) Can the lump sum payment be less than the present value of $1,500 monthly?

RESPONSE

(a) No.

(b) No.

[MGB]

After thinking about this more, I think there are two ways to approach this.

In the Q&A setup above, the person is eligible for an annuity that is defined. They are making an election to take the present value (or it is less than 5000 and is being forced). In that case, 417(e) is invoked.

However, I think it is appropriate to define a pre-retirement death benefit as a lump sum equal to the PV of the accrued benefit and define this PV any way I want (not constrained to 417(e)). As long as the beneficiary is not being offered an annuity, there should be no concern about 417(e). Of course, the lump sum would have to be at least the 417(e) PV of the survivor portion of the QPSA, as defined by the plan.