Is a lump sum distribution to a NHCE subject to recapture if plan terminates? Also, what are the current PBGC guaranteed early retirement monthly maximums?

[Guest Carol the Writer]

I am trying to advise a friend of mine. Her husband was a middle manager (NHCE) in a large company. They are both 57 years old. Two years ago the company's pension plan was converted to a cash balance plan.

His position was eliminated, but he is due a $496,000 lump sum or a $3,300 J and 100% SS immediate annuity.

I searched the open annuity marketplace and could not find a better deal for him. There are two questions that I could think of, though. First, if he took the LSD, rolled it over and took the hit in an annuity purchase, would any of the LSD be subject to recapture by the PBGC if the plan terminated. How long is this exposure out there? Second, what is the maximum monthly J and 100% SS monthly pension that the PBGC would guarantee at age 57? He did receive significant salary increases in his final two years of employment. The question is how to minimize his exposure.

Any thoughts would be appreciated. Thanks in advance.

[AndyH]

No, there is no recapture provision for NHCEs, only (in limited cases) HCEs. The answer might be different if fraud were involved, however.

Here is a link to the limits. In addition to the dollar amounts, someone should check about potential changes to the guaranteed amounts for plan amendments.

http://pbgc.gov/benefits.htm

[Guest Carol the Writer]

Thank you very much.