PFEA and Lump Sums Under RR 98-1

[Guest merlin]

How is the PFEA interest rate change applied to lump sums calculated under Q 14 of RR 98-1? Is the wearaway amount considered to be calc'd using the interest rate in effect at 12/31/04? Is the wearaway amount protected after 12/31/04?

What if the plan uses the "sum of" method? Is the A portion protected? What about the B? Are amounts accrued after 12/31/04 now a "B' " portion that is calc'd under PFEA?

[Blinky the 3-eyed Fish]

The old-law benefits are those that do not take into account the GATT changes and are determined based on AE in effect on 12/7/94. PFEA modified the GATT changes for 415 purposes by replacing (temporarily at this point) the 417(e) rate with 5.5%. But since the old-law benefits don't factor in the GATT changes, they certainly aren't affected by PFEA.

The "B" amounts or new law benefits are affected by the PFEA changes.

Now the real applications of old and new-law benefits in Rev. Rul. 98-1 are very limited when it comes to determining maximum 415 limits. I think you will find that unless a person was at a compensation limit, the EGTRRA increases clearly provide higher 415 amounts than anything derived from 98-1 methodology, so I am curious as to the details of your situation.

What about the B? Are amounts accrued after 12/31/04 now a "B' " portion that is calc'd under PFEA?

The last date possible for old-law benefits being earned was the last day of the plan year ending in 2000, which means new-law benefits would beginning accruing then, so I am not sure what you mean by this question.

[Guest merlin]

You're probably right that the EGTRRA increases render the question moot? No specific case at hand, just one of those random thoughts that flash to mind, and then die of loneliness.