50% J&S benefit for young non spouse beneficiary

[Guest crosseyedtester]

For a DB plan which allows a non spouse designated beneficiary, the beneficiary is age 26, the retiree 55. Applying the standard factor for 50% J&S benefit form, the benefit does not seem to get as small as was thought. Is there some kind of adjustment which would need to be made?

[david rigby]

Adjustment? Not sure what you mean. Just use the definition of actuarial equivalent in the plan. Do you want it checked? Post the definition and the factor, and someone will respond.

[Guest Harry O]

You need to make sure that your payments comply with the minimum distribution rules when you have this much of a disparity between the annuitants . . .

[AndyH]

......unless it is the spouse.

(p.s. oops, I missed the non-spouse part.)

[Guest smstls]

The rules mentioned by Harry O are in 401(a)(9)(G). In the example you cited, the nonspouse beneficiary is 29 years younger than the participant. Based on that difference, the greatest J&S that can be offered is 61% according to the regs. So, even if the plan had optional forms of 50%, 75% and 100% you would only be able to offer the 50%.

[Guest crosseyedtester]

Single Life Benefit at 55 = 723.21

50%J&S with spouse (55,55) = 666.64

50%J&S with child (55,26) = 625.90

UP84-2-7@6.5%

[david rigby]

I reproduced your numbers exactly.

[Guest crosseyedtester]

My understanding of 401(a)(9)(G) is:

Age difference: 55 - 26 = 29

Years under age 70 at benefit start date: 70 - 55 = 15

Adjusted age difference in Table: 29 - 15 = 14

Applicable Percentage of 14: 87%

This applies to the form of benefit, not the amount. So the participant may elect any J&S form of benefit available so long as the survivor portion is under 87%.

In this case, 50% J&S is fine, and as per pax's confirmation the numbers are fine.