Lump sum interest rate for 2005

[rcline46]

In 2004 we used 5.07% for calendary year plans for lump sum distributions. This was grandfathered by PFEA.

For 2005 what rate do we use? Do we now use the corporate bond rate, the 5.07% or the 30 year t-Bill for December 04?

That law is STILL confusing me!

[Effen]

I feel like I'm walking into a trap, but the rate for 2005 would be 4.86% (December 2004 30-yr).

interest rates

Not sure why you’re asking the question. This stuff hasn't changed has it?

Obviously, your plan provisions dictate the lookback month (assumed December) and stability period (assumed CY

[Blinky the 3-eyed Fish]

Rcline, your question is not clear as to your purpose. First, PFEA did nothing to change 417(e) for purposes of MINIMUM lump sums. What did change was the calculation of MAXIMUM lump sums where 5.5% replaced the previous use of the 417(e) interest rate. You correctly stated that 2004 had grandfathered issues, but that is now past the wayside. For 2005, 5.5% is the rate to use instead of 417(e).

I won't go into the details of the rest of the calculation in hopes that you have an understanding of them.

[Effen]

I missed the reference to PFEA. Bink's comments are right on target.

[rcline46]

Thanks guys. Sometimes I just need reassurance.

It wasn't the maximum, just run of the mill lump sums were the concern. What with a 2 year law, grandfathered rates, some applying to funding and all that I wanted to be sure the 30 year T-Bill rate (look-back and stability) was solid.

Which of course means the funding problems for plans gets worse cuz you funding at a high rate and paying a low rate.

[Blinky the 3-eyed Fish]

Fund at a lower rate then.

[david rigby]

Contribute more. Use Unfunded Current Liability.

[AndyH]

Check the document. Is it possible that ALL your documents provide for a 1 month lookback with a 1 year stability period? I sure wish mine were all the same.

[rcline46]

Since we control the docs and did the restatements ourselves, you can count on it!

[AndyH]

Conder yourself lucky if you have never taken over a plan!

[Blinky the 3-eyed Fish]

Lucky on one hand, out of business on the other?

[AndyH]

What, you like QSLOBS?

[Blinky the 3-eyed Fish]

Only legitimate ones with over 50 people, thank you very much.

[rcline46]

DB takeovers seem to be a rarity here, and even then its only a 1 year problem cuz things like rates are changed to our way if not already there.