How are people handling this?

[Guest tintree73]

re new relative value regs: We were just told that three of the optional forms of benefit under the pension plan are not actuarially equivalent to the QJSA. We understand it would be good to amend these to be actuarially equivalent by 12/31/2005 - but they are union plans so we really can't make that type of change without bargaining w/ the union. Also, are there any anti-cutback problems with amending the non-actuarilly equivalent optional forms to make them equivalent to the QJSA?

[Guest Harry O]

There are a lot of ways to satisfy the relative value standard under the regs. You should make sure your actuary has explored them all (e.g., using different actuarial assumptions for different participants for bona fide reasons, using the life annuity rather than the QJSA for comparison purposes). If your problem is with a union plan you will probably need to negotiate any changes. If you are improving the value of the non-qualifying optional forms to make them at least 95% of the value of the QJSA, I'm not sure why you would have a cutback issue . . .

[SoCalActuary]

I have operated on the rule that the old options must remain fully enforced on the accrued benefits of existing participants. However, you can change them prospectively to provide the greater of:

A. The accrued benefit after any future accruals on the new conversion factors, or

B. The protected accrued benefit on the old options.

[Guest tintree73]

Thanks for the replies! I should have stated that the OFBs are not actuarily equivalent and the QJSA is not the most beneficial option - which we know is an issue. Accordingly, we were thinking of amending the mortality tables to make the QJSA the most beneficial option (by 12/31/2005).

Then we would do the relative value disclosures (detailed showing differences) and next year (e.g., march/april) we could then modify the OFBs prospectively? Are we missing something? Thanks.

[SoCalActuary]

It all sounds ok. Just be prepared to demonstrate that the new options are at least as valuable as the old ones.