dist at 415 limit - today, Jan 4th

[Effen]

If you were going to calculate a lump sum distribution payable today, based on the 415 max. would you use 5.5% (assuming they will retroactively change it back) or the current 417(e) rate (recognize that the PFEA provisions have expired).

This is more of a pole. I'm pretty sure the current law allows me to use the 417(e) limit, but does anyone see any potential problems using it?

I guess I am worried about the potential of a future, retro-active change.

[SoCalActuary]

Thanks for making this poll question.

I believe you could defend a lump sum payment today on the basis of the law now in effect, using the 417(e) interest rate. But do it quickly, because Congress could quickly take it away.

[rcline46]

We are staying with the 5.5% knowing that we can always give more. We are concerned that the GATT rate just might give one a 110% Current Liability problem, and the Corporate Bond Yield Curve might give a smaller benefit.

Of course doing nothing and letting the participant starve to death is always an option.

I vote for all 4 options. Anyone got more?

[Guest saeissler]

I have that very issue on my desk today. I am going to tell the client the number using the 417(e) rate (the client is doing some projections) but tell him that it is subject to change. The IRS wouldn't make a change retroactive on this, do you think?

[JAY21]

I don't see how they could make it retro-active when the law now is back to the 417(e) rates (Due to expiration of the prior bill). I'm doing the 417(e) rates too if any come up before the next pension bill is passed. By the way, do we even know if either/both the Senate or House version of pension reform includes the 5.5% to again be used for 415 limits ? I don't recall hearing anything about this.

[SoCalActuary]

Senate version makes the 5.5% permanent.