Reading The Tea Leaves

[JAY21]

Does anyone know, or care to venture a guess, as to what the "phase-in" over 4-5 years might mean for replacing the 417(e) rate for lump sum purposes under the Senate & House Bills ? I keep seeing a snyopsis of the two currently passed bills (House, Senate) stating lump sum rates a yield-curve "phased-in" over 4 or 5 years and wonder if it's likely to similar to the Gatt rate phase-in where you had an option to adopt it within a window period of a few years, or likely to be a mathematical phase-in where the impact is slowly phased in (e.g., 20% the first year, 40% second year....) ? Any thoughts or guesses ? I have a client's considering a plan term and the plan's somewhat under funded so I'm wondering if there's likely to be any relief on the lump sum values in the next couple of years (of course if it only applies to new accruals it won't help much).

[SoCalActuary]

My reading of the proposal is this:

Suppose your 417e settlement rate was $140 under 30 yr rules, and your plan rate was lower (say $130).

Suppose the phased yield curve settlement rate was $135. If the yield curve did not change over 5 years,

you would start at $140 before the phase-in, then 139 with a 5 yr phase-in, then 138 in the second yr, and so forth until the settlement rate is 135 in the 5th year.

[david rigby]

... and other phase-in arrangements are possible.