abanky Posted September 18, 2007 Posted September 18, 2007 If a plan terminates in 2006 or 2007 and the payouts are in 2008, does the plan have to pay the lump sum greater of Gatt factors or PPA factors or just Gatt Factors or just PPA factors?
Andy the Actuary Posted September 18, 2007 Posted September 18, 2007 My understanding is if Plan was amended at time of termination or before to adopt PPA lump sums as standard basis (superseding GATT), then may pay according to PPA. Else, would have to pay greater of GATT or PPA. This issue was addressed in ASPPA ASAP 06-38 November 15, 2006. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.
ak2ary Posted September 18, 2007 Posted September 18, 2007 If the plan is PBGC covered, they may have a different opinion, they said at an ALI-ABA conference earlier this year that if you terminate in 2007, even if you have a provision in your plan pre-termination that says that 2008 LS's will be on PPA rates, that you cannot recognize that law change for purposes of the plan termination and would have to pay out the GATT amount. This caused a huge contraversy and, while the PBGC has not backed off the position, they do not talk about it in public. Prolly won't matter though, since 2008 lump sums will likely be greater than 2007 lump sums, and you will have to pay the PPA lump sum to keep the plan qualified
John Feldt ERPA CPC QPA Posted September 18, 2007 Posted September 18, 2007 Wow - cool new posting features! ak2ary - are you talking about the recent drop by about 0.33% in the 30-year treasury rate? Are you saying that even with 20% of the corporate bond rate applied you're thinking that the PPA 80/20 rate will produce a larger amount due than the 100% GATT rate would have? Please elaborate, I haven't kept up on this issue as well as I should.
ak2ary Posted September 18, 2007 Posted September 18, 2007 The PPA mortality table is much more expensive than the old table. The PPA table does not phase-in, only the interest rate does. SO in 2008 you get 100% of the more expensive mortality table and 20% of the less expensive interest rates and your result is likely going to be higher
John Feldt ERPA CPC QPA Posted September 18, 2007 Posted September 18, 2007 Ah, yes, okay, and that should vary based on the age of payee as well. Does anyone have a link to the new table (for lump sum payouts after 2007)?
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