204(h) Notice Required

[Just Me]

We have heard that a 204(h) notice may be required to be distributed by November 16th to notify employees of the reduction in lump sum values that will occur effective 1-1-08 as a result of implementation of the new 417(e) interest and mortality rates under the PPA.

Anybody heard otherwise?

[Just Me]

Does anybody have any opinions on whether this is required or not? What are plan sponsors doing?

[John Feldt ERPA CPC QPA]

Your post is the first I've heard. I hope it's not true. Who is the source of your comment, perhaps they can elaborate?

[SoCalActuary]

Are you sure of a reduction in lump sum values?

There will be a new mortality table. No, I have not seen it yet.

But I understand that it will be a blended male-female combo table

based on the IRS published RP-2000 table with mortality projections.

So the plan will require a change in computed 417e value, but I can't

see it causing a 204(h) notice unless the IRS says so at the time they

publish the new table.

[FAPInJax]

The IRS commented at ASPPA that they are considering this and should have guidance out timely for a 204h notice (if they deem it necessary). It was pointed out to them that they only have 2 weeks <GG>.

[Just Me]

The IRS commented at ASPPA that they are considering this and should have guidance out timely for a 204h notice (if they deem it necessary). It was pointed out to them that they only have 2 weeks <GG>.

Thanks. I'm not sure I can find an exact source of this requirement, but it does make me nervous that the IRS thinks it's uncertain enough that they need to noodle on it.

[Guest nancy_keppelman]

We have been told by actuaries that the new interest rate curve will likely cause significant reductions in the value of lump sums. For that reason, we are preparing clients to issue 204(h) notices if they are going to PPA factors (and not grandfathering GATT factors, which is not necessary under PPA). However, we would REALLY REALLY like the IRS to tell us this is unnecessary, and to do so NOW.

[tymesup]

IIRC, 204(h) notices were not required when PBGC factors changed to GATT. Perhaps they will treat this the same way.

We should probably be telling our clients about this change in any event. Further, some of them will want to inform participants even if it is not required.