Vested lump sum calculations

[FAPInJax]

A peculiar question has arisen with respect to 415 lump sums. My answer was b) but wondered whether others might have the alternative opinion and why one or the other is correct. It has been my belief that the 415 maximum lump sum has nothing to do with vesting.

A participant is 80% vested and his benefit is not limited by 415. However, his lump sum is limited as follows:

Plan actuarial equivalence 100,000

GAR minimum floor 125,000

5.5% 415 lump sum 120,000 (assume the 105% calculation is not an issue)

What lump sum is payable to the participant?

a) 80% of the greater of (100,000 or 125,000) but not to exceed 120,000

100,000

b) 80% of the lesser of (120,000 or the greater of (100,000 or 125,000))

96,000

[Effen]

I think I would say "a", assuming the 120,000 415 limit properly reflects the fact he has < 10 years of service and participation.

I think the 415 limit is a final check. Calc the benefit payable under the plan, then check it against the 415 limit. There is no vesting schedule applied to a 415 limit.

[tymesup]

I agree with a. I don't see anything in 415 that says make all these adjustments for age, service, etc., come up with a number, then apply vesting.

This seems similar to the question of when to apply the 415 limit if you have an accrual fraction. You're allowed to project a large benefit, then pro-rate for service/participation, then limit to 415.