"Loss of Use" Interest rate

[Young Curmudgeon]

Nobody on the "correction of defects" board had an opinion, so let's try the DB crowd...

We are correcting some missed minimum distributions for a DB plan and sending in the VCP. The instructions indicate to make missed payments with an additional payment for "loss of use" of the money. Has anyone seen guidance for DB plans on what rate to use in this situation? Is it the plan stated actuarial equivalence, the trust asset rate, or maybe some other "reasonable" fixed income index? Do you think it would be the greater of the three? Is anyone familiar with an internal IRS document that may shed some light?

Thank you for any input!

[SoCalActuary]

good question.

I would go with the plan's post-retirement actuarial equivalence rate, and stop worrying about it.

[Young Curmudgeon]

If only I were king. Sadly I'm not and the finance dept, CFO and many others want to know "why" we choose such a rate. Such is the life of a compliance drone in a big corporation.

[SoCalActuary]

My recommendation to follow the document is simple and easy to understand, justified by the clear plan language.

That does not prevent the lawyers from getting jumpy; it just makes sense.

Good luck with your complex governance environment.

[david rigby]

There is no single "correct" answer, but SoCal's suggestion is a good one.

[Guest Harry O]

Your CFO doesn't have enough to do if he is spending time worrying about what interest rate should be used to true up missed MRDs . . .