actuarial equivalent of 415 limits

[Guest tomc]

For retirement ages above 65, is the actuarial equivalent of the dollar limit equal the dollar limit multiplied by an immediate annuity at age 65 divided by a deferred annuity from age 65 to the actual retirement age or dollar limit mutiplied by an annuity age 65 divided by immediate annuity at the start date?

[Andy the Actuary]

For retirement ages above 65, is the actuarial equivalent of the dollar limit equal the dollar limit multiplied by an immediate annuity at age 65 divided by a deferred annuity from age 65 to the actual retirement age or dollar limit mutiplied by an annuity age 65 divided by immediate annuity at the start date?

185,000 x a65 x (1+j)^(x-65)/ax unless there is a forfeiture upon death afte 65.

[SoCalActuary]

Add the note that the interest rate used for late adjustment is capped at 5%.

So the formula looks like this:

The lesser of A or B:

A: the plan rules

185,000 x a65 x (1+j)^(x-65)/ax

where j is the plan interest assumption for late retirement and the a65 and ax values are on the plan assumption,

But not greater than

B: statutory adjustment

185,000 x a65(at 5%) x (1.05)^(x-65) / ax(at 5%),

using the mortality table for the limitation year specified by the IRS for 417(e) purposes. Further, note that the statutory adjustment should be done to the month that benefits commence, not to the nearest year.

If a payment governed by 417(e) will be offered, then additional constraints apply.