415 Limitations

[Guest Scott0609]

I'm reading Example 5 of §1.415(b)-1©(6): A plan provides an option to receive a 100% QJSA with a 10-year certain feature. Assume the following: The annual benefit payable as a 100% QJSA with a 10-year certain = $100,000. The SLA factor = 11.7941; the 10 CC factor = 12.3204; the 100% QJSA (w/o a certain feature) = 14.3569; 100% QJSA with a 10-year certain = 14.3954. FYI, the annuity factors have been computed at 5% interest and GAR94 mortality.

I think what's called for (and for which I'd like someone to confirm) is that the SLA equivalent = 100,000 x (12.3204 / 11.7941) = 104,462. Although configured a little differently, I believe that result is consistent with the "old" 415 regulations.

If I were left on my own, I would have concluded that the 100% QJSA option factor = 11.7941 / 14.3569 = 0.8215. Consequently, the "notional" SLA equivalent = 100,000 / 0.8215 = 121,729. So, the QJSA portion that is not charged against the 415 limitation = 21,729. Next, I would have determined the SLA equivalent based on the 100% QJSA with a 10-year certain option factor (which is equal to 11.7941 / 14.3954 = 0.8193). Hence, the SLA equivalent based on the form of payment under the plan is 100,000 / 0.8193 = 122,055. Therefore, final adjusted SLA = 122,055 - 21,729 = 100,326. Thoughts anyone?

[eeyore]

I believe what you suggest at first ($104,462) is correct. This is the same approach to the issue that they've always taken.