And yet another relative value question.

[Guest GMP]

We've acquired a plan that only provides for lump sums prior to NRD - all other benefits are payable only at NRD as monthly annuities. As a consequence, there is no way to show an immediate QJSA. However, the 417 (a)(3) regs seem to be fairly clear about requiring this. The only thing that seems to make sense (which could really get me into trouble) is to show a deferred monthly annuity payable at NRD along with its PVAB calculated using 417(e) rates for comparison with the lump sum. Any thoughts?

[zimbo]

I think the plan is out of compliance with QJSA rules. You cannot offer any benefit (except for small lump sums under $5,000) without offering the QJSA as well. So offering immediately lump sums versus QJSA only at NRA does not comply.

I would therefore show the immediate QJSA for relative value purposes and then change the plan as well.

[Andy the Actuary]

We've acquired a plan that only provides for lump sums prior to NRD - all other benefits are payable only at NRD as monthly annuities. As a consequence, there is no way to show an immediate QJSA. However, the 417 (a)(3) regs seem to be fairly clear about requiring this. The only thing that seems to make sense (which could really get me into trouble) is to show a deferred monthly annuity payable at NRD along with its PVAB calculated using 417(e) rates for comparison with the lump sum. Any thoughts?

Whether or not the Plan is silent (most are), the Plan in operation must provide an immediate QJ&S if it provides for a volutary election to take a lump sum in excess of the cashout limit ($5,000). So, such immediate annuity has a PV which can be compared to the lump sum.

[John Feldt ERPA CPC QPA]

In order to get the lump sum (over $5000), the participant must waive an annuity. Remember, the waiver is only valid for 180 days (that used to be 90 days, right?). Thus, the annuity start date must be within that 180 day period for the waiver to be valid. You cannot waive an annuity that is payable later than 180 days from the date of the annuity notice is provided, it would not constitute a valid waiver.

Thus, an annuity payable at NRD can only be waived (in favor of a lump sum payment instead) during the 180 days preceding NRD, unless an annuity is payable earlier than NRD.

[Guest GMP]

Thanks for the feedback.