Another PPA anomaly

[FAPInJax]

Can the effective rate be outside the range of the interest segments??

For example, a plan has a 5%, 5% Applicable actuarial equivalence and the sole participant is 62 retiring at 65. There is no effective rate within the range (assuming a 1/1/2009 valuation) of interest segments that will work.

Another PPA anomaly???

[Guest AP914]

Can the effective rate be outside the range of the interest segments??

For example, a plan has a 5%, 5% Applicable actuarial equivalence and the sole participant is 62 retiring at 65. There is no effective rate within the range (assuming a 1/1/2009 valuation) of interest segments that will work.

Another PPA anomaly???

I would think the 5% would be used to value the benefit at 65 but you still have to use the segmented rates to discount from 65 to 62 (assuming a lump sum is paid at 65 and not an annuity). Since payment is within 5 years the first segment only would be used for discounting. Since this is the only participant in the plan the effective rate would just be the first segment rate.