Installment Payment Optional Form

[Guest careful1]

I am calculating the benefit options for a plan that offers a ten year installment payment option. The normal form is a life annuity. I see that a term certain annuity is subject to 417(e). How do I calculate that installment payment? BTW, the plan has switched to PPA for 417(e). Do I amortize the 417(e) lump sum value of the life annuity over the 10 year certain period using the first two segment rates?

[David MacLennan]

Yes. This would be a more complex question if it were a cash balance plan . . .

I assume you are talking about an immediately commencing 10-yr annuity.

Has the plan actually been amended for PPA 417(e)? If not, there may be some grandfather issues.

[Andy the Actuary]

I am calculating the benefit options for a plan that offers a ten year installment payment option. The normal form is a life annuity. How do I calculate that installment payment? BTW, the plan has switched to PPA for 417(e).

What does the plan say? Normally, the plan specifies and actuarial equivalance basis for non-lump sums.

[SoCalActuary]

I am calculating the benefit options for a plan that offers a ten year installment payment option. The normal form is a life annuity. How do I calculate that installment payment? BTW, the plan has switched to PPA for 417(e).

What does the plan say? Normally, the plan specifies and actuarial equivalance basis for non-lump sums.

But some documents simply punt to the 417(e) rates when the plan benefit form of payment requires it. They override the regular AE rates, and use only the 417(e).

[Penman2006]

Yes, it's immediately commencing, and yes the plan has been amended to the PPA 417(e) basis. Thanks for your help.