415 lump sum

[Mister Met]

This is always confusing to me

Say participant has annual annuity (limited by 415b) of $251,000. Participant is age 72.

Plan calls for lump sum to be the greater lump sum of PPA interest/mortality and UP84/5%

Definition of actuarial equivalence otherwise is UP84/5%

Lump sum factor using PPA interest/mortality is 9.80 (effective interest rate is about 4.7%)

Lump sum factor using UP84/5% is 7.90

Lump sum factor using 5.5%/PPA mortality is 9.35

Is the lump sum $251,000 x 9.35 = $2,346,000?

[Andy the Actuary]

See post #13

http://benefitslink.com/boards/index.php?s...aximum&st=0

There is some question (see subsequent posts) whether post #13 step 7 should also include (for small plans) worse of 417(e) as well. In any event, it looks like 7.90 is your man.

Also, wouldn't 415 increase be constricted to high 3, which would be less than $251,000?

I sense that some large percentage of earth's actuaries (I lead the list) have been confused with how 415(b) applies ever since the '98 IRS "clarification."