Death Benefit calculation

[Guest DBStudentAct]

I am doing a death benefit calculation for a 60 year old terminated vested participant.

I am really stuck on this one, it being my first death benefit calc.

Participant terminated 5 years back with 13 YOS. Death benefit as per the plan document is 50% QPSA. Plan's early retirement criteria is attainment of 55 years along with 15 YOS.

My first confusion is whether I should value the QPSA as on the date the participant would have attained Earliest Retirement Age, i.e. in 2 years time(assuming he would have been rehired and completed another 2 YOS) . Should I then apply the Early retirement reduction factors to the Accrued Benefit? The Plan document reads :

"No actuarial adjustment to the Annual Benefit is required for (a) the value of a Qualified Joint and Survivor Annuity, (b) benefits that are not directly related to retirement benefits (such as the qualified disability benefit, pre-retirement death benefits, and post-retirement medical benefits)"

Does this mean that no reduction to the accrued benefit should be made? Or am I getting this all wrong and should just value the entire vested benefit at NRA payable today?

Also should this benefit be determined as at the Date of death(April 10) or now(Feb 11). The interest rates will vary accordingly or is a time lag of less than a year ok?

All help will be much appreciated. TIA.

[Effen]

Nothing personal, but please tell me you are not "responsible" for this calculation. Surely you have someone at your company with some working knowledge of this plan who can help you. If not, I suggest you start looking for a more responsible employer.

What forms of payment are available to beneficiaries? Can they have a lump sum, or must they take an annuity?

If the participant died prior to satisifying the early retirement requirements, then generally, the beneficiary must also wait until the participants NRD to commence payment, but you need to check the document to be sure.

When you say "should I value the benefit" do you mean you are calculating a lump sum?

Benefits are always determined as of the payment date.

[david rigby]

... and don't overlook plan provisions on "small" lump sum payments.

For example, even if the plan has no LS option for the spouse, it might require a LS to spouse (now) if the LS < $5000.

[Guest DBStudentAct]

I am just an analyst working on this death benefit lump sum calculation.

My real query now is whether a TV is ever eligible for an Early Retirement Benefit? I know for sure that if this was an active participant he would have been eligible for an ER.

My whole confusion stems from the definition of QPSA(Death BEnefit) as mentioned in the Plan document:

QUALIFIED PRERETIREMENT SURVIVOR ANNUITY (or QPSA)

The term Qualified Pre-Retirement Survivor Annuity (or QPSA) means a survivor annuity for the life of a deceased Participant's surviving Spouse which is equal to (a) the same benefit that would be payable if the Participant had retired with an immediate Qualified Joint and Survivor Annuity on the day before the Participant's date of death, or (b) if the Participant dies before the Earliest Retirement Age (as defined in Section 8.11), the same benefit that would be payable if the Participant had (1) terminated employment on the date of death, (2) survived to the Earliest Retirement Age, (3) retired with an immediate Qualified Joint and Survivor Annuity at the Earliest Retirement Age, and (4) died on the day after the Earliest Retirement Age.

Does this stand only for active participants and can I work the benefit assuming that this TV would never have been eligible for ER and calculate his benefit as the PV of his NRB?

TIA.

[david rigby]

My real query now is whether a TV is ever eligible for an Early Retirement Benefit?

Yes, per ERISA. IRC 401(a)(14).