Quick 415 Question

[JBones]

A plan has normal retirement age of 65 and an early retirement age of 55. Participant has 10+ YOP. To determine the age 55 maximum 415 $ limit, will the calculation be (a) or (b) below.

(a) 195,000 * age 65 a.p.r. / age 55 a.p.r. * (1+i)^-10

(b) 195,000 * age 62 a.p.r. / age 55 a.p.r. * (1+i)^-7

In the past I have had plans with normal retirement age 55 and the adjustment is from age 62, but the confusion in this case comes from the fact that the normal retirement age is 65.

[SoCalActuary]

Option B is normally the answer. But document language can get in the way, imposing the 415 limit at NRA, then the reductions based on it.

Further, you need the secondary interest calculations, using the 5%/plan rate issue for the monthly benefit, along with the 5.5%/plan rate issues for lump sums.

[JBones]

Option B is normally the answer. But document language can get in the way, imposing the 415 limit at NRA, then the reductions based on it.

Further, you need the secondary interest calculations, using the 5%/plan rate issue for the monthly benefit, along with the 5.5%/plan rate issues for lump sums.

Thanks.

The plan doesn't have language specifically stating that the 415 limit is at NRA, the death benefit is 100% pvab, so there is no preretirement mortality and the plan offers an SLA at both 62 and 55, so most of the variations on the calculation are avoided. For now, I'm only concerned with the age 55 monthly benefit rather than the lump sum (although I'm struggling with that calc lately too), and I made the 2 options generic to avoid the 5%/plan rate issue. In this case, the plan rate of 7% UP84 is the governing assumption.

I think I've got it, so as a follow up, since the plan rates govern the reduction in this case, is it correct that if the plan did not offer a single life annuity commencing at both 55 and 62, the reduction using the plan factors would not apply and the limit would be based only on the 5%/Applicable Mortallity assumptions, providing a larger benefit?