Lump sum to retirees

[david rigby]

I got this question twice recently. Maybe my easy answer should be re-thought.

With Ford and GM amending their plans to offer a lump sum to current retirees, I wonder about the case of a retiree who choose a J&S, but the spouse is now deceased. If you bought a commercial annuity for this retiree, the price would (I assume) value this as a LA to one person. Suppose the plan pays a LS (417e3) to this retiree, would such LS be based on the remaining LA? Any interpretation that might require the plan to value it as a LS of a J&S benefit?

[SoCalActuary]

I would go with the obvious answer here.

The annuity purchase would guarantee the same benefits already in effect. If a former J&S has devolved into a life annuity, why purchase anything else.

Similarly, no 417 regs require a lump sum equivalent of benefits not provided under the plan.

[AndyH]

David, we do this all the time with terminated plans, and would pay the 417(e) value of whatever annuity was payable, in your example the life annuity.

Same thing as if you annuitized the person, you wouldn't purchase a j&s for a life only recipient.

[david rigby]

No debate about the "obvious" answer. Just wondering if the bureaucracy / regs might look at it differently.