92 year old family member receiving 415 limit as a J&S

[tymesup]

A 92 year old family member is currently receiving a J&S annuity at his 415 limit. While he's alive, the plan is underfunded. After he dies, the plan will be close to 100% funded. It would be nice to have some cost certainty.

We asked insurance companies if they'd sell us an annuity. They're not interested because of his advanced age.

I don't think we can pay him a lump sum because he'd lose the value of the survivor benefit (assuming we ignore the multiple annuity starting date issue).

Any ideas would be greatly appreciated.

[Andy the Actuary]

A 92 year old family member is currently receiving a J&S annuity at his 415 limit. While he's alive, the plan is underfunded. After he dies, the plan will be close to 100% funded. It would be nice to have some cost certainty.

We asked insurance companies if they'd sell us an annuity. They're not interested because of his advanced age.

I don't think we can pay him a lump sum because he'd lose the value of the survivor benefit (assuming we ignore the multiple annuity starting date issue).

Any ideas would be greatly appreciated.

It even a bit more complicated: Implicit in your analysis is that the participant will predecease the beneficiary, which may not be the case. If this occurs, the Plan will be "close to" (likely well over) 100% funded as well. Also, you would need to look into whether or not 415 would permit purchasing an annuity for the surviving spouse in the even life plays as you would think. It is surprising that insurers won't touch this because everything has its price. The issue would be would your client be able to deduct fully the contribution required to fund up to purchase the annuity? The other question to be asked is what happens after there is no one receiving payment? The client would terminate the Plan and the excess would revert back to the Plan Sponsor and then we know that the IRS is the only happy camper.

[tymesup]

Thanks, Andy.

The 88 year old beneficiary is also a retiree, with him as the beneficiary. Her benefit is also large. If either dies, the plan is close to 100% funded.

I imagine if we waved a check for some arbitrarily large number, we could interest some insurers, but then the plan is taking a bath.

The plan is large enough that the deduction limit is not an issue (thank you PPA).

The current owners might want to keep the plan around if we can get some cost certainty. At the moment, we don't need know if we need more money or less money in the plan.

[david rigby]

Is this person one of the Top 25?

[tymesup]

Is this person one of the Top 25?

Yes