GATT Lookback?

[David]

Will someone please check my math. In determining the GATT applicable interest rate to be used for ex. Jan. 1, 1999, we use the Dec. '98 30 Yr rate. Looking back two months (no grandfathering req.), we would be using the Oct. '98 30 Yr rate, and looking back 5 months (garndfathering req.) we would be using the July '98 30 Yr rate. Correct, or have I went back one month too far?

[david rigby]

A plan defines three things:

the "applicable mortality table", and two items related to the interest rate.

1. The stablilty period; month, quarter, or year;

2. The lookback period; the first, second, third, fourth, or fifth month prior to the beginning of the stability period.

Example, if the stability period is the (calendar) plan year, the lookback period is the rate in effect for the month of December, November, October, September, or August prededing the year.

A new (proposed I think) reg. permits the use of averaging; for example, the lookback period could be defined as the average of the rates for the second and third months preceding the stability period.

Note that the 30-year Treasury rate is the average for the month, not the rate in effect at the end of the month. Generally, the rate is not officially announced until about a week after the end of the month, so that using an early lookback period allows the plan sponsor to be able to make lump sum calculations in advance of the actual desired payment date.