Can a Grandfathered Benefit Trump the QJSA Most-Valuable Rule?

[Übernerd]

The general rule is that the QJSA must be at least as valuable as any other optional form of payment. The only exception is when the 417(e) factors, standing alone, cause a lump-sum to be more valuable. We've come across a plan that grandfathers a lump-sum for all pre-89 service. It's more valuable than the QJSA for the same service, but not because of 417(e)--it's because the lump sum is calculated with an early-retirement reduction factor that is twice as favorable as the ERF for any annuity form. I guess whoever drafted it took the position that the most-valuable rule simply doesn't apply to pre-89 accruals.

It looks like the most valuable rule first appears expressly in the 1988 batch of regulations that added it to Q&A 16 of § 1.401(a)-20 and to the definition of "QJSA" in § 1.401(a)-11(b)(ii). Those regs were generally effective for plan years beginning on/after January 1, 1989. To my ear, the Preamble to those regs makes the most-valuable rule sound like a continuation of a previous IRS position, and of course the statutory definition hadn't changed after REA. Has anyone heard of an option to grandfather pre-89 benefits against application of the most-valuable rule?

Cheers,

Ü