415 COLAs

[Guest ak]

Participant in plan has annual accrued benefit of $140,000 as of 1/1/99. Because of 415 limit max is $130,000. Participant terminates due to retirement in 1999. Plan purchases annuity to fully provide the benefit of $130,000. Assuming plan provided for the 415 COLA increase each year, can annuity provide for such increases, too. That is , can annuity in 2000 be increased to reflect the new $135,000 limit and any future increases up to $140,000?

[Guest jks]

According to § 1.415-5, ". . . the annual benefit payable to a terminated participant, which is otherwise limited by the dollar limitation, may only be increased in accordance with cost-of-living adjustments of the dollar limitation if the plan specifically provides for such post-retirement adjustments."

So, if your plan document provides for c-o-l increases, you can have them.

[Guest]

Seems to me that if you Plan provides for the 415 cola, the annuity contract MUST provide it, otherwise I think it's a 411(d)(6) violation, since you are taking the right to the COLA away.