Earning a Future Benefit after Being Paid the 415 Lump Sum Limit

[Pension RC]

Earlier this year, the sole-participant of a DB plan was paid out his 415 lump sum limit of about $2.3M at age 64.5. At the time, he already had 10 years of service and participation. His limit was based upon his average comp of $200,000, which was slightly lower than the $205,000 dollar limit. He is asking if there is any way for him to accrue an additional benefit. At first, I thought that he could do so by earning enough in 2013 - 2015 that his average comp would increase to $250,000. My thinking was that, since the dollar limit will probably increase above $205,000 (and, additionally, it is actuarially increased after age 65), his 2016 dollar limit would probably be above $250,000. However, it looks like, once he generates a new higher 415 limit by 2016, it will be completely offset by his 2013 payout of $2.3M actuarially increased to 2016. Am I thinking about this correctly?

Any help would be appreciated!

[Andy the Actuary]

Analysis sounds right. Normally this works to advantage in small plans because participant gets paid maximum lump sum, continues to participate in the plan (to satisfy 401(a)(26)), earns a benefit under the formula, but then has the formula benefit completely offset by the a.e. of the benefit paid, and no further benefits are payable.

[Calavera]

Depends on how agressive you want to be in your thinking. The section 415 must be satisfied as of each of the annuity starting dates, but the regulations for multiple annuity starting dates is not available. So any "reasonable" method that you can defend should work. See this article for more details.

http://www.soa.org/library/newsletters/pension-section-news/2006/january/psn-2006-iss60-maclennan.aspx

[GMK]

After seeing the name for a time, it's good to see that it's you, Manny. "Grim" is great.

[ubermax]

Depends on how agressive you want to be in your thinking. The section 415 must be satisfied as of each of the annuity starting dates, but the regulations for multiple annuity starting dates is not available. So any "reasonable" method that you can defend should work. See this article for more details.

http://www.soa.org/library/newsletters/pension-section-news/2006/january/psn-2006-iss60-maclennan.aspx

this paper was good & there was also one by Sohn & Atteridg from the '91 Pension Section News - and additionally there supposedly was one by Larry Sher that was in the '82 Transcript of the EA Meeting.

I'd be interested in getting a copy of the Sher paper if anyone has it or can direct me to a site - in the meantime I've left my name with the Conference and they're checking their archives .

Sorry that I couldn't add any thoughts for the OP but Calavera opened the door for this query .

[Calavera]

After seeing the name for a time, it's good to see that it's you, Manny. "Grim" is great.

Indeed. It took me just 6+ years to upload my photo. Were kind of busy I guess.