415 Lump Sum Basic

[retbenser]

I know this topic has been discussed before.

Given:

AB = $10,000

415 comp Limit = $11,000

Age 62

Plan Actuarial Equivalent = 5% and 2013Table

AE APR = 156.04

5.5% 2013Table APR = 149.07

417(e) APR = 176.3

(1) 415 maximum LS = $11,000 x min(156.04, 149.07, 176.3) = $1,639,770

(2) $10,000 x 156.04 = $1,560,400

(3) $10,000 x 176.03 = $1,760,300

Final max LS = min( $1,639,770, max( $1,560,400, $1,760,300 ) = $1,639,770

Is the procedure correct? Thanks for all responses.

[Andy the Actuary]

Lump sum = $10,000 x Max (156.04,176.30) = 1,763,000

Annuity Conversion = 1,763,000 / Min (149.07, 156.04, , 176.30) = 11,826.66

Since Comp3 = 11,000

Must reduce benefit 10,000 x 11,000 / 11,826.66 = 9,301.02

Lump sum = 9,301.02 x Max (156.04, 176.30) = 1,639,770 Check!

You've addressed using the traditional way of reducing the factors; the approach outlined tends to follow the regs. 6:1 1/2 doz of other

In short, give the worst of all worlds!

[Calavera]

Annuity Conversion = 1,763,000 / Min (149.07, 156.04, , 176.30) = 11,826.66

Should be:

Annuity Conversion = 1,763,000 / Min (149.07, 156.04, 176.30 * 1.05) = 11,826.66

176.30 * 1.05 part is eliminated for small plans.

[Hojo]

Annuity Conversion = 1,763,000 / Min (149.07, 156.04, , 176.30) = 11,826.66

Should be:

Annuity Conversion = 1,763,000 / Min (149.07, 156.04, 176.30 * 1.05) = 11,826.66

176.30 * 1.05 part is eliminated for small plans and hasn't been applicable for a few years now...

IFYP

[ubermax]

didn't realize that the 1.05 * (applicable factors) hasn't been applicable for small plans for awhile - could someone provide a cite for this ?

[Andy the Actuary]

1.05 eliminated for small plans by WRERA.

SEC. 122. MODIFICATION OF INTEREST RATE ASSUMPTION REQUIRED
WITH RESPECT TO CERTAIN SMALL EMPLOYER PLANS.

(a) IN GENERAL.—Subparagraph (E) of section 415(b)(2) of the 1986 Code (relating to limitation on certain assumptions) is
amended by adding at the end the following new clause: ‘‘(vi) In the case of a plan maintained by an eligible employer (as defined in section 408(p)(2)©(i)), clause (ii) shall be applied without regard to subclause (II) thereof.’’.

(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to years beginning after December 31, 2008.

[ubermax]

great !! thanks Andy .