covered comp and applicable mortality table

[Draper55]

I was reviewing a benefit calculation for an individual and I had two questions:

1)the plan is a integrated excess plan. for covered comp the calculation showed the

covered comp for someone turning 62 in 2014..every covered comp excess formula I have seen used participant specific covered comp based on year of birth. 401(l) reg is quite difficult to read regarding single integration $ amounts so I am wondering if that is ok or someone doing the calc picked up the wrong amount.

2)the lump sum amount payable as of 2/1/15 uses the 2014 applicable table. I reviewed the IRS guide and it seems that you must use the mortality table relevant to the applicable stability period(i.e., 2015 table in this instance)

[Andy the Actuary]

1. What sayeth the plan document?

2. What sayeth the plan document?

[david rigby]

1. While checking on Andy's question, don't forget that 401(l) is the safe harbor definition of "permitted disparity". Other variations may be permissible, but they just aren't safe harbor.

2. Might be an error, but not necessarily.

[My 2 cents]

Concerning the lump sum calculation, it depends. What is the plan year? What is the stability period. If the stability period containing the annuity start date begins in 2015, then it certainly seems that the lump sum should be based on the 2015 table. What discount rates were used? The lump sum amounts as of early 2015 (if based on late 2014 segment rates and 2015 mortality) are higher than lump sum amounts as of late 2014 (if based on late 2013 segment rates and 2014 mortality), so it is important not to use lump sum rates that are not current. But it all depends on the stability period for that particular plan. Also, is it not the case that if the participant is provided all the proper paperwork before an annuity starting date of (for example) October 1, 2014, then even if the election is not made until now, the annuity starting date would remain as October 1, 2014 until 180 days after the QJSA notice was given?

[Mike Preston]

The ASD isn't established until all acts have been completed, not just acts of the Plan Administrator. Unless you have a retroactive ASD provision that is scrupulously followed.

[Draper55]

thanks for your responses..in this case the stability period is the plan quarter and the lookback is the second

calendar month before the stability period...no problem with the interest rates...I do think that 2015 mortality is required though...Actually from an administrative standpoint there were two other issues here...participant was given the paperwork for 2/1/2015 asd in January 2015 so no 30-180 window and only absolute values were shown..no relative values which why I was engaged to see how much of a loss in value would occur by taking the lump sum versus the subsidized early annuity...

[My 2 cents]

The ASD isn't established until all acts have been completed, not just acts of the Plan Administrator. Unless you have a retroactive ASD provision that is scrupulously followed.

I thought that if you give out the election materials based on a specific ASD and the QJSA notice, both before that ASD, then the ASD holds if the election is made less than 180 days later. No RASD language is needed under those circumstances. Example: Election materials and QJSA notice are given out mid-December 2014 for a 2/1/15 ASD under a plan that does not allow RASDs. The election is returned, signed by the participant in mid-April, and payments based on the 2/1/15 ASD (i.e., no further actuarial adjustments) commence 5/1/15, with a catch-up payment for February, March and April, with appropriate interest. No violation has occurred.