415(b) Increases and Governmental Plan

[John314]

1.415(b)-1(c)(5)  states that an automatic benefit increase can essentially be disregarded when applying the 415 dollar limit to a benefit if 1) the benefit is paid in a form to which section 417(e)(3) does not apply, 2) the plan satisfies other requirements.

I have a plan that provides for an accelerated form of payment (a Social Security Level Income Option), but otherwise satisfies all of the requirements of the above section. The catch is that this is a governmental plan that is exempt from the requirements of 417(e). Does a form of payment that would otherwise be subject to 417(e)(3) no longer fail the above exception by virtue of being paid from a governmental plan?

[John314]

I was able to find the following in the background to the final 2007 Section 415 regs:

"One commentator asked whether the rules regarding adjustments for forms of benefit that are subject to the minimum present value standards of section 417(e)(3) apply to plans that are not subject to the requirements of section 417. Section 415(b)(2)(E) applies based on the form of the benefit, and not the status of the plan, and therefore the final regulations provide that these rules also apply to plans that are not subject to the requirements of section 417."