lump sum payout from cash balance plan

[Gary]

A plan provides that a cash balance account ("cba") can be paid out as follows:

cba = 200,000

final salary = 100,000

lump sum is limited to 100,000 an the remaining 100,000 is converted to an equivalent annuity.

My problem is, what about 417(e). It seems either an equivalent pvab under 417(e) need be determined and if it is greater than 200,000, say 250,000, then 100,000 paid in cash and remaining 150,000 converted to an annuity.

Or at least the 200,000 should be converted to an annuity and the 100,000 cash payment should be offset from the gross annuity as an equivalent offset annuity using 417(e). So for eg if 100,000 as an annuity under 417(e) is 10,000 and the 200,000 is 25,000 then the remaining annuity s/b 15,000.

It seems something s/b done to incorporate 417(e). Any thoughts?

[Guest]

I agree and like your 2nd idea better than the first. Once again, your document should lay it out and if it has a determination letter, the language is most likely there. My experience is that the IRS were sticklers when it came to cash balance plans and conversion of benefits provisions especially. Each one we submitted, they looked at those provisions very carefully.