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7 Cards in this Set
- Front
- Back
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The lump sum value of an accrued benefit cannot be less than |
the value determined using the applicable interest rate and the applicable mortality table (see IRC section 417(e)(3)). |
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The applicable interest rate is re-determined for each |
stability period.
A stability period can be one calendar month, one plan quarter, one calendar quarter, one plan year, or one calendar year. |
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The look-back period. |
The applicable interest rate is the rate in effect for any of the five full calendar months preceding the beginning of the stability period
Note that the look-back month for purposes of IRC section 417(e)(3) can be different from the month used for determining the minimum required contribution under IRC section 430. The interest rate used to determine the minimum lump sum value can use an average of any two or more of the interest rates from these 5 months. |
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If the look-back and/or stability period is changed by plan amendment, the lump sum value under the old look-back month definition (or stability period definition) must be protected for |
one year from the effective date of the amendment (or the adoption date, if later) in order to avoid a violation of the anti-cutback rules of IRC section 411(d)(6). |
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The present value under IRC section 417(e)(3) must be valued using the same method as is used under the plan’s |
actuarial equivalence (see IRS regulation 1.417(e)-1(d)(1)). So, if the plan uses pre retirement interest only, then use interest only for the IRC section 417(e)(3) lump sum. Under PPA, however, for years after 2007, it is not clear whether this will still be the case (the IRS position seems to be that pre-retirement mortality must be used, although regulations have not been issued). |
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Applicable interest rate |
- For years prior to 2008, the applicable interest rate was the 30-year Treasury rate.
- For years after 2007, the applicable interest rate is based upon the segment rates of IRC section 430(h)(2). These are determined without regard to any 24-month averaging for purposes of IRC section 417(e)(3).
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Applicable mortality table |
- For years prior to 2008, the applicable mortality table was the 1994 GAR table.
- For 2008 and later, the applicable mortality table is the table published in regulations, and is updated each year.
- Mortality is based upon a 50-50 blend of the male and female mortality rates. o The mortality table in effect for purposes of a lump sum distribution is the table in effect as of the first day of the stability period (the table for the calendar year in which the stability period begins). |
