I would appreciate your help in checking my calculation of Maximum Target Normal Cost for 2008 at various ages.

Assumptions:
Valuation - segment rates: 5.31 / 5.92 / 6.43%. Pre/Post retirement mortality: None / 2008 combined static mortality table (which is irrelevant if probability of lump sum payment at NRA is 100%).

S417 - applicable rates: 4.85 / 5.02 / 5.09%. Pre/Post retirement mortality: None / 2008 applicable mortality table.

Plan’s A/E: 5%/5%. Pre/Post retirement mortality: None / GAR 94.

S415 maximum lump sum based on: 5.5% & GAR 94 mortality

NRA: 62 / 2008 Max monthly accrual: 1,541.67

Probability of lump sum payment at NRA: 100%.

Lump sum at NRA not to exceed S415 max lump sum.


Age TNC

35 41,700

40 56,900

45 84,400

50 112,500

55 149,900

TNC is rounded to nearest $100.

Let's suppose max lump sum at 62 prevails for sake of argument. I calculate a factor of 145.47

Then, we have the following maximum TNC. 1541.67 x 145.47 divided by

35: 1.0643^27 = 41,690

40: 1.0643^22 = 56,932

45: 1.0592^17 = 84,361

50: 1.0592^12 = 112,468

55: 1.0592^7 = 149,941

I have changed these thanks to Jay (the 21 year old) who pointed out my numeratic senility. They agree with Flosfur's. The point being the other information doesn't enter into play.

Andy, I think you used the correct NRA of 62 for the target normal cost at age 55 but then for earlier ages it appears you switched to using an NRA of 65 for discount purposes. I think if you'll change that you'll match.

I matched flosfur numbers and agree with his numbers.

I believe the 415 lump sum rules now use the Applicable table for mortality.

For 2008 it is optional and therefore needs an amendment to the plan to be taken into account for funding.