I have a plan that allows participants to start receiving monthly benefits upon attainment of normal retirement age (age 65) while remaining employed on a full time basis. I was hoping someone can help me with the calculation of the subsequent accrued benefit.

Plan year = 3/1 - 2/28
Actuarial Equivalence = UP84 at 5.5% (pre and post retirement mortality)

John reached NR on 6/1/2004 and began receiving monthly benefits in the form of a life annuity in the amount of $1,684 per month. I need to calculate John's accrued benefit as of 3/1/2005.

The document says that "At the close of each Plan Year prior to the Participant's Actual Retirement Date, a Participant shall be entitled to a retirement benefit equal to the greater of (1) the Actuarial Equivalent of the monthly retirement benefit such participant was entitled to at the close of the prior Plan Year, or (2) the Participant's Accrued Benefit determined at the close of the Plan Year. The monthly retirement benefit shall be offset by the actuarial value of the total benefit distributions made by the close of the Plan Year.

How do I calculate the "actuarial value" of the benefits John has received as of 3/1/2005?

Please use actual numbers.

Thanks!

You should probably start with the Plan's actuary. They should be able to walk you through this calculation.

Harold, do you know how to convert a lump sum amount to an annuity? If so, and it depends on a consistent methodology used, well then you have a new lump sum to convert every month the annuity is taken valued at the date in consideration. The offset is the sum of them.

No time for actual numbers, but a quick example is if the guy is 65 11/12 when he took a monthly payment of X and now he is 66. Convert X to an annuity like this:

X * (1.055) ^ (1/12) / (APR of UP 84 at age 66) = annuity value to subtract

Blinky,
Do I need to take the mortality assumption into account? So in your example, the annuity value I should subtract from the age 66 benefit for payment of the age 65 11/12 benefit is:

X * (1.055)^(1/12) * (lx at 65 11/12) / (lx at 66) / (APR at 66) = annuity value to subtract

Yes, I didn't notice until you pointed it out you have pre-retirement mortality. Of course then for simplicity, you can use D(65 11/12)/D(66) instead of (1.055)^(1/12) * (lx at 65 11/12) / (lx at 66) or you could just use X * D(65 11/12)/N12(66)