As I talk to the various actuaries/programmers about when/if they'll have a 417(e) J&S annuity factor program for those plans where the true normal form of benefit is a subsidized 100% J&S benefit, it's apparent that this is a cumbersome programming effort not likely to be completed immediately. What would you think of the following approach for a calendar year plan where there is a 2008 termination and client is pushing hard for a lump sum distribution to be paid immediately (plan allows for it too).

1. Since current plan document in 417(e) section of actuarial equivalence still references 30-year GATT rates for 417(e), pay out on pre-PPA 06 417e rates per plan document (Our plans don't just reference 417(e) in general; there is extra language that ties it to old 30-year treasury bond rates).

2. If ultimately later in 2008 it can be shown that old 417(e) rates used to pay out someone in early 2008 produce slightly higher PVABs than new mortality table & segment rates do, which I think will generally be the case, then I think we've both followed the terms of the plan and met minimum thresholds on lump sums (417(e)). Yes, we may have paid a small amount more than we would otherwise have to but if client is ok with that.....

3. If ultimately later in 2008 the new mortality table (post PPA 06) more than compensates for the higher segments rates so that new 417(e) PVAB is GREATER than old 417(e) PVAB, then we'd have to do an additional true up distribution and also amend the plan to reflect the new rates (the amendment will be needed anyway at some point so that's nothing extra really).

What do you think ? I'm going to try to delay lump sum distributions on subsidized J&S plans until some annuity tables for J&S can be developed, but if push-comes-to-shove have I violated anything going the route above given the plans haven't been amended yet for new 417(e) language and aren't auto-amending plans in the 417e area of the plan doc.

Jay, I am not certain of the complete answer to your questions, but I have some observations:

I understood that we have 411(d)(6) protection on cutbacks for going to the new PPA lump sum basis, but only if we apply it immediately, and only if we do not preserve any other basis as a minimum. I think if you keep the GATT basis for any lump sums, then you would thereafter have to maintain the accrued benefits and GATT lump sum basis (at the time of distributionon) on that benefit as a minimum forever.

Our calculations show that PPA basis produces smaller lump sums for GATT basis for younger ages, but a slight increase for ages over 60 or so

Also, the joint and survivor calcs with the segment rates were a bit tricky, but the programmers will either nail it in a day, or they will never do it. (didnt do the programming myself, but I know it can be done in excel. I think someone here may have even published one?)