In valuations using the 100% LS option, I've been calculating the FT as follows:

A) PVAB at NRA using the plan rates of 5.5% pre/post and GAR 94 post ret only
B) PVAB at NRA using 430 rates and Applicable Mortality Table for the valuaton year
(i.e. if NRA is 5 years from val date, PVAB at NRA is calculated using the second segment rate for 15 years and 3rd segment rate thereafter)


Greater of A or B is then discounted to the valuation date using the appropriate interest rate (1st segment rate from the above example)

Now, throw in that the LS in A or B has to be limited to the 415 max LS. Now, I have the min {415 max LS at NRA, max (A,B)}, which is then discounted as above.

Seems right so far and I've matched the results from running ProVal with these calculations.

Now, however, I'm not matching the Proval results and I wonder if it is just coincidence that I did before (i.e the 415 Max LS I was calculating was higher than A and B above), if I have something set up in ProVal incorrectly or if I'm just doing it wrong in my spreadsheet.

Here is my confusion:

For a small plan we can use 5.5% and the Applicable Mortality Table to get the Max 415 LS, right?

Now for calculating the PVAB at NRA, I have been using the AB (which is the lesser of the AB by plan formula or 415 max LO annuity) * the annuity factor at NRA. This is the number I have compared to the 415 Max LS which is calculated by the Max 415 LO annuity * Min (5.5%/Applicable mortality factor, Plan rates factor). Now, I'm wondering if the LS I should be calculating in A and B above using the plan AB withOUT limiting it ot the 415 max LO annuity.

They way I've been doing it seems to be using the 415 limits twice.

I think part of the reason 2008 matched fine is because the mortality table used for 415 max LS = plan mortality. Probably, the 2009 checks I have done did not get to the 415 limits and any error wouldn't have shown up, yet.

Post a real number example.

Think there is a further wrinkle on the 415 max lump sum, in that it is the lesser of your plan actuarial equivalence assumptions (w/o 417 minimum taken into account) and 415/417 mort @ 5.5%. What are your plan's assumptions in the document?

DoH 01/01/1980
DoP 01/01/2005

Salary always > $250,000
NRA 62
Benefit formula 20% * Years of Participation
Final Average three salary
Plan LS Actuarial Equivalence - 5.5% GAR 94
415 Max LS AE - 5.5% 417(e) Applicable Mortality

01/01/2009 415 Max $ Benefit = 195,000

Formula benefit = 225,000 * 20% * 4 = 180,000
415 Max $ = 195,000 * .40 = 78,000

Plan LS AE age 62 APR 12.1225594 (APR using 430 rates and 417e table is less than this)
415 Max LS AE age 62 APR 12.33754824

415 Max LS:

Option 1:
Min (78,000 * 12.1225594 = 945,560, 78,000 * 12.33754824 = 962,329) = 945,560

Option 2:
Min (78,000 * 12.33754824 = 962,329, 180,000 * 12.225594 = 2,182,061) = 962,329

It's option 3 (I didn't check your APR's so I am just going with those numbers):

Compute plan lump sum using plan benefit and plan AE (you already stated that 430 rates will yield a lower LS, so I went with that) - $180,000 * 12.1225594 = $2,182,061

Compare this to 415 LS limit which is the lesser of that computed using 5.5% & applicable mortality or plan's AE: $962,329 or $945,560 = $945,560

Now take the lesser of $2,182,061 or $945,560 = $945,560.

Same concept as laid out in Rev. Rul. 98-1.

Thanks, I think I just have ProVal set up incorrectly and it was hidden last year since the 415 mortality table was the same as my Plan AE table.