A Plan says that for payment of a lump sum the lump sum shall be determined as follows:

Section 5.1

"The equivalent lump sum value of an annuity shall be determined by applying the factors published by the PBGC for distributions in the calendar month preceding the Ret. date."


Section 1.2

The Plan def. of Act. Equiv. is 8% and 83GAM table.

A person retires on 5/1/99.
What assumptions (w/r/t interest and mortality) would you use to value the lump sum?

Gary

Just an opinion, since that language is pretty sparse (that is the nicest word I could think of):

Use the UP84 table and the PBGC interest rates for April 1999. Caveat, I think you might have a problem with using April 1999 if the lump sum was actually paid anytime other than May 1999.

Second Caveat: If the lump sum is not yet paid, then you likely have a minimum under GATT to worry about, even if not yet adopted.

Pax,
I think you got my point. The lump sum was paid out in April 1999. You hit on my real question. That being what mortality table to use. So if a plan says "factors published by the PBGC ..." it not only applies to a set of interest rates, but it also applies to a mortality table, namely the UP 84 Table (Table 3 in ERISA 4044)? And (playing devil's advocate) why couldn't it be the Table 1 in the Appendix to ERISA 4044 (which uses the 83 GAM table)?

Gary