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  #1  
Old 03-29-2016, 04:07 PM
tlally tlally is offline
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Default DB death benefit Calculation

I'm working on a DB plan death calc for a client, and I'm hoping I can get some clarification/guidance. Here are the details.

1. Participant was active at time of death, and spouse will be beneficiary
2. According to the plan the spouse receives a lump sum of 100% of the participant's PVAB based on Plan's A/E. States that this is the only option available to spouse.
3. Plan's A/E is based on UP84 and 7.5%
4. The Plan's AFTAP is approx 70%
5. The A/E lump sum is approx $450K
6. The 417(e) lump sum is approx $700K
7. The Plan allows for unlimited 417(e) lump sums.

I don't believe the spouse can receive the entire $450K amount in a lump sum due to the funded status, but can receive up to 50% of the 417(e) amount in a lump sum. If so, spouse would receive $350K in a lump sum and the remaining $100K converted to an A/E life annuity.

I don't have a lot of confidence in this and would greatly appreciate input. Thanks in advance.
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  #2  
Old 03-29-2016, 05:33 PM
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Carol Marler
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"States that this is the only option available to spouse."
My information is really out of date, but I don't think this would be allowed if the plan in question is subject to ERISA. Is it?
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Old 03-29-2016, 06:09 PM
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Sorry. Meant to say that a Life Annuity is the only optional form (outside of Lump sum).
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Old 03-29-2016, 07:32 PM
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Originally Posted by tlally View Post
Sorry. Meant to say that a Life Annuity is the only optional form (outside of Lump sum).
OK gotcha.
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Old 03-30-2016, 07:10 PM
Helen Sass Helen Sass is offline
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Quote:
Originally Posted by tlally View Post
I'm working on a DB plan death calc for a client, and I'm hoping I can get some clarification/guidance. Here are the details.

1. Participant was active at time of death, and spouse will be beneficiary
2. According to the plan the spouse receives a lump sum of 100% of the participant's PVAB based on Plan's A/E. States that this is the only option available to spouse.
3. Plan's A/E is based on UP84 and 7.5%
4. The Plan's AFTAP is approx 70%
5. The A/E lump sum is approx $450K
6. The 417(e) lump sum is approx $700K
7. The Plan allows for unlimited 417(e) lump sums.

I don't believe the spouse can receive the entire $450K amount in a lump sum due to the funded status, but can receive up to 50% of the 417(e) amount in a lump sum. If so, spouse would receive $350K in a lump sum and the remaining $100K converted to an A/E life annuity.

I don't have a lot of confidence in this and would greatly appreciate input. Thanks in advance.
I assume you are talking about restrictions that apply when the AFTAP is below 80% but over 60%. The AFTAP can't be "approx 70%". It is whatever the actuary certifies it for that year. If it is below 80% then notices were required to be sent to all affected parties describing the restrictions that apply to lump sums over $5,000. Those restrictions would say that any participant, including a beneficiary, is limited to 50% of the lump sum (not to exceed the PV of the maximum benefit guaranteed by the PBGC) and the rest can either be paid in monthly installments or paid later when the AFTAP is certified to exceed 80%.

You can look up the description of monthly installments. It is not necessarily the same as a life annuity.

Also, if the 2016 AFTAP has not yet been certified by Friday (April 1) it may change. If it goes below 60% you have a new set of challenges to deal with.
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Old 03-31-2016, 10:04 AM
tlally tlally is offline
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Thank you Helen. I certified the AFTAP, and yes I realize it's not approximate. None of the numbers I stated are exact. Just for discussion purposes. AFTAP is greater than 60% and less than 80%, and it will stay in that range this year. Notices have been sent to participants. I will proceed with my initial methodology. I'm on an "island" and I was a little uncertain. Thanks again for your help.
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