| FAQ 469: 415 Limit - How is the dollar limit reduction being calculated? |
For this 2020 valuation, why is the projected benefit for this participant whose retirement age is 60 being limited to $15,624.44? I would expect their benefit to be $16,712.03.
The system default uses the 415 $ limit based on age last birthday at the earlier of Date NRA Attained and Normal Retirement date. NRD is the Anniversary Nearest attainment of 60 & 5 and the participant's birthday is in the first half of the year, so he is being limited to the age 59 415 $ limit. The 415 $ limit payable before age 62 is the lesser of the age 62 415 $ limit adjusted to age 59 using (a) Plan actuarial equivalence assumptions or (b) statutory assumptions. In your plan's case, the statutory assumptions produce the lesser benefit. In this case: (161.307/171.933) X (1/1.05)^3 X 19,166.67 = 15,624.50.
The system has several options to allow the user to select to adjust the dollar limit. The options are selected in Plan Specifications in the Assumptions \ MAXBNADJ screen with the Age Reduction field.
1) Age Last - this is the system default
2) Completed Months - the system will adjust the dollar limit based on age on the calculation date in years and completed months using interpolation from the earlier of the Date NRA Attained and the Normal Retirement date.
3) Age Last (NRD) - the system will adjust the dollar limit based on age on the calculation date in years and completed months using interpolation from the age on the participant's last birthday before the Normal Retirement date.
4) Completed Months (NRD) - the system will adjust the dollar limit based on age on the calculation date in years and completed months using interpolation from the age in completed months on the Normal Retirement date.