FAQ 880: 415 Limit - Funding to Lump Sum for Term Vested Participant

Problem: My plan is coded to fund to lump sums. I changed a terminated participant's accrued benefit and reran the PPA valuation, expecting to get an updated maximum lump sum and PPA Funding Value, but they did not change. How should this situation be handled?

Solution: When a plan is coded with Fund to Maximum 415 Lump Sums set to Yes, terminated participant calculations are done according to how the participant's Annuity Type is coded in their Employee record on the ACCRBENF screen. A description of the impact of each Annuity Type selection is as follows: - When Annuity Type = 0 - Plan Normal Form - the system will calculate the maximum lump sum and PPA Funding values as of the valuation date based on the accrued benefit and a weighted result based on the plan specs Pct Assumed to Receive Lump Sum entered on the BENFORM screen. - When Annuity Type = A - Lump Sum, the system will calculate the maximum lump sum and PPA Funding values as of the valuation date based on the accrued benefit assuming 100% payment in the form of a lump sum. - When Annuity Type = B to G, the system will calculate the PPA funding values as of the valuation date based on the accrued benefit payment and assuming 100% payment in the form of the annuity selected. When a participant is coded as terminated and the termination date is in the 12 month period preceding the valuation date, the system will calculate the accrued benefit and their maximum lump sum at retirement is calculated based on their accrued benefit, and this lump sum is not expected to change for subsequent valuations. If the termination date is before the 12 month period preceding the valuation date, the system will not recalculate the accrued benefit. Therefore, for participants who terminated prior to the 12 month period preceding the valuation date, the maximum lump sum at retirement is not recalculated unless that field is blank. If you increase a terminated participant's accrued benefit, you must clear the maximum lump sum at RA field in his/her Projected Benefit screen (if you decrease the benefit, this is not needed because the value in that field will be high enough to allow for the lower PPA actuarial liability).