Almost 20 years ago, the IRS issued proposed regulations for handling Internal Revenue Code Section 415(b) limits when multiple annuity starting dates (MASDs) are involved. While the approach given was simple—basically a straight actuarial adjustment to benefits paid, it led to some absurd results, particularly for the compensation limit (at all ages) and the dollar limit between ages 62-65, because the limits themselves are not adjusted for age during these periods. ASPPA commented upon the proposed rules and explained the absurd results.
The IRS issued final regulations but reserved the specific section that ASPPA objected to. Since then, we have been on our own. Wandering about through the barren pension actuarial wilderness with only a handful of regulations and our calculators to guide us—from fill & spill to the percentage method, with COLA offsets to the dollar limit, and without COLA offsets to the dollar limit—with each IRS audit driving us further into MASD induced madness. Okay, maybe I’m being a bit too dramatic…
Perhaps what makes MASDs so maddening is that the IRS has been raising MASD issues and has not been terribly consistent on the offset methods they accept.
There is perhaps no actuary with more IRS MASD audit experience than Jim Holland. I have the pleasure of presenting with him in Session 2 of Actuarial Insights. Jim Holland will share what he has learned over the years and we will share some methods and considerations that—fingers crossed—should keep you out of trouble on audit.
Also, this is my first non-internal presentation (so it could be horrible), but I have been preparing, and with Jim Holland as my co-presenter, it should at least be half-good. Registration closes Jan. 23, so sign up today!
Tiffany Myers is Manager of Actuarial Services at FuturePlan.
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