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Notice to terminated participant of permanent break in service


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In a multi-employer, qualified defined benefit plan, is it required that participants be notified that they have incurred a permanent break in service and have forfeited their accrued benefit? I've been told it's necessary by legal counsel because it gives the terminated participant time to dispute the loss of service and that the notice starts the "count" for the statute of limitations during which the dispute can be filed with the Plan. Without the notice being sent, then apparently the participant can dispute the issue decades later, which of course makes it harder for the Plan to defend the record. So, does anyone know if this notice is required based upon regulation or just good Plan practice for protection? If it is reg, I'd like to know where I can find the language outlining it.

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Perhaps legal counsel can provide a description of where to "find the language"?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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I don't know of any requirement to notify a non-vested terminated participant that they are not entitled to benefits. I also don't know of any statute of limitations on benefits disputes.

It is probably good practice to notify them, but I don't think it is required for any reason.

Also, make sure your document states that all non-vested participants are deemed to have been fully paid all benefits at their date of termination so the IRS can't argue they should become 100% vested if the plan terminated at some point in the future.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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