A pension attorney recently said that there is a provision that plans are automatically frozen as a default.
That is, plans can be designed to have an automatic freeze.
He is not referring to the AFTAP test in connection with benefit restrictions.
I am not talking about making a plan amendment to freeze benefits, but more like a a standard plan provision.
Does anyone know what this attorney may be referring to?
Thanks.
Full Version: Automatic Plan Freeze
Can the attorney provide a sample of such provision?
IIRC, I recently read of a plan (union?) with frozen benefits. Late in year 1, they would amend the plan to provide a year's worth of accruals. They would ignore the amendment for funding purposes that year. In year 2, the benefit accrued in year 1 would be part of the accrued liability, but there would again be a frozen plan for funding purposes. They would then amend the plan late in year 2 to provide another year's worth of accruals.
It would seem this approach could be applied post PPA.
Hope this helps.
It would seem this approach could be applied post PPA.
Hope this helps.
QUOTE (tymesup @ Nov 18 2008, 04:11 PM) 
IIRC, I recently read of a plan (union?) with frozen benefits. Late in year 1, they would amend the plan to provide a year's worth of accruals. They would ignore the amendment for funding purposes that year. In year 2, the benefit accrued in year 1 would be part of the accrued liability, but there would again be a frozen plan for funding purposes. They would then amend the plan late in year 2 to provide another year's worth of accruals.
It would seem this approach could be applied post PPA.
Hope this helps.
It would seem this approach could be applied post PPA.
Hope this helps.
(For FASB87 purposes, the Plan would not be considered frozen?)
QUOTE (tymesup @ Nov 18 2008, 03:11 PM)
IIRC, I recently read of a plan (union?) with frozen benefits. Late in year 1, they would amend the plan to provide a year's worth of accruals. They would ignore the amendment for funding purposes that year. In year 2, the benefit accrued in year 1 would be part of the accrued liability, but there would again be a frozen plan for funding purposes. They would then amend the plan late in year 2 to provide another year's worth of accruals.
It would seem this approach could be applied post PPA.
Hope this helps.
It would seem this approach could be applied post PPA.
Hope this helps.
I know the IRS does not like this approach. Whether they have standing to do anything about it is a different story, but just them not liking it may cause you problems.
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