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Guest Sunnybeau

Retroactive Annuity Starting Date

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Guest Sunnybeau

Does a defined benefit plan with the following language contain a retroactive annuity start date ("RASD")? The provision is: "Normal Retirement - A Participant shall be eligible for an Accrued Benefit if his employment is terminated on or after his Normal Retirement Age. Payment of an Accrued Benefit under this Section shall commence as of the first day of the month coinciding with or next following the date of the Participant's termination of employment with the Employer and Affiliated Employer." My concern with this provision is the situation that could arise if a Participant contacts the Plan on May 29 of a Plan Year (calendar year) and wants to retire June 1. Assuming that the Plan was not able to provide the QJSA explanation to the Participant by June 1, does this situation constitute a RASD? The Plan's actuary indicated that this situation is not a RASD because the Plan does not provide the Participant with the right to "affirmatively elect" between a RASD (i.e. the right too have his benefits calculated as of a retroactive annuity starting date) or a current date. Instead, the Plan document does not give a Participant a choice between two different distribution dates. It provides for the payment date (i.e. first day of the month coinciding with or next following the Participant's termination date). I have taken the position that the above situation constitutes a RASD because the Participant's payment relates to a date in time before he received the QJSA explanation, irrespective of whether the Participant had a choice as to the distribution date. Your insight would be appreciated.

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Any time the QJSA notice is given after the Annuity Starting Date, you have an RASD, subject to the RASD rules, necessitating RASD language in the plan, including the ability to take a prospective annuity actuarially equivalent to the retro annuity. If the plan does not provide for these things, and the plan does not provide the QJSA notice in a timely manner, the plan will find itself with an operational defect for failing to follow plan terms and/or a form defect for failing to have RASD language.

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Guest Harry O

That is a poorly drafted plan. A well drafted plan should say that benefits don't commence until after the participant has requested payment and completed the necessary paperwork.

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I have a plan with a pre-retirement death benefit paid if participant is eligible for early, to spouse FMF date of death

We notified the spouse 3 years after death since we just got death certificate

Plan does say sposue can defer.

If we pay her 3 years worth of monthyl payments and the plan doesn't have retro langauge si this an issue?

I can think of other situations where we have done this retro as well such as disability pesniosn contingent on getting the SS award letter and term vested who didn't start their pension at age 65 then died at say age 68 and we paid lump sum of accrued beenfit to estate

Also late MRD's

If we add retro langauge can we limit to only certain situations?

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