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Notification to Deferred Vested Participants prior to Normal Retirement Date


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The client's plan document provides that deferred vested participants will begin receiving their pensions on their normal retirement date, and no deferred starting dates are permitted by the plan. However, neither the client nor their TPA has any set procedure for notifying deferred vested participants that they're nearing their normal retirement date and should apply to start their benefits.

There are a number of DV participants in the plan who are between 65 and 85 and have never been contacted to start payment of their benefits. We are going to file a VCP application with regard to the over-70-1/2 participants, but I'm wondering whether the failure to notify the over-65 participants is also a failure that needs to be included in the VCP application? Is anyone familiar enough with plan administration to tell me what sort of process should have been followed with respect to these participants who were nearing/over age 65? For some reason, I'm having a difficult time finding any legally prescribed process.

Thanks in advance for any leads.

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The process that should have been followed is whatever the Plan document provides. Now, this advise is valueless. So, about six months prior to 65, the Plan should have contacted them and asked for information (e.g., spouse's dob) and then explain that you will be sending out an election package. The transmittal with the election package (or election package itself) will include language that if it is not returned by the appropriate drop dead date, payment will be made under the automatic J&S form which depends upon the Plan provisions and marital status of the participant.

Unfortunately, life does not allows follow a recipe. What we've done to handle cases such as yours is amend the Plan to provide for a retroactive annuity start date election in addition to a current election. This is fairly complicated but should satisfy that the participant is whole. You can check with legal counsel but my understanding is it is impermissible to forfeit missed payments once the participant reaches 65 just because the participant has not applied for benefits.

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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I suggest you also consider the possibility of death, and search here: http://ssdi.rootsweb.ancestry.com/

If you get any deaths, then your job becomes more difficult because you have to search for a surviving spouse. The best starting source might be an online obituary.

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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Thanks for the comments. Andy, fortunately, the plan already allows for retroactive annuity starting dates even though it doesn't otherwise allow delayed starting dates (not very clean drafting, but this is an old individually designed plan). If the employer can contact the participants now and give them the option of a retroactive annuity starting date, are you thinking that there's no error that would require VCP? It's easy enough to include this issue in the VCP application that we're already filing, but there's obviously no reason to do so if there's no error.

You mentioned the QJSA, and I'm wondering whether the failure to send the QJSA notice prior to NRD might have been the error ... something just doesn't seem right about the employer not being required to notify DVs at the time when they're eligible for retirement benefits.

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... something just doesn't seem right about the employer not being required to notify DVs at the time when they're eligible for retirement benefits.
Why? The plan administrator is required to provide a notice to VTs, no later than the 5500 filing of the plan year following the plan year of severance of employment. Doesn't that (effectively) put the VT on notice to request the benefit? IMHO, it's unreasonable to expect the ER to do the legwork of tracking down all VTs (assuming they have been properly notified).

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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The client's plan document provides that deferred vested participants will begin receiving their pensions on their normal retirement date, and no deferred starting dates are permitted by the plan. However, neither the client nor their TPA has any set procedure for notifying deferred vested participants that they're nearing their normal retirement date and should apply to start their benefits.

There are a number of DV participants in the plan who are between 65 and 85 and have never been contacted to start payment of their benefits. We are going to file a VCP application with regard to the over-70-1/2 participants, but I'm wondering whether the failure to notify the over-65 participants is also a failure that needs to be included in the VCP application? Is anyone familiar enough with plan administration to tell me what sort of process should have been followed with respect to these participants who were nearing/over age 65? For some reason, I'm having a difficult time finding any legally prescribed process.

Thanks in advance for any leads.

Considerations before submitting a VCP application.

1. All participants with a deferred vested benefit under the plan are notified by SS of the existance of the deferred vested benefit within 30 days or so of the date their SS benefits commence. About 90% of SS benefits commence by age 65. Assuming that the address of the plan administrator listed on the SS notice form is still current, living participants would contact the plan to request benefits. If the participant is deceased SS notifies the surviving spouse of the existance of the benefits when the spouse applies for SS benefits.

2. The failure to claim benefits at 65 or 70 is likely due to the death of the participant so you need to check a database to determine if the participant is alive or the date of death.

mjb

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Guest Robin.Wolf

The SS death index on ancestry.com is a wonderful resource, but you can only input one SSN at a time and can't cut and paste. Is anyone aware of something similar (meaning free of charge) where you can input SSNs in batches to check more participants?

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