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New MDIB rules


Guest Barbara Neckrich
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Guest Barbara Neckrich

Is it clear under the IRS guidance for Notice 96-67, that if an employer decides to 'eliminate' the 70 1/2 rule --- that the employer can force a participant to terminate and commence benefits, WITHOUT any choice to continue to work and receive benefits?

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No. I see no implication that an ER can "force" severance of employment, at least not in any different circumstance than at any other time. The change in the statute, and the IRS Notice, do not in any way modify ADEA rules.

The ER (in most circumstances in this "free market economy") has an "employment at will" doctrine (I think that is the term).

Where do you read any special ability in 96-67?

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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Guest Barbara Neckrich

the notice does not 'state' this -- this is a client's interpretation; they will apply actuarial increase to 'deferred' receipt of benefits -- but, they just do not plan to 'allow' participants to commence benefits and continue to work -- as of 1/1/99 for new 70 1/2ers. I thought not 'allowing' a ppt to choose may be against some law/reg, whether ADEA or other. I will follow-up with an ERISA attorney.

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Guest Barbara Neckrich

I guess this is the point -- why start a benefit if you then immediately plan to suspend, under the new provisions of MDIB. If the client has decided to go the route of not initiating age 70 1/2 benefits, do they by law (ADEA or other) have to offer the choice? I believe under the new regs the answer is the employer has the choice to decide NOT to allow participant to commence benefits while still employed; again, I will verify.

Thanks for the feedback!

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On or before December 31, 1998, depending upon how the plan will be amended, an employer can give employees a choice of whether to commence benefits or not OR automatically commence benefits. (I question whether automatic commencement is permissible under the ADEA once it is no longer statutorily mandated, but I don't suppose too many people would object in a defined benefit plan.) After December 31, 1998 (or the date the amendment is adopted, if later) the plan can provide an option for age 70 1/2 commencement or eliminate it. I see nothing in the regulations or other guidance that, without participant election, would permit payments to be suspended after December 31, 1998 for employees who attained age 70 1/2 on or before that date.

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