DB surviving spouse annuity - help!

[Guest cngriffin]

Hello! Here's a question that I need some help on. Facts: husband recently died at age 49 after 30 years of service. The company has a DB pension plan with early retirement age at 55 plus 10 years service or age 65. The plan includes a formula to calculate both the benefit and the "early retirement" benefit.

On the first day of what would be the month of his death, he notified the company that he wanted to retire as of that same day. He died on the 15th day of that month. The wife filed w/ the company to receive her surviving spouse annuity under the DB plan. The company granted this to her, but reduced the amount because the company claimed that because the husband had 4 weeks of vacation left at the time he purported to retire, the company still treated him as an "active employee" and said he could not retire until the first of the next month. As such, he (and in turn she) was entitled to a lesser amount. [i don't get this part.]

However, the company is treating the husband as having "retired" when it comes to determining his eligibility etc. for other benefits! In other words, they are being very inconsistent from what I can tell.

My questions are (1) can the company claim he was not "retired" because of his accrued vacation time? I understand under state wage laws they have to pay him that same time, but I cannot imagine the need to pretend he was actually working another 4 weeks. Are there any ERISA provisions regarding when someone "retires"? (2) what other ERISA provisions govern this dilemma? I have read the provisions regarding QPSA'a but have not been able to really find something that addresses the issue.

Any thoughts/comments are really appreciated.

[david rigby]

This sounds like an issue of personnel practices, not an issue of plan design or ERISA requriements. Of course, it is important to maintain consistency in such practices.

This may boil down to:

what is the definition of "retirement date"?

what is proper and sufficient notice for an employee to make to retire?

However, if EE was 49 and Early Retirement eligibility is at least age 55, I'm not sure how the accrued vacation time, no matter how it is paid, would have any significant bearing on the benefit. He was not eligible for Early Retirement, so HER benefit will be determined under the death benefit provisions of the plan.

Probably need some more facts about the plan provisions.

Also, has anyone checked the summary plan description?

[Guest RARogers]

From a technical standpoint, the question is whether he died before or after his "annuity starting date." If he died before, she's entitled to the spousal death benefit, which is often based on a joint and 50% survivor annuity. If he died after, she's entitled to the death benefit provided under the form of payment he elected - for example he might have elected a joint and 100% survivor annuity.

The definition of "annuity starting date" is in my opinion very hard to get a grip on, but there is a Code definition: "the first day of the first period for which an amount is payable as an annuity." Code ss 417(f)(2) There are also regulations on this definition - look in Reg. ss 1.401(a)-20 and elsewhere (but it is a pain).

I think you'd have to analyze the Code rules, the plan document, and their normal administrative practices.

Good luck.

[Wessex]

If the only criteria for early retirement under the plan is 55&10, then it's clear that the participant died before his annuity starting date and the spouse is entitled to the QPSA beginning when the participant would have attained age 55. (The plan could provide for a spouse to commence earlier than that, but it is uncommon.)

Does the plan also have a 30-&-out-at-any-age early retirement provision(otherwise I don't see how this participant could elect to retire)? If yes, did the participant actually elect a form of payment that would provide a survivor benefit in excess of the QPSA amount? Does the plan permit waiver of the 30-day election period (and the participant waived)?

If the answer to all three questions is yes, the participant died after his annuity starting date and the spouse would be entitled to survivor payments under the option elected.

If the answer to the first two questions is yes, but the plan does not permit waiver of the 30-day period, the participant died before his annuity starting date. However, the regulations provide that if a participant elects a form of payment other than the designated QJSA under the plan that would meet the qualified joint and survivor requirements and dies before the annuity starting date, the QPSA must be based on that form, not the actual QPSA. (See Q&A18 of Section 1.401(a)(20).) Thus, it is possible that the spouse is eligible for a benefit based on the elected form.

If the participant did not make a valid election - really did just notify the company that he wanted to retire - then, of course, none of the above would apply and the spouse would be eligible for the QPSA commencing at or after the earliest time permitted under the plan.

[This message has been edited by Wessex (edited 04-29-99).]

[david rigby]

I'm with Wessex on this one.

Only other possibility that comes to mind is whether there might be any special disability provisions that apply. Not likely, since most such provisions require some waiting period (such as five months), but thought I would ask anyway.

I still don't see any facts that give rise to the question of whether his (or her) benefit is affected by the payment of the 4 weeks of vacation pay.