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Suspension of Benefits upon Reemployment


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A frozen plan provides for a suspension of benefits upon re-employment.  Plan Administrator never sent notice, and over a year has passed. 

1) Can Plan Administrator stop payments and restart them upon subsequent "second" retirement?

2) If the Plan Administrator can do so, is it required to give actuarial equivalence of benefits upon second retirement because it did not provide notice of suspension of benefits?

3) If Plan is required to give actuarial equivalence to this retiree, does it need to treat all future rehired retirees the same way, i.e., not suspend benefits or provide actuarial equivalence at subsequent retirement?

 

Thank you

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The following is how I understand this:

1.  "Frozen" is irrelevant.  You either pay benefits after rehire or you don't.  The only difference between frozen and not frozen is that there is no accrual for the period of rehire.  The suspension rules remain the same.

2. No proper notice should mean that you either keep paying or you actuarially adjust the amounts for the period of suspension.

3.  The administration of the plan is required to be consistent with the plan document.  If it was not done right this time, even without a VCP filing, you are acting in correction mode.  Doing it wrong consistently does not change it from being wrong.

Always check with your actuary first!

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Agree with Cents - if document says you issue notice and suspend then you have a defect. I would issue notice and suspend ASAP. if payments were suspended w/o notice provided then I think actuarial increases must be provided for that period until notice was provided. This is a defect correction and shouldn't create a precedent. I used to hear some actuaries say consistency over accuracy, which drove me nuts - like Cents' comment at the end!

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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