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draper1

normal retirement age forfeitures due to 415

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I have seen in presentations that a participant stuck at the 415 comp limit post NRA will suffer an impermissible forfeiture unless

a suspension of benefits notice has been timely provided. If this is true what are the acceptable corrections. If the Plan contains a RASD

feature can this be uses? If not can the Plan simply self correct by paying the forfeited annuity payments with interest? 

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1 hour ago, draper1 said:

I have seen in presentations that a participant stuck at the 415 comp limit post NRA will suffer an impermissible forfeiture unless

a suspension of benefits notice has been timely provided. If this is true what are the acceptable corrections. If the Plan contains a RASD

feature can this be uses? If not can the Plan simply self correct by paying the forfeited annuity payments with interest? 

If sob is proper, nothing to correct. Otherwise VCP. 

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Consider whether this plan provision is what the plan sponsor wants.  For example, when "stuck at 415", pay the benefit?  (The answer to this question might depend on the relationship between the EE and the decision-maker.)

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32 minutes ago, david rigby said:

Consider whether this plan provision is what the plan sponsor wants.  For example, when "stuck at 415", pay the benefit?  (The answer to this question might depend on the relationship between the EE and the decision-maker.)

Nothing to consider. Plan provisions for sob must be in place before any accrual. 

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Exactly. Plan should either have SoB provision (and notice provided accordingly) or the plan should provide for the automatic commencement of benefits if/when actuarial increases would otherwise cause benefit to exceed 415 limit (which is a standard in the pre-approved plans I've seen and we use).

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CuseFan is correct with respect to many plans’ provision for the commencement of benefits in that situation (which has been true for many plans since the amendment for final 415 regulations).  See also:

 

<https://benefitslink.com/boards/index.php?/topic/63716-415-limits-distributions-while-still-employed/>

 

The regulation cited by the first responder in the above link reads as follows:

 

(7)Effect on other requirements. Except as provided in § 1.417(e)-1(d)(1), the application of section 415 does not relieve a plan from the obligation to satisfy other applicable qualification requirements. Accordingly, the terms of the plan must provide for the plan to satisfy section 415 as well as all other applicable requirements. For example, if a defined benefit plan has a normal retirement age of 62, and if a participant's benefit remains unchanged between the ages of 62 and 65 because of the application of the section 415(b)(1)(A) dollar limit, the plan satisfies the requirements of section 411 only if the plan either commences distribution of the participant's benefit at normal retirement age (without regard to severance from employment) or provides for a suspension of benefits at normal retirement age that satisfies the requirements of section 411(a)(3)(B) and 29 CFR 2530.203-3. Similarly, if the increase to a participant's benefit under a defined benefit plan in a year after the participant has attained normal retirement age is less than the actuarial increase to the participant's previously accrued benefit because of the application of the section 415(b)(1)(B) compensation limitation (which is not adjusted for commencement after age 65), the plan satisfies the requirements of section 411 only if the plan either commences distribution of the participant's benefit at normal retirement age (without regard to severance from employment) or provides for a suspension of benefits at normal retirement age that satisfies the requirements of section 411(a)(3)(B) and 29 CFR 2530.203-3.

 

 

 

 

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