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Anti-cutback problem?

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I don't know why this is bothering me, but it is. ERISA 403(b) plan.

If a plan has a NRD of age 60, and wants to amend it to age 65...

Currently all accounts are all 100% vested at all times. In-service withdrawals are NOT currently allowed other than for hardship or disability. Allocation conditions for employer match/nonelective are NOT waived for termination of employment after attaining NRD.

I don't much see the point in amending NRD to age 65, as it doesn't accomplish anything under the current terms of the plan. But if they did amend, is there any problem? I don't see a cutback of any benefit, but it just feels odd - anything obvious I'm missing?

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Technically, I think you can only increase NRA with respect to future contributions or future participants but cannot uniformly increase for everyone and all balances now even though the actual impact on participants and administration is nil. It would make practical sense that should be able to amend because of that, but would that argument hold up with IRS?

Employer may want 65 to present that as an expectation to employees in its written materials, rather than age 60, which is this only possible reason I could think of for wanting to amend. In that case, amending for future contributions could accomplish that message.

Unfortunately, as is often the case, I think it's a matter of form over substance - but maybe this Administration's kinder, gentler IRS would accept substance?

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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I know you said the plan does not have an in-service withdrawal feature, but does it allow for distribution upon attainment of retirement age?  If so, then the right to withdraw at age 60 would have to be preserved for the current account balance.

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