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If a plan has the following language related to suspension of benefits - A participant who remains employed by the Employer after his normal Retirement date and who is to be credited with at least 40 Hours of service each month will have a Late Retirement Date on the first day of the month coincident with or next following actual termination of employment with the employer or change in employment status to a position in which the Participant would be expected to be credited with less than 40 Hours of Service each month.  The Plan Administrator shall notify such participant that Monthly Retirement Income will not commence until his late retirement date and the Monthly retirement Income will be equal to that amount determined pursuant to 4.03.

and 4.03 (late retirement) says - When a participant retires on his late retirement date, his Monthly Retirement Income shall be an amount equal or greater of: (a) his accrued benefit based on the Participant’s Years of Credited Service and Average Monthly Compensation as of his Late Retirement Date, and (b) the Actuarial Equivalent, as of his Late Retirement Date, of the Normal Retirement Benefit which would have been payable at his Normal Retirement Date.  This benefit is payable in the Basic Form and commences on said Participant’s Late Retirement Date.   

Isn't it irrelavant if notice is given or not since the SOB language states that the monthly retirement income will be equal to the amount determined persuant to 4.03 which says the benefit will be the greater of the accrued benefit at the late retirement date or the actuarial equivalence of the NRB as of the NRD?  Even if notice was given the particiapant should have had actuarial equivalance if it was greater than the accrued benefit and it wouldn't have been limited to NRB at NRD.

Thanks for your input

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Follow on question.  Can SOB be added to a plan for exististing participants or do they only affect future participants once added to a plan?  I.e participant was covered under a plant for 25 years prior to suspension of benefits being added to the plan.  5 years after the suspension of benefits clause was added, participant turned 65.  Would the suspension of benefits clause apply to that participant, or only to particpants that joined the plan after the suspension of benefits clause was added?

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Regarding the initial question ... an SoB Notice might be needed because the actuarial adjustment described in your plan falls appears to fall short of the adjustment that's required when a Notice isn't provided, at least for a plan that is not frozen.

As I recall the actuarial adjustment that's needed if a Notice is not provided is not simply the equivalent of the NRD benefit, but the result of a "rolling up" process. Suppose NRD is 7/1/18, plan year is calendar year, and retirement is 9/1/20. Start with accrued benefit at 7/1/18, actuarially increase it to 12/31/18, then actuarially increase the larger of that result and the accrued benefit at 12/31/18 to 12/31/19, then actuarially increase the larger of that result and the accrued benefit at 12/31/19 to 9/1/20. Participant then gets larger of that result and accrued benefit at 9/1/20.

Regarding your second question, this seems like one for the attorneys. In most contexts I'd expect them to say that the added SoB clause can apply to participants who joined before the clause was added, but only to the portion of their benefits that is earned after the plan was amended ...

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Thank you for your response.

Sorry, I'm a layman trying to understand this.  So...am I correct that the language, the way it is written, says that if they are given notice they still get a calculation of the greater of actuarial equivalence  or accruals as of late retirement date?  They wouldn't just get NRB.

How does it change if plan is frozen?

Example:. Participant turns 65 in 2015 no notice given, plan freezes in 2016.  Participant retires in 2019.

With plan freeze, SOB is removed in amendment, after participant turns 65 but before retirement.  4.03 late retirement remains in plan.

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1. I believe that the plan document language, as presented, does not support giving SOB notice at all. 
2. If plan will be amended to add SOB notice language, it would only apply to benefits accrued after amendment.
3. The late retirement actuarial adjustment as described, may be acceptable. However the IRS really doesn't like the "one-shot" method, and would prefer to see the "year-by-year" approach (see Sellarsian description above)

 

 

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