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Qualified Disability Benefit Protected?

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What is a Qualified Disability Benefit under IRC Sec. 411(a)(9)? An example would be appreciated. Is such a benefit considered an "ancillary benefit" that doesn't need to be "protected" under IRC Sec. 411(d)(6) or not an ancillary benefit (e.g., a "retirement-type benefit) that is protected under that IRC Section.

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Many retirement plans offer unreduced benefits upon disability - meaning no early retirement reduction.  Sometimes they are even supplemented for a period. If the participant recovers, the disability payments stop (no one ever does).  If the participant dies, the disability benefit stops and the normal death benefit is paid to the beneficiary.  Once they participant hits NRA, the disability payments stop and the participant elects a retirement benefit.  The disability benefit is completely separate from the retirement benefit and is therefore considered to be "ancillary".  This benefit can be removed without violating 411(d)(6).

Other plans may provide a similar unreduced benefit, but the participant chooses a form of lifetime payment at the time of disability.  Not sure what happens if the participant recovers, but the participant in essence "retires" at their disability date.   In my experience this type of provision is very rare.   I believe this benefit would possibly be subject to 411(d)(6) since it is really a retirement benefit.

The benefits aren't always unreduced, but they are usually heavily subsidized.  These types of features are most common in hourly or bargained  plans.  

Hope that helps.


The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.

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