Gary

An employee terminates service say 6/1/2000. He intends to receive a lump sum, but has discovered that in his opinion the lump sum payable is several thousand dollars lower than he feels it should be. What are his options (or best options)? Should he try and correct error prior to distribution or is it best to take distribution and then file a claim for additional benefits? Interested in hearing strategies as well as any legal aspects and citings.

It would appear that if the annuity is within the 415 limits, then it could be paid as a lump sum. Although I myself need to do some 415 lump sum work of my own, to be up to speed.

An ee receives a lump sum. plan provides for a COLA tied to the increase in CPI. What is a reasonable future COLA assumption when determining a lump sum. At this point it seems an employer can exclude the COLA on the groiunds that there is no way to say if the COLA will be positive or negative. Curious to hear any comments. One suggestion is to take a long term avg of past annual changes in the CPI.

A plan provides an annual COLA. A participant chooses the lump sum option. Is the COLA typically included? The plan does not explicitly state one way or the other. is there any feeling as to which is appropriate or what the default would likely be?

I have had several situations occur where a retiree was awarded interest on corrected back payments. I have seen the actuarial equiv. interest rate used. For lump sum distributions I have seen the lump sum rate used and I have seen the use of some chosen short term rate such as a one year treasury. It seems to vary based on what is agreed and that I don't know of any objective and consistent approach. I just see what the Plan decides on and if necessary then make a suggestion. Good luck Curious to hear what you find out.

A cash bal plan defines AB by saying that the account is projected to age 65 at 8%. Then converting the amount to an annuity that is increased each year by the rate of 8%. i.e. a COLA of 8%/yr. The Plan says if a lump sum is chosen, then the account bal at termination is projected at App Int Rate (PBGC rate) and the COLA is the App Int Rate. Can they change the projecting interest rate and the COLA just because the lump sum option is chosen? To me it doesn't seem right. In other words it appears that they are changing the AB, which seems that it s/b the same weather the pension is an annuity or a lump sum payment Any thoughts?

I feel it s/b the act equiv of normal form. I feel interest s/b added to the lump sum at the act equiv int rate. I have added int at the lump sum act equiv rate and at the plan act equiv rate. The latter appears more consistent and straightforward.

A plan does not provide a lump sum option, but pays lump sums < 5,000 using PBGC rates. The company is merged w/ another company into a new plan. The new plan allows for lump sums under GATT (includes lump sums > 5,000). Is it reasonable to require that for a participant that was in pre merged plan to say that his pension accrued at time of merger must preserve the PBGC rates for his lump sum (even though a lump sum was not an option, except for small pensions)?

Say an ee retires at age 60. The cash balance plan states that the immediate annuity is equal to the act equiv of his account balance. Isn't it required that the plan determine accd ben. as the account balance projected to 65, then converted to an annuity at age 65, then reduced for early commencement at age 60? Is it allowed to have the early ret ben as simply the act equiv of acct bal at rerm date?

An ee retires at age 50 w/ an early ret ben reduced by 50%. He is rehired at 55 and retires at 58. His pension ceased upon reemployment, but no notice was given. The law provides that his pension s/b actuarially increased if Notice is not given. My question is what pension s/ act increased? His original reduced early ret ben., his original early ret ben (ignoring the early ret reduction), his final accd ben at his age 58 ret, or something else? Curious to hear any comments.

A plan uses an inactive interest credit of the average for a 12 month period of the 1 year treasury and the 30 year treasury. They use an active interest credit of the inactive rate + 2.25%. Any comments w/r to the legality of these rates and any specific violations, if any?

The active interest credit is the rate that is applied to the hypothetical account balance for actives and the inactive interest credit is the rate that is applied to inactives. This has nothing to do with pay based credits.

An employee retires early at age 50. Is reemployed at age 55. Pension is suspended. Let's say he does not get Suspension notice. He retires again at age 58. If suspension of benefits notice is not given, then the pension would be act increased. However, my understanding is that it would be the age 50 early ret pension that would be act increased. And this pension is less than the final AB, since the final benefit uses more years of service and does not have the large early ret reduction factor. Does this make sense or s/ we be act increasing say his final pension? Clearly if a person is over age 65, quite often the act. increased amount is the larger amount, but it appears this is not necessarily the case for an early retiree, unless we are act increasing the accd ben and not the early ret reduced ben. Any thoughts on this would be appreciated.

I have a situation where an individual is planning to retire, effective 7/1/2000. He is having me review his pension now. I feel there may be an error w/r to his pension calculation. However, I am not sure if a claim can be filed for additional benefits prior to the actual commencement of benefits. Does anyone know how this situation can be handled?

Does a 204(h) Notice have to contain language that explains that future accruals will be reduced or need it just summarize the plan change without explicitly saying that there is a reduction in future accruals?

A company merges into another company. The new plan formula is lower than prior to the merger for future service for employees of company being merged in. Is a 204(h) Notice required by the new company, just like when a plan amendment reduces future accruals?

I currently have a subscription to Research Institute of America Pension and Benefits Weekly Updates. It is quite expensive for a self employed actuary starting out. Does anyone know of either a cheaper service or an internet site or any other means that gives a pension acturay up to date happenings in the pension world as well as applicable interest rates? Thank you

Pax, That makes sense. So are you saying that if there is a lump sum after eff date and prior to adoption date, it would have to be under old basis? Clearly this employer (and I am not the plan administrator) has made lump sums during this period. So they must have some obligation. Gary

A plan says that eff 11/1/96 all lump sums will be paid under GATT assumptions. The amendment isn't adopted until 8/14/97. A person terminates in May 1997 and receives lump sum in June 1997. Should this lump sum be paid under pre amendment PBGC rates or can it be paid under GATT?

A Plan defines act equiv mortality as GAM1971; 5 yr setback for females. Any thoughts on what this translates to? And if a plan uses sex distinct tables for lump sums, would they be required to make up a shortfall to males or ask females to make a payment back to the plan?

If a Plan changes the benefit formula and it results in a reduction in the Normal Ret. Benefit, clearly a 204(h) Notice is required. Say a Plan doesn't provide such a Notice, but includes the change in a subsequent updated SPD. Is this sufficient or do the old formula benefits continue to accrue until the Notice is provided or any other thoughts?

Say a person retires from a company, but he first worked for one company and that company was merged into another company and then that merged company was again merged into yet another company. Finally when he retires his pension is based on a frozen benefit from both the first and the second companies and an additional portion from the company he retired from. He retires at age 58. The plan states that his early ret factor for the frozen pensions s/b no less than what it would have been under the prior plans. Is it reasonable to use the factor from the company he retired from for the prior frozen benefits as well (it happens to of course be a higher factor)? There is nothing in plan that is specific, except for the fact that it protects the prior plan factors. Any thoughts, observations? Look at it from the angle of the plan participant or from an objective angle (if possible). Gary.

Say somenone receives a lump sum of 50,000 at 1/1/99. and on 1/1/2000 they discover they s/ have received 70,000. As a result the person is given an extra 20,000 plus interest from the original time of payment. What is a reasonable interest to credit the makeup payment from 1/1/99 to 1/1/2000 (i.e. the date the makeup payment is made)? Since lump sums can be computed using variable rates of interest.

Are participants in 401k plans entitled to the rights under ERISA 104(B) as pension participants? That is can they request all plan documents of the Plan? And how does an individual review their account balance to ensure that it is accurate, when they leave or during employment?

A plan says that the mortality table s/b the 1983 GAM table. I am reviewing the plan as an independent actuary. It does not say if it is male or female rates. My position is that it is reasonable to say that the appropriate table s/b the 50/50 blended rates. The employer uses male rates. This interpretation clearly can lower lump sums paid from plan. Any thoughts. This is plan documentation prior to GATT amendment.