Suspension of Benefits Notification

[Gary]

A person is born in 1916 and retired in 1999.

It appears that this person was not required to receive a pension at 70 1/2, since she was over 70 when this became law. I believe this became effective 1/1/88 or 1/1/89, as part of either TRA '86, OBRA '87 or ADEA.

However, wouldn't the plan be required to provide this person with a suspension of benefits notice? I am not sure when this became effective, but even if it became effective say 1/1/88, and she was well over 65 at this time, it would appear that they s/ provide the notice then.

The plan does notprovide for an actuarial increase to the pension for working past age 65 (NRD).

Any comments?

[david rigby]

IRS Proposed Reg. 1.411(B)-2(B)(4) indicates that if the notice is not given and if the benefit does not commence, then the plan must define the benefit at "late" retirement date as the greater of:

the benefit accrued using service after NRD, or

the actuarial equivalent of the NR benefit.

[Gary]

I agree with what you're saying Pax. I just wasn't sure of when these requirements took effect, given that this individual reached 65 in 1981. I was wondering if the suspension requirement and the accruals after NRA all became effective on 1/1/88 (or thereabout). And if that would mean that these rules would begin say at 1/1/88 and not age 65 in this person's case. Just curious about the logistics in this situation.

[david rigby]

My understanding is that Proposed Reg had an effective date of 1/1/1990. However, I don't know if there is any guidance since then. Also, since that portion of the reg was issued after the change in IRC 411(B)(1)(H) [changed was in OBRA 87 I think, to be effective i/1/1988], the emphasis was to recognize benefit accruals and service after NRA. And it was considered to have retroactive effect for any participants over NRA (of course excluding any whose benefit had already commenced).

[MGB]

The suspension of benefits rules were in ERISA. DOL regs containing the notice requirements were issued in 1978, and amended in 1981.

OBRA'86 (yes there was a tax law about a month away from TRA'86) changed the accrual rules after NRA. The requirement for an actuarial increase was from ERISA. The new rules allowed an offset to the actuarial increase (which applies when no notice is given) for the additional accruals.

I'd say she should have received a notice at NRA, and if not, she is entitled to an actuarial increase (although mitigated by any additional accruals).

If you want lots of details, see my speeches in the EA meeting transcripts for both 1990 and 1991 on this subject.