Suspension of benefits notification

[Gary]

Does anyone know when the requirement to prvide suspension of benefits notices for employees working past age 65 became effective and where I can find legislative history on that topic?

Also, what transition issues were implemented for employees already over age 65 at the time of this change?

[Guest Harry O]

The suspension of benefits exception to the vesting rules were added by ERISA. You should also look at the DOL regulations on this issue. There may be some transition rule discussion there as well (I don't have those regs handy).

[david rigby]

Not sure about the timing, but 1988 sounds familiar. I think earlier discussions on this topic might have identifed such reference. (Proposed IRS regs under section 411?)

Try this.

http://benefitslink.com/boards/index.php?showtopic=10139

[MGB]

ERISA section 203(a)(3)(B) (original passage in 1974, not a later amendment) provides for the ability to suspend, with a direction to DOL to issue regulations to implement the rule.

December 19, 1978, DOL issues proposed regulation which includes the requirement to provide a notice in order to suspend. Final regulation issued January 27, 1981, 2530.203-3 "Suspension of pension benefits upon reemployment of retirees." Note that even though the title says "reemployment", this includes continued employment. There were also minor amendments on December 1, 1981, following a written comment period.

Preamble to the final regs: "Plans which provide for suspension of benefits will be required to comply with all relevant aspects of the regulation. To the extent that this regulation imposes specific requirements not provided for in the Act, it will have only a prospective effect on the operation of plans and the rights of employees. Suspension of benefit payments by plans prior to the effective date of the regulation will be governed by section 203(a)(3)(B) of the Act without reference to the regulation."

Effective date: May 27, 1981.

So, in the period when one hour of service is worked after the effective date, a notice had to be given to suspend. You could have suspended prior to that without a notice because the notice was only in the regulation, not the Act.

Pax's mentioning of 1988 is a different, related subject.

Under ERISA, you could stop benefit accruals at NRA. All suspension meant was that you were forfeiting the receipt of benefits that you could otherwise have received if you terminated (suspension of benefits is an exception to the vesting requirements). Just stopping the payment is not suspension...you have to lose value to have a suspension. If you did not provide the suspension notice, you need to preserve the value of the benefits they could have received, i.e., give an actuarial increase.

Under OBRA'86, amendments to the Code, the Act and ADEA (passed within a month or two of TRA'86), plans were mandated to give accruals after NRA, whether or not you are suspending benefits. However, if you are not suspending benefits, you can offset the new accrual and the actuarial increase, effectively giving the larger of the two.

The IRS issued proposed regulations under the new OBRA'86 rules on April 11, 1988. They have never been finalized.

Note that nothing in OBRA'86 (or the '88 proposed regs.) changed the suspension of benefits notice...it only changed the accrual requirement.

[Gary]

Thank you MGB, I appreciate your detailed answer.

So the final regs became eff 5/27/81. Then say a person reached age 65 in 1977, would a suspension notice be required in 1981 when the regs were finalized?

So then I presume that these final regs could be found in my Pension and Employee Benefits Book that contains regs and code. Or have these original regs been entirely superseded and would therefore look nothing like it did in its original form?

Thanks again.

[MGB]

The regs have only been amended in Dec. 81; just minor changes in language (primarily multiemployer-oriented).

Yes, a notice would have been required in 1981 for someone over the NRA at that time. You could have suspended previous to the effective date without a notice. If a notice was not given in 1981, you could have a suspension up until 1981, and then would be required to give an actuarial increase after that date.