Reduction of Early Retirement Benefit

[Guest JOSTAR1]

I am age 52. I was 100% vested in my pension plan in 1982. In 1995, the plan was changed: 1) The benefit payable upon early retirement was reduced. As of the date of my vesting in 1982, the benefit payable at age 55 was 79% of the full benefit. In 1995, the plan was changed so that the benefit payable at age 55 is 56% of the full benefit at age 65.

2) A new class of employees, called Vested Former Employees, was added. Under this provision, the benefit payable at age 55 is 38% of the full benefit at age 65. I became a Vested Former Employee in 1993 when the subsidiary I worked for was sold. Because of the changes in the plan, my vested benefit at age 55 was reduced from 79% to 38% of the full benefit at age 65. Can someone advise if these changes are permitted under ERISA?

[Guest nikomendy]

I am not sure of the erisa legality of the

plan changes you describe. But I assume from

your post, that when the plan was cutback-

you were vested, but not yet early retirement

eligible- is this corect ?

age 65 retirement.>

what was the plan criteria for such early retirement ? age 55 , x years service or what ?

for sure, any participant (not just vested),

but also eligible for the plan's age 55 retirement, ahead of the amendment reducing it-- could not be cut back.

Do you know of cases, of colleagues (who already were early retirement eligible) when the plan was amended who were cutback ? This is not allowed

under 411d and erisa 204g.

[david rigby]

Please be careful of absolute statements such as "This is not allowed under 411(d) and erisa 204(g)."

The "anti-cutback" provision found in Internal Revenue Code section 411(d)(6) is with respect to accrued benefits. A plan can be amended to make changes that affect future benefit accruals.

[Guest nikomendy]

-you are correct, db qualified plan could be amended to reduce future benefit accurals,

subject to 204h notification and further egtrra

changes to notification, if reductions are material.

-BUT, if a plan is qualified- has a provision

for an early retirement factor, an employee satifies such a provision- then although future

accurals could be reduced, the amount of accured

benefit (including early retirement factors),

accured as of the date of employee eligibility,

CANNOT BE cut back, .... although future

accurals could be effectively significantly reduced.