DB plan cutback

[alexa]

I have a collectively bargainned DB plan where for anyone retired after 10/1/1995, efective 11/1/2002 the retirement income is recalculated effective 11/1/2002 to be $ 70 per month of Credited Service; prior to 11/1/2002, the multiplier was

$ 68

This is a benefit that was collectively bargained and the plan was amended for the prospective increase.

Assuming as part of current negotiations, this is rescinded, would this violate anti-cutback rules if the current benefit remains the same; i.e. increase not given?

[Guest Harry O]

Section 411(d)(6) prohibits amendments that reduce accrued benefits. An accrued benefit is generally the accrued dollar value of the annuity benefit payable at normal retirement age. No one in this plan has accrued the $70/month benefit @ age 65 until 11/1/02. Thus, the plan can be amended prior to this date to delete the increase scheduled for 11/1/02 (subject, of course, to bargaining).

This is not an early retirement benefit, retirement-type subsidy or optional form of benefit that would otherwise be protected by section 411(d)(6). Note that early retirement benefits and retirement-type subsidies cannot be eliminated because they are "attached" to the age 65 accrued benefit earned by the employee. In your case, there is no age $70/month age 65 benefit that has been earned by the employee.

[alexa]

This is someone already in retirment (i..e pay status) not an active employee

Does that change the answer?

[MGB]

A couple of months ago, a tax court case was settled (Sheet Workers National v. Commissioner). They had an increase to retirees (similar to your situation). After they had paid it awhile, they rescinded it. The tax court said that it was not a cutback in accrued benefits subject to 411(d)(6). Their reasoning was that the language in 411 focuses on accruals "while an employee." Accruals granted after being an employee are not protected accrued benefits.

I disagree with this finding (but who am I?).

The IRS filed a notice that they are going to appeal the decision.