Must 204(h) notice for a DB plan state what the benefit formula used to be, or can it just say that further benefit accruals are frozen?

[nancy]

If you are issuing a 204(h) notice for a db plan, must the notice state what the benefit formula was prior to the freeze or can you merely state that no further benefits will accrue?

[Mike Preston]

While the regulation mentions that you must provide enough information so that the recipient can measure the impact of the reduction (which would imply that a benefit statement that identifies the numeric impact of the amendment would be sufficient see Q&A 11 - 4), it also states in Q&A11 - 3 that you must provide a narrative that includes "a description of the benefit or allocation formula prior to the amendment...".

[david rigby]

http://benefitslink.com/taxregs/204h-final-2003.shtml

[dmb]

Does that mean that an individualized notice must be prepared for each participant comparing what they would have received to what they are going to receive?? or can it be a general notice that explains the benefit formula before and after the plan term or in my case, plan freeze?? Thanks.

[Mike Preston]

Individual statements will certainly satisfy the requirements, but they aren't, per se, required. See the following portion of Q&A 11:

(D) Individual statements. This paragraph (a)(4)(ii) may be satisfied by providing a statement to each applicable individual projecting what that individual's future benefits are reasonably expected to be at various future dates and what that individual's future benefits would have been under the terms of the plan as in effect before the section 204(h) amendment, provided that the statement includes the same information required for examples under paragraphs (a)(4)(ii)(A) through © of this Q&A-11, including showing the approximate range of the reductions for the individual if the reductions vary over time and identification of the assumptions used in the projections.

[flosfur]

How does one satisfy the 15/45 days advance (of amendment effective day), notice requirement when a DB plan is amended (to reduce future accruals, of course) after BOY or worst yet, per S412©(8), within 2-1/2 month after the PYE and the amendment is made effective BOY (so it can be taken into account for the full year for funding cost computations)?

If a plan amendment is not made effective BOY, then per Rev Rul 77-2 the Charges and Credits for the PY are computed under the Old and New formula and prorated for portion of the year after BOY etc. (or the change can be ignored if the effective date is after the val date).

[Blinky the 3-eyed Fish]

While the effective date of the of the 412©(8) amendment is the beginning of the prior year, it doesn't mean that benefits accrued to date can be cut back. You still have to satisfy the 204(h) requirements like any other amendment.

In reality you have 2 dates to consider. One, the effective date of the accrual reduction (15/45 days after the notice), and two, the effective date of the overall amendment (retroactive for 412©(8) or 77-2 purposes)

[flosfur]

My question was: How does one satisfy the 15/45 days advance ....?

Do you just mention the effective date (which is in the past) of the new benefit formula and leave it at that or do you add the fact that benefits will continue to accrue under the prior formula until 15/45 days after the notice date ...?

[Blinky the 3-eyed Fish]

Do it like this:

blah, blah Employer adopts this amendment ,effective January 1, 2003, as follows:

Effective March 30, 2004, the benefit formula will be amended to x% blah, blah.

These are the 2 dates I am talking about. One is the effective date of the overall amendment, the other is the effective date of the change.