anti-cut back rule and employer discretion

[Guest Smokin]

Treas. Reg. 1.411(d)-4 permits employer discretion with respect to protected accrued benefits if objective plan criteria set forth in the plan are followed.

Does a plan that entitles an employee to an ehanced benefit if that employee joins the plan in 1995 qualify under this rule if an employer transfers employees into the plan not only in 1995 but also in 1994 and 1996, so that the favored class is confined to one calender year.

[Everett Moreland]

As I understand your question, by the terms of the plan document groups of employees became participants in 1994, 1995, and 1996, and the plan document gives a particular benefit to the 1995 group but not to the 1994 or 1996 group. As I understand the rule about employer discretion, employer discretion is not involved here because each group's benefit is fully described in the plan document.

[MGB]

It doesn't sound as clear to me as EM describes and I am guessing the plan document language is ambiguous.. That is where the question of discretion coming from.

I am only guessing here, but here is a likely scenario.

There are mergers/acquisitions that occurred over those years. There is a provision in the plan that those that were acquired during this period get some type of extra grandfathering (e.g., their old formula or ER subsidy on future accruals). There is now confusion over whether all people involved in these acquisitions get the extra benefit or if it is only those that entered at a certain point in time. The confusion (and need for discretion in interpretation) is probably arising out of ambiguous language.

Ambiguous language should usually be settled in favor of the participants, particularly if they were led to believe they get extra benefits.

Of course, the above is conjecture and more information is needed on the actual situation (what kind of communications occurred?) and what the plan document language says.