Integrated Benefit - Is AB protected?

[Guest HaroldA]

Is it legal for an accrued benefit to decrease for a plan that uses an integrated benefit formula?

Example:

Accrued Benefit = (30% Avg Comp - 40% PIA) * (Accrual Service / Service at Normal Retirement)

In some instances, with an increase in the PIA, the accrued benefit in the above formula may be smaller than the prior year's accrued benefit. Do you have to maintain the prior accrued benefit as a floor, or can the accrued benefit actually decrease?

[david rigby]

I believe the proper analysis is that an accrued benefit cannot decrease solely due to an increase in the SS benefit and/or wage base. Is that an adequate answer to your Q?

[Guest HaroldA]

Perfect. Thank you!

[SoCalActuary]

I believe that floating integration, whether PIA offset or step rate covered compensation, are intended to compute the accrued benefit only at the time of a benefit event. I contend that the accrued benefit can decrease. If a participant has a dramatic increase in PIA, (unlikely in later ages since there is 35 year averaging), then the plan offset does increase.

[david rigby]

SoCal,

Perhaps this is my day to be an idiot, but can you explain that response? Example?

[SoCalActuary]

I will try to work on an example when time permits. Maybe HaroldA can show us the example of his plan as a starting point.

[AndyH]

FWIW, I think pax is right but I don't have the cite at my fingertips either.

[Effen]

You guys have been down this road before....

benefitslink

benefitslink2

[AndyH]

And the answer is ? [Reserved until Social Security no longer exists?]