Suspension of Benefits - Notification

[Guest ircreader]

I'm left a little confused about ERISA Reg. Sec. 2530.203-3(b)(4) after reading some of the posts on suspension of benefits. We had a system failure and did not get notices sent to a group of rehired employees most of whom were under 65 (just a couple over 65). Neverthless, their monthly pension payments were stopped.

The regulation states that no payment shall be withheld unless the plan notifies the employee by personal delivery or 1st class mail during the 1st month or payroll period in which we withhold payment that his benefits are suspended.

I have learned by reading MGB's posts that stopping benefit payments when reemployed is NOT what suspension means. That confuses me in light of the regulation. Can anyone help me sort this out?

Thank you.

[david rigby]

Not an answer to your question, but why not consider amending the plan(s) to remove the suspension requirement? This is especially useful if the retiree is rehired in a part-time status, or is otherwise not expected to accrue additional years of service.

[Guest billkalke]

It has always been my understanding that in IRS-speak a "suspension" occurs when any participant continues to work past NRD without ever beginning to draw benefits (as well of course when anyone receiving benefits does have benefits suspended upon rehire.)

[Guest Harry O]

Strict compliance with the DOL regs is only necessary if benefits are permanently withheld by reason of re-employment or continued employment after NRA. It is optional for pre-NRA suspensions. In fact, most plans are more generous for pre-NRA suspensions than what the DOL regs would require. In most FAP plans, pre- and post-early retirement service is aggregated and the resulting benefit is then reduced by the actuarial equivalent of any prior payments. Even flat dollar plans typically give a re-hiree the updated flat dollar benefit on all service. It is hard to see a situation for re-hirees in most plans where the normal retirement benefit would be less than the benefit payable at early retirement.

If a plan really wants to permanently withhold benefits when an early retiree is rehired, the plan can either comply with DOL regs or not comply with the regs and just withhold the subsidized portion of the early retirement benefit (the unsubsidized portion would be temporarily withheld and then actuarially increased for delayed payment when the employee eventually re-retires).

Bottom line is that most plans don't have a forfeiture issue (which is what the suspension of benefits rules are all about) for early retirees. Thus, no notice is usually not fatal and most plans don't even call for such a notice. It is only in the rare case where you have a true forfeiture of benefits when an early retiree is re-hired.

[Guest ircreader]

Hey thanks. The company does not want to provide the actuarial increase but if I understand all this correctly, the actuarial increase must be given for the period of time when the payments were withheld without notification. Query whether if the notice is given now then for those payments withheld after the notice, no actuarial increase would be required?? (So you could have a participant at 2nd retirement date who is got an acutarial increase on part but not all the benefit.)