Subsidized early retirement benefit - its own plan

[Guest mbw]

Employer wants to provide for early retirement subsidy in its own qualified pension to subsidize reduced benefits on account of early retirement under separate pension. Employer is considering this option to accomodate early retirement needs of employees while staying away from ADEA issues by stopping benefits at a certain age. Anyone considered whether you can have the subsidy set out in a qualified plan separate and distinct from the general pension? I cannot seem to find any discussion of this one way or the other. The employer is a governmental entity so I am not concerned about other issues which could normally arise in the private employer context--just the separate plan issue.

[SoCalActuary]

If I understand this correctly, Plan A benefits are used to determine part of the benefits payable under Plan B.

The combined total of both plans is subject to all limitations, non-discrimination in benefits, benefits/rights/features tests.

It seems fine, so long as the eventual benefit is drafted correctly to be definitely determinable, and that the operation of the benefits comparison can be made timely.

In a multi-employer plan I administered, we determined the plan benefits as the excess of the plan formula over benefits provided in the prior plan, which was not administered by us.

[Guest Steve C]

Governmental status helps, but don't forget to check on whether state law restricts plan design.

[Guest Harry O]

I don't see how you could satisfy the section 411 vesting and accrual rules if you have a free-standing plan that only provides an early retirement subsidy to a normal retirement benefit in a separate plan. I don't think you can aggregate plans for this purpose. I'm not sure if governmental plans get a pass from the rules or not. Someone with expertise in this area can weigh in . . .

[Guest mjb]

Govt plans are exempt from vesting and accrual rules of ERISA.