Retirement Options

[Guest MC2]

The Multiemployer Pension Plan requires a Participant to provide the Plan with a Social Security Disability Award before that Participant can be eligible for Disability Retirement. In that a majority, if not all, Social Security Awards are retroactive, can a Participant elect to take an Early Retirement until they get their Social Security Disability Award and then come back and change their election to a Disability Retirement? My thoughts are that this practice, if it is legal, should be discouraged, if possible, in that it would cause additional administration and cost to the Plan.

Thanks.

[JanetM]

Generally in any DB plan once you begin a benefit you can not change the form later. IMHO I don't think this should be done.

[Effen]

Although I agree with Janet, I work with a fund that permits this. If the person is eligible for Early Retirement and is applying for disability, why should they have to wait for 6-12 months without any income?

The fund permits them to elect ER pending the disability claim, then, if and only if they are awarded a disability benefit, their previous election is revoked and the benefit changes to a disability benefit. I believe the fund lets them make a new election at NRA, but they may treat the original election as binding.

All of this should be stated in the plan document and you need to work closely with the ERISA attorney.

I don't think "additional administration and cost" is a valid reason not to do it. The difference between the disability benefit and the reduced early retirement benefit can be very significant and I don't think it is fair to the participant to make him wait. The Funds generally want the members to get the best benefit available from the plan, remember that is what the plan is for. If the person qualifies for a disability, the funds will retro the payments anyway, if they are not, they were eligible for ER anyway. The fund isn't really out any extra money; it’s just a matter of when the payments will be made.

[jpod]

Would not the J&S requirements, including spousal consent, apply separately to the additional pension amount paid on account of a disability retirement? In other words, is there a sepaparate annuity starting date for that additional increment?

[Effen]

Generally the disability payments are pure subsidy and have no J&S requirements.

There could be implications for the spouse if the death benefit payable to someone who is on disability is different (lower) than the death benefit if the person "retired" and elected a J&100. On my plan, they are the same, so it is basically a non-issue.

Maybe the spousal consent on the "retirement" election should also mention that the spouse understands the election is be revoked if a disability benefit is obtained.

There are lots of little issues that need to be considered before this is done. Lots of information the participants need to understand. What happens if the participant dies prior to the disibility award? What if they don't get the disibility award?