Amendment After Year End

[Dougsbpc]

Suppose you have a DB plan with a 12/31/2005 year end that was amended 2/15/2006 to increase the retirement age from 64 to 65 effective for the 2005 year.

412©(8) allows for retroactive amendments as long as

1) It was executed within 2 1/2 months after the close of the plan year.

2) The amendment does not reduce the accrued benefit of any participant as of the first day of the plan year to which it applies.

If a participant had an accrued benefit of $1,000 on 1/1/05, he would still have an accrued benefit of at least $1,000 after such amendment. However, his PVAB might be less valuable on 1/1/05 because of another year of discounting. Would this negate the amendment?

[Blinky the 3-eyed Fish]

What about the actuarial increase of the benefit? That should make the two benefits equivalent.

But besides that the amendment cannot cut back certain BRF's. Keep in mind that retirement age brings possible perks, like 100% vesting, perhaps the right to take an in-service distribution, etc. You still have a grandfathered $1,000 benefit payable at age 64 to account for. Your amendment cannot take that away.

[Dougsbpc]

Blinky

Thanks for your observation.

You are right that the actuarial increase would make the two equivalent.

I dont think the BFR's will be an issue in this case as the company owner is the only participant.

Are you saying that the requirements of 412©(8) will not be satified because the $1,000 accrued benefit payable at age 65 will be less valuable than $1,000 payable at age 64? Wouldnt the actuarial adjustment make it equivalent?

Thanks again.

[SoCalActuary]

I believe Blinky is saying that you have an accrued benefit of $1,000 payable at age 64, but $1,100 payable starting at 65 (or whatever the actuarial equivalent provides.)

You do not have $1,000 payable at age 65 unless you have the unlikely event that

you have reached your 415 salary cap.

(If you have the salary cap that prevents you from an increase,

then you need to give a notice of suspension of benefits.)

[Blinky the 3-eyed Fish]

SoCal is right that is what I am saying. Your original post inquired about the amendment under the guise it was somehow a reduction in the benefit. I am stating it is not a reduction.

As for the BRF's, I was referring to those in the context of what cannot be taken away under 411(d)(6), not regarding nondiscrimination. Along those lines is the need to preserve the right to associated with the original NRA as I mentioned. Because those rights are preserved, I disagree a suspension of benefits is needed even if an actuarial increase is not possible due to 415 constraints.

[Dougsbpc]

Thanks for clearing this up.