Eliminating Actuarial Increase

[Guest Nini]

Is it possible to eliminate the actuarial equivalent increases for employees working beyond normal retirement age? In the alternative, can we eliminate the actuarial equivalent increase prospectively by splitting the benefit (i.e., accrued benefit up to the effective date of the amendment will continue to be actuarially increased beyond NRA, however, accrued benefits as of the effective date of the amendment and beyond will not receive actuarial equivalent increases)?

Furthermore, please provide thoughts with regard to eliminating the increase for active employees, but retain it for terminated vested employees.

Any cites/authority would be helpful.

Thanks.

[Andy the Actuary]

I have yet to find a client who can issue a timely suspension of benefits notice, let alone administer the provision correctly.

Just remember, the SPD must explain in easy to understand English how this provision would operate. Bifurcation is an interesting word -- no one understands what it means; likewise, no one will understand a bifurcated process.

Can't help thinking you're looking for trouble.

[david rigby]

I agree with Andy. You cannot count on the administration to be accurate.

Alternatively, you can encourage the EE to commence payment at NRD (amend the plan if necessary), but you cannot require it.

[ak2ary]

Even if the administartion is perfect, you cannot eliminate an actuarial increase on a previously accrued benefit without violating 411(d)(6) ... (and the Heinz decision)

You could eliminate the actuarial increase with respect to future accruals, except that you will blow the suspension notice...everybody does. Keep in mind also that, at age 70.5, you must begin actuarial increases even if the suspension rules are followed perfectly