Benefit Restriction (Accelerated Payment) Notice

[AndyH]

How are people interpreting the distribution requirements of this? It appears to me that blanket distribution is required, but I am seeing indications that some organizations intend to distribute it only to payees. Anyone have insight into how the IRS (or other applicable authorities) view the distribution requirement?

[Andy the Actuary]

I have spoken with a couple of benefits attornies. They (like me) take the fundamentalist approach and prescribe the notice be given to all participants, beneficiaries, alternate payees, etc., irrespective of whether or not restrictions will affect them.

They also see no problem with prefacing the notice that "This is a required notice and if you are in one of the following categories, the provisions of the notice will not affect your 2008 distribution . . ." The categories would include persons in payout, terminated vesteds who will not reach a distribution age in 2008, active employees who do not terminate employment in 2008, and active employees who terminate employment in 2008 but who are not eligible for an immediate distribution in 2008.

I have seen no pro forma notice. There are two key issues: (1) What should the notice contain? I'm guessing at this point you would include the language from the August proposed regulation on 436. (2) How will you respond to the participants who want to know specifically how they're affected?

[AndyH]

Thanks for the comments. Ugghh.

[Andy the Actuary]

It's beyond "ugghh." It's quite possible some employees will not read beyond you're benefit is being restricted and will believe their pension is being forfeited. Thus, it is important before getting into the body of the crud that the notice preface that the provisions do not affect the amount of your pension but only how much can be distributed to you at any one time.

andy t.a.

[tuni88]

When does the notice have to go to participants for a calendar year plan that is going to have an AFTAP between 60% and 80%?

[Andy the Actuary]

An actuarial answer: It depends.

Presumptive 2007 AFTAP certified at less than 90%: By May 1, or for those who more conservative, April 30.

Presumptive 2007 AFTAP certified at least 90%, then within 30 days after certifying 2008 AFTAP.

[chc93]

Suppose the 2007 AFTAP is less than 90%, so it is not certified. April 1 the AFTAP is 60%. So, a notice is issued by April 30. Sometime after that (April 2 or later), the 2008 AFTAP is certified to be >80%. Is there "another" notice to participants that the benefit restriction is now "lifted"?

[flosfur]

Suppose the 2007 AFTAP is less than 90%, so it is not certified. April 1 the AFTAP is 60%. So, a notice is issued by April 30. Sometime after that (April 2 or later), the 2008 AFTAP is certified to be >80%. Is there "another" notice to participants that the benefit restriction is now "lifted"?

On that point, my question is, is the notice required at all by April 30 if an AFTAP is certified to be >80% by 04/29, say? If it is required then is it OK to say that the benefit restrictions applied from 04/01 to the day before the certification date so there is no need for a second notice to let them know that the restrictions are now lifted!