Provisional Retirement

[J Simmons]

A client has a DB plan. One of the employees who is not yet in pay status is no longer able to work. He has been receiving LTD benefits, but the insurance company stopped them. (The premiums for the coverage were paid by the employer). The individual is appealing the denial of further LTD benefits, internally at the insurance company. In the meantime, the employee has a screaming cash flow need and so has reluctantly begun taking retirement benefits.

A-Can the LTD insurance carrier now deny the LTD benefits because the individual is in pay status as a 'retiree' under the DB plan?

B-If the LTD benefits are reinstated in the appeal process, can the DB plan and individual agree to "undo" his retirement at this time--stop further DB payments and the individual pays those DB payments back?

[Andy the Actuary]

A - You would need to look at LTD contract to determine what the Insurer can and can't do. Why did the insurance company stop LTD (e.g., participant failed to meet definition of disability; offset by pension benefit?)

B - Doubtful since annuity start date has passed. However, always let the Plan document be your guide. What does the Plan say? Did the Participant retire under a disability provision or was it simply and early or normal retirement provision.

Both of these questions are legal rather than actuarial so always best to involve attorney expert in the area rather than drinking from the soup bowl of some dumb old propeller-head.

[david rigby]

A - Most LTD plans/policies have offset provisions, almost always including any pension being received, but also sometimes including any pension for which the EE is eligible.

B - Agree with Andy. It may be possible to amend the plan to add an "undo" provision, but (as you know) tread carefully.