Participant not fully vested-when is distribution required

[bamma]

If a 65 year old retires but is not completely vested in the company DB plan, when is he required to begin receiving distributions from the plan?

[Andy the Actuary]

Not sure of the facts. Person quits at 65 but is not 100% vested. This implies the person's NRD was the later of age 65 or 5 years from the date first participated. Hence, would this be by age 70. Former employees are supposed to begin receiving payments by their NRD and if they don't make an election, payments should begin under the automatic J&S. The only time I've witnessed a former employee start his pension after NRD is when the plan administrator failed to take timely action.

What is missing?

[Effen]

You should double check the definition of NRD. If he has reached his Normal Retirement Date, he must be 100% vested. In other words, if NRA is just 65 (and not 65 & 5th anniversay of his DOP), he must be 100% vested at 65, regless of how many years he actually worked.

If it is 65 & 5 and he is not 100% vested, I would say the benefit should commence at his NRD, when ever that would be.

[david rigby]

Minor enhancement to Effen's advice:

Generally, plans will define NRA as the time at which 100% vesting occurs (as is done in IRC 411), while NRD is the date on which this benefit commences. Although not advisable, some plans have NRA = age 65, and NRD = later of age 65 and fifth anniversary of participation. Thus, this EE could be 100% vested, but still have to wait for commencement date. But, as stated, check the plan definitions.