Testing Former Employees

[Guest merlin]

I have a new client that is a Local of the IBEW. The Local sponsors a defined benefit plan for its employees. There are basically two groups of employees: Administrative Assistants, and Officers/Executive Board Members. The AAs have no connection with the other than as employees of the Local. The OEBMs work for any company the bargains for benefits with the IBEW (in this instance they all come from Verizon), then are elected to the Local's Exective Board. Many of the OEBMs are HCEs or former HCEs.

The Local's plan is not collectively bargained, but is patterned after the IBEW plan. Benefits are based on the Pension Bands written into the CBA. The IBEW bands are based on the individual's "craft", eg, a draftsman might be in band 113 which currently provides for a benefit of $52.62/month/year of service. When the draftsman gets elected as an OEBM his benefit under the Local plan is figured on the highest band 124, which currently is 68.85/ mo/yos. Further, the OEBM's benfits are subject to a multiplier, which can range from 1.25 to 1.75. All years of service with the Local and Verizon are counted, and the Local benefit is offset by the Verizon benefit. The AAs have no multiplier, and since they are not from Verizon, they have no offset. So the plan does not meet the safe harbor for offset plans,and must pass the general test for the active employees.

The problem I have is with the former employees. If an OEBM is voted out of office, he goes back to work for Verizon, where he continues to accrue service credit for purposes of his benefit with the Local. Also, if the dollar amount of his pay band increases, he gets that increase as well. It's almost as if the OBEM never left. Needless to say, this arrangement does no apply to any terminated AAs. So I now have to test the former employees. There are currently 7 vested terminees, 5 of whom were HCEs when they were OEBMs. Since they are benefiting and the other simplt 2 are not, does this part of the plan fail simply "by inspection"? Or does the continuation if the service credit violate the rules on imputing service? I'm sure this fails somewhere, but the practice is so entrenched that anyone who say it's no good is probably going to be named in a suit. So I need backup, especialy since the prior actuary never mentioned any of this stuff to them.

Or can someone see some way that it's OK?