Post-NRA Actuarial Increases

[Guest Jayco]

Client has a DB plan under which an ex-employee who last worked for the client in 1981 did not begin receiving benefits at age 65. Now (five years later) he is applying for benefits and the plan did not provide for an increase in the employee's benefit after attaining age 65 (NRA). Is this okay or does the ex-employee's benefit need to be increased to take into account he is beginning to receive benefits at age 70?

[Andy the Actuary]

Client has a DB plan under which an ex-employee who last worked for the client in 1981 did not begin receiving benefits at age 65. Now (five years later) he is applying for benefits and the plan did not provide for an increase in the employee's benefit after attaining age 65 (NRA). Is this okay or does the ex-employee's benefit need to be increased to take into account he is beginning to receive benefits at age 70?

Please correct if wrong but assumed is the Plan states the pension will start at age 65 and further, if no election is made, the Plan would provide for a J&S if married and normal form if unmarried. In such case, shouldn't the pension be paid in this manner and the back payments made from age 65? An actuarial increase is not equivalent to awarding payments. If you actuarially increase a life annuity (i.e., unmarried) and the pensioner dies after receiving one payment, then he (his estate) has come out way behind. You may wish to check the regulations on retroactive annuity start date to see if any meaningful guidance is provided.

I'll stop here because this is more of a legal than actuarial matter.

[mwyatt]

Andy, the propeller beanie avatar coupled with the disclaimer is priceless!

[mwyatt]

Andy, tried to modify your suggested signature line for content. Have to find an avatar now...

In all seriousness on this post, think you have to go back to the 85-86 reg changes that outlawed the "within five year of NRA exclusion" for entry to a DB plan; think a complicating thing here is the '81 termination date. Some things don't exactly make sense with respect to this issue.

The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice, instead of trying to poach professional advice on the sly by trolling random message boards.