Benefit Restrictions

[Effen]

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1) after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

I know some of these have been asked before, but I'm looking for consensus.

1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree?

2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

[dmb]

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1) after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

I know some of these have been asked before, but I'm looking for consensus.

1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree?

2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

Don't have any plans less than 80% for 2008 so i'm not sure about scenario 1, but would guess you would need to provide another notice, i would say no notice for Scenario 2 because there will be no restrictions. That is the way we are operating under Scenario 2 since the small cashouts are not subject to restrictions.

[AndyH]

Well, I guess there is no consensus.

Don't know about 1. Good question.

We assume a notice would be required under 2 under current guidance because the plan is "subject to" the restriction. This precludes an amendment adding such an accelerated payment, for example.

[Andy the Actuary]

Would think you need to provide notice each year. It is important to keep in mind that a fine of $1,000/day/per indicent can be imposed, where an incident is a failure to provide notice. So, if a plan had 200 participants, we're talking $200,000 per day and the client could be forced into bankruptcy if there were some compelling reason (e.g., medicare fraud).

Until guidance is issued, unless the Plan attorney advises otherwise, I would provide the notice even if no lump sums are payable. While this doesn't make sense, it also doesn't make sense that you have to notify retirees and beneficiaries that they can't get a lump sum, but that's what the words say. But, there is a subtle shred of reason: The Plan also cannot purchase an annuity, and this could affect such participants.

Second, in a similar light. Suppose a plan is frozen in 2008 and now the AFTAP=55%, would you not only have to indicate "no lump sums" but also "no accruals?"

[HiVi]

With the lack of guidance on the content of the notice on benefit restrictions, I am just wondering what actuaries out there are using as far as the verbiage on the notice. Would anybody be willing to share what they had drafted?

Thanks.

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1) after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

I know some of these have been asked before, but I'm looking for consensus.

1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree?

2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

[ScottR]

With the lack of guidance on the content of the notice on benefit restrictions, I am just wondering what actuaries out there are using as far as the verbiage on the notice. Would anybody be willing to share what they had drafted?

Thanks.

Act Sec. 101.

(j) NOTICE OF FUNDING-BASED LIMITATION ON CERTAIN FORMS OF DISTRIBUTION. --

--The plan administrator of a single-employer plan shall provide a written notice to plan participants and beneficiaries within 30 days --

(1) after the plan has become subject to a restriction described in paragraph (1) or (3) of section 206(g)),

I know some of these have been asked before, but I'm looking for consensus.

1) Lets say my 2008 AFTAP is 75% and my 2009 AFTAP is 65%. I gave the appropriate notice in 2008. Do I need to give another notice in 2009 even though nothing changed? The statute says the notice is required "after the plan has become subject to a restriction". I was subject to the restriction in 2008, nothing new in 2009, so it seems that no additional notice is required. Agree?

2) Lets say my 2008 AFTAP was 85% and the 2009 AFTAP is 75%. My plan only pays lump sums less than $5,000 and therefore the restrictions have no practical impact. Do I still need to give a notice? I think the conservative answer would be yes, but does everyone still agree?

Attached is the language I've been using.

.. Scott

AFTAP_EE_Notice___less_than_60_.doc

AFTAP_EE_Notices_60__to_79.99_.doc

[HiVi]

Thank you, Scott.