Deferral Past NRA

[Guest shaul]

If a plan allows a participant to defer receipt of his benefit past normal retirement age - - - assume he quits before NRA, and does not work on or after NRA at all - - - and the participant affirmatively, voluntarily does so by electing to defer until age 68, must his benefit be actuarially increased for the delayed payment? My understanding of 401(a)(14) and 411 is that the payment must be increased, but I wasn't sure whether his affirmative election to defer somehow eliminates that requirement.

Thanks.

[Effen]

The two main questions are:

1) What does the document say

2) If the document permits, did you properly notify the participant with a Suspension of Benefit Notice.

If you didn't properly notify the participant, my opinion is that you must provide the actuarial rollup regardless of the language in the document.

[Andy the Actuary]

Would suspension of benefits apply since participant servered employment prior to NRD?

Also, do not believe it is permissible (even if participant elects) to forfeit benefits at NRA because then you'd effectively have accrued benefits decreasing on account of age. For this reason, the retroactive annuity start date rules were created. I believe you could allow the suspension provided as Mr. Effen indicated the plan so provides but then would have to apply the retroactive annuity start date rules and it is questionable whether or not simply giving an actuarial increase would be satisfactory. Suggestion is to read the retroactive start date rules.

[Effen]

Good point Andy. Most documents I have seen don't allow for a vested deferred to defer past NRD. Often times the attorney's take the position that a retro annuity must be paid, but just as often they allow for the rollup.

I don't try to tell the client which interpretation is correct; I'm just an old country actuary. I don't know noth'n bout all that legal stuff... I just do the ciphering.