Actuarial Increase or Not?

[JBones]

I have a plan with an age 65 normal retirement age with a benefit formula of 2.4% x YOS (max 10) x High 3. There is an active participant in the plan who is fully accrued (was by age 65), is age 70 and has yet to begin receiving benefits. Up to this point, his benefit has been actuarially increased due to his late retirement. The plan provides that the late retirement benefit is the greater of the actuarially increased benefit or the NRB taking into account any accruals after attainment of retirement age.

The plan is amending the benefit formula from 2.4% per year to 5% per year.

Would the increase in benefit formula be considered an accrual after retirement age, i.e. would his benefit at age 70 be 5% x 10 x High 3 or would it be 5% x 10 x High 3 adjusted from age 65 to 70?

[Effen]

I would determine his AB immediately before the amendment, then immediately after the amendment and he gets the greater.

I think you need to ask the client what they want, then make sure the amendment provides for it. As long as you don't reduce the participant's benefit from what is was immediately preceeding the amendment, I think you are ok. That said, if you are doubling the multiplier, I would expect that he would get an increase, but you don't need to calc what his benefit would have been at 65 under the new formula and then roll that up. Just check his new formula benefit against his current rolled up benefit and that becomes his current accrued benefit.

[Blinky the 3-eyed Fish]

In other words, phrase your amendment properly and don't cut back his pre-amendment benefit.