Protected Benefits

[Guest SSL]

Is there any issue with changing the NRA in a defined contribution plan from age 55 to age 60? THis plan has a distribution requirement at NRA(no earlier) and former participants payout date will now be extended another five years. It doesn't seem like an cutback issue because the benefit is not being reduce - the availablility to access the distribution has been delayed. THis is similar to loan and in service withdrawal features. I look forward to your feedback. Thank you.

[Guest Sieve]

The benefit includes the timing of a payment, as well. So, providing a benefit at age 55 and then moving it back to age 60 is a cutback. It can be done prospectively--i.e., with repsect to contributions/benefits accrued after the effective date of the change--but it cannot eliminate a benefit option (payment at age 55) to the extnet it already had been accrued. It is not similar to a loan or hardships, which specifically--per the regs--are not fully protected from cutback.

[Guest SSL]

The benefit includes the timing of a payment, as well. So, providing a benefit at age 55 and then moving it back to age 60 is a cutback. It can be done prospectively--i.e., with repsect to contributions/benefits accrued after the effective date of the change--but it cannot eliminate a benefit option (payment at age 55) to the extnet it already had been accrued. It is not similar to a loan or hardships, which specifically--per the regs--are not fully protected from cutback.

So if I understand you correctly, anyone that has not reached age 55 has not accrued a benefit and will not be affected by this amendment. Do you agree? THank you.

[Guest Sieve]

Any benefits earned (contributions made, plus earnings) while the Plan's terms permit payment of that benefit at NRA (age 55) will NOT have the payment date extended to age 60 by this amendment. Only the payment of new benefits earned (contributions made & their earnings) after the effective date of the amendment can be delayed until the new NRA (age 60).

Note that this is different from earning the right to receive an allocation of an employer contribution, where you may not have earned the right to that allocation (if it contains an end-of-year employment condition) until you actually are employed on the last day of the year, and the allocation therefore can be changed prior to that date. That's because the allocation is not a protected optional form of benefit, while the timing of a distribution date is.

[Guest SSL]

Any benefits earned (contributions made, plus earnings) while the Plan's terms permit payment of that benefit at NRA (age 55) will NOT have the payment date extended to age 60 by this amendment. Only the payment of new benefits earned (contributions made & their earnings) after the effective date of the amendment can be delayed until the new NRA (age 60).

Note that this is different from earning the right to receive an allocation of an employer contribution, where you may not have earned the right to that allocation (if it contains an end-of-year employment condition) until you actually are employed on the last day of the year, and the allocation therefore can be changed prior to that date. That's because the allocation is not a protected optional form of benefit, while the timing of a distribution date is.

Thank you for your comment. I think I'm coming around.

[betheeg]

Sieve, I'm wondering if this could work if you change the NRA to 60 and then provide for an early retirement date at 55?

[Guest Sieve]

If you protect the age 55 distribution for pre-amenedment accrued benefits, then Yes. But the OP wanted to delay the commencement of distributions until age 60, and that would be a cutback as to accrued benefits as of the amendment's effective date.