Post NRA at plan termination

[ombskid]

A plan is being terminated. Several participants are still employed past NRA. Can the termination date be used as retirement date in calculating benefits and lump sums?

[david rigby]

Probably not. What does the plan say?

Perhaps I misread the question. If you are asking if the NRA can be used to determine the benefit and/or lump sum, then "probably not". If you are asking if the plan termination date should be used as a retirement date for the determination of the benefit and/or lump sum, that is probably what the plan will direct you to do.

[ombskid]

That is what I intended to say - if someone is still employed past NRA can the plan termination date be used as the actual retirement date for calculation purposes.

I will go through the document again to see if it addresses the situation.

Thanks

[AndyH]

The answer of course depends on the document, but unless the termination amendment changed this the payment would not consider the plan termination date.

Remember you must satisfy 417(e) regardless, which is based on the acc bn payable as of the later of NRD or the payment date.

[Effen]

if someone is still employed past NRA can the plan termination date be used as the actual retirement date for calculation purposes

I still don't understand the question. The benefits are calculated as the the benefit commencement date. I don't think the plan termination date has any relavence.

If the benefit is going to commence after NRD, it would need to be actuarially increased to reflect the missed payments, unless you gave the participant a suspension of benefits notice at their NRD. You wouldn't stop the rollup just because the plan terminated.

[david rigby]

The benefits are calculated as the the benefit commencement date. I don't think the plan termination date has any relavence.

If the benefit is going to commence after NRD, it would need to be actuarially increased to reflect the missed payments, unless you gave the participant a suspension of benefits notice at their NRD. You wouldn't stop the rollup just because the plan terminated.

Yes, the benefits s/b calculated at the BCD; the plan termination date is relevant because that is the absolute last date of any benefit accrual, unless the plan was amended to freeze accruals earlier.

And, Effen is correct in his comment about actuarial increase. The exception might be if the EE had actually commenced payment at NRD (or some later date).

[ombskid]

If someone is still working past NRD and the plan terminates, what is the benefit commencement date? Actual retirement date is an unknown future event.

[Effen]

Can you be more specific about what you are trying to do? Are you preparing a Notice of Plan Benefits, are you trying to calculate a lump sum, are you preparing distribution election forms, are you gathering information for an insurance company quote?

Actual retirement date is always an unknown future date. If you are determining a lump sum for someone beyond NRD, you determine the monthly benefit as of the lump sum payment date, then figure out the amount of the lump sum. If the termination delays the actual payout date, you just need to recalc everything as of a new date.

There is no deferral period once they are past NRD. If the plan is terminating, and you are offering a lump sum, the participant should be given the choice of an immediate lump sum, an immediate annuity (with options), or continued deferral (which must be purchased by an insurance company).

OR, are you saying your plan only pays a benefit after separation from service and since they haven't terminated, they aren't entitled to a benefit under the terms of the plan? If that is true, you can amend the plan to allow for immediate payment on the termination date, or buy an annuity that will pay the benefits once they separate from service (insurance companies generally don't like this type of provision because they will need to track the participants status).

[david rigby]

Actual retirement date is an unknown future event.

Maybe not. For EE over NRA, perhaps the plan's termination automatically defines the BCD. Read carefully.