abanky Posted January 28, 2010 Posted January 28, 2010 If a plan (for a chiropractor) was established in 2005 and has a nra of 55, didn't the nra need to be amended to at least 62?
WDIK Posted January 28, 2010 Posted January 28, 2010 Age 62 will not draw scrutiny from the IRS. Below age 62, you are supposed to be able to show that the retirement age is justifiable based on data available for that industry. For NRAs of 55 to 62 there are differing opinions as to how much leeway the IRS will give. ...but then again, What Do I Know?
abanky Posted January 28, 2010 Author Posted January 28, 2010 is there anywhere that I can get retirement trend date sorted by field?
david rigby Posted January 28, 2010 Posted January 28, 2010 Do you really need that? The most common method of dealing with this issue/problem is to amend the NRA to 62, and simultaneously add a subidized early retirement. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
abanky Posted January 28, 2010 Author Posted January 28, 2010 doesn't that still lower the PVAB and FT? Is there any anti cutback issues?
david rigby Posted January 28, 2010 Posted January 28, 2010 The PVAB and FT are based on the actuarial assumptions. Is it reasonable to assume (without regard to the plan's definition of NRA) that one or more participants will retire prior to NRA? I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
AndyH Posted January 29, 2010 Posted January 29, 2010 Is there any anti cutback issues? Yes. That is why you provide a subsidized early retirement benefit (like 0% reduction). Plus you need to adjust the formula going forward if you don't issue a 204(h) Notice because you need to avoid both accrued decreases and avoid a significant reduction in the rate of future benefit accrual. And if the plan is not a safe harbor, the changes will have testing implications.
abanky Posted February 22, 2010 Author Posted February 22, 2010 Ok, I have another scenario... maybe it's monday or maybe I'm just not that smart... Currently, Plan assumptions are: NRA: 60 Benefit 32% reduced for service less than 25 Accrual formula: Fractional based upon Service. What would be the best way to get this up to code?
SoCalActuary Posted February 22, 2010 Posted February 22, 2010 abanky, the minimum requirement is to change the nra to 62. Existing employees still retain full right to the benefits that existed before the change, so someone could retire at 60 and get their full current accrued benefit. But future accruals have no such guarantee. If you want to make the plan whole, then compute a reasonable actuarial equivalent of 32% at 60 to a higher rate at 62. Maybe this would end up with a 37% benefit at 62, depending on your mortality and interest assumptions.
david rigby Posted February 22, 2010 Posted February 22, 2010 Also, consider some type of unit accrual formula, prospectively. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
abanky Posted February 23, 2010 Author Posted February 23, 2010 Perfect... those were both ideas I was thinking of. Thank you.
AndyH Posted February 23, 2010 Posted February 23, 2010 But, Andrew, the change in NRD was supposed to be retroactive to 1/1/2009 (for a calendar year plan). So that makes the fix a bit dicier.
SoCalActuary Posted February 23, 2010 Posted February 23, 2010 But, Andrew, the change in NRD was supposed to be retroactive to 1/1/2009 (for a calendar year plan). So that makes the fix a bit dicier. But the IRS dealt with this issue. The benefit change cannot reduce any values accrued to the signing date of the change. A choice to go with the same formula at a later NRA is a cutback in benefits, so you also need to do your 204(h) notice as well. So a signed amendment now will provide the correct NRA adjustment, retro to 1-1-09, but the only problem will be for people who took an inservice distribution at the old NRA between 1-1-09 and the signature date.
abanky Posted February 23, 2010 Author Posted February 23, 2010 Andy, Very good point... Got to love take over plans...
abanky Posted February 23, 2010 Author Posted February 23, 2010 How does this sound... freeze the benefit at 1/1/2010, actuarially increase the benefit to 62 and throw in a actuarial equivalent age 60 ERB. Then create a future benefit that is slightly better than the formula they currently have.
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