Which Plan Document Covers Employee

[Guest jfreeborn]

Hello

Individual is a participant in a defined benefit plan. She turned 70.5 (1994) while still working for sponsoring employer. As such, she received an in-service pension for about a year until she actually retired around age 73 (1996).

My question:

Which plan document applies to this person? The one when she began receiving a pension payment, or the one when she actually terminated service.

I know the law is that the plan document applicable to a particular participant is the one in effect on their last hour of covered service, but not sure about this situation. Any citations would be wonderful. Thanks everyone!

[Andy the Actuary]

Perplexing question. It is presumed you read and reread the most recent document and cannot find direction. I would vote for the documet when she finally broke service since she was still an active employee at that time.

Now, hears some porridge to sip:

Suppose that plan provides $100 month pension is amended to provide for $125 month pension. The amendment should be careful so that new level applies to the appropriate group. Otherwise, you might have to apply it retroactively!

On the other side, suppose participant had terminated in 1977 and the Plan said he could get a lump sum at 65 and specified the lump sum interest rate was 8%. Now, the person is retiring today and so we must use the PPA stuff to determine the minimum lump sum. Of course, in this case, new law has superseded.

It is interesting that when you terminate a plan and purchase a deferred annuity with a lump sum option that the insurers will price and guarantee for the current interest/mortality basis and will continue to use it regardless of published interest rates. While this doesn't seem kosher, they all seem to do this.

[SoCalActuary]

Hello

Individual is a participant in a defined benefit plan. She turned 70.5 (1994) while still working for sponsoring employer. As such, she received an in-service pension for about a year until she actually retired around age 73 (1996).

My question:

Which plan document applies to this person? The one when she began receiving a pension payment, or the one when she actually terminated service.

I know the law is that the plan document applicable to a particular participant is the one in effect on their last hour of covered service, but not sure about this situation. Any citations would be wonderful. Thanks everyone!

I vote for the document when she last worked for determination of her benefit, along with the document changes ever since, because this was a participant every year. If a prior document version had created a 411(d)(6) right, then you must also honor it.