Plan Termination Calculation

[Guest DBStudentAct]

I am doing plan termination calculations – Early retirement eligibility is age 55 and 10 years of service. All those participants who are already eligible for early retirement are easy to handle. What about those for e.g who are 55 and have say 8 or 9 years of service, should we assume that they would have become eligible for early retirement had the plan continued to exist. Who all do we give this consideration to? Or do we just take a call that anyone currently eligible for early retirement will get the benefit of early ret and amend the plan doc to state likewise. I realize that a lot of the plan termination calculations depend on what the plan doc says but just wanted to know what most other people have done in their experience.

TIA.

[Andy the Actuary]

Attached is your answer: So long as the entity is not shutting down, both annuity contracts and lump sums must provide that any active participant who would otherwise have become eligible does grow into the subsidy. This can significantly increase the cost of a termination, in particular if a plan provides for unreduced early retirement.

IRS_Rev._Rul._85_6_Early_Retirement_Subsidy_Termination.PDF

[Guest Tony Ramsey]

Attached is your answer: So long as the entity is not shutting down, both annuity contracts and lump sums must provide that any active participant who would otherwise have become eligible does grow into the subsidy. This can significantly increase the cost of a termination, in particular if a plan provides for unreduced early retirement.

Thanks for share! It's my demand!