Notice 2007-69 NRA Change

[Penman2006]

I am looking at a plan document that was amended effective 1/1/09 to change the NRA from 60 & 5 YOP to 62 & 5 YOP. Previously ER was 55 & 10 YOS and the reduction was AE. Now ER is unreduced from 62 to 60 and then AE before 60, there is no longer a service requirement. The plan pays the lump sum on termination of employment. There was no 204(h) notice distributed with the amendment.

I know Notice 2007-69 gave 411(d)(6) relief but I am still not sure, having read some other posts on various boards, that a 204(h) notice isn't required if you wanted the future accruals to be payable at age 62. The benefit fromula was not changed in any way with the NRA amendment. So how are future accruals handled? Would it be that the 1/1/09 AB (or the AB through the date of adoption) would be adjusted to age 62 and then all future accruals would be automatically an age 62 accrual, or would all accruals, past and future, be adjusted from 60 to 62? I would think the former but there is no language in the document to this effect.

Getting to the point, this is a small plan and the plan sposnor was perfectly happy with the age 60 NRA. I am wondering if simply adding an amendment clirifying that "all optional forms of benefit will be based on the age 60 unreduced accrued benefit" would in any way run afoul of the law. Basically then the change in NRA would only effect the issue of in-service distributions not being allowed until age 62 and other than that the plan would be the same as before the amendment changing NRA.

I would appreciate any thoughts on this. Thanks.

[AndyH]

I am looking at a plan document that was amended effective 1/1/09 to change the NRA from 60 & 5 YOP to 62 & 5 YOP. Previously ER was 55 & 10 YOS and the reduction was AE. Now ER is unreduced from 62 to 60 and then AE before 60, there is no longer a service requirement. The plan pays the lump sum on termination of employment. There was no 204(h) notice distributed with the amendment.

I know Notice 2007-69 gave 411(d)(6) relief but I am still not sure, having read some other posts on various boards, that a 204(h) notice isn't required if you wanted the future accruals to be payable at age 62. The benefit fromula was not changed in any way with the NRA amendment. So how are future accruals handled? Would it be that the 1/1/09 AB (or the AB through the date of adoption) would be adjusted to age 62 and then all future accruals would be automatically an age 62 accrual, or would all accruals, past and future, be adjusted from 60 to 62? I would think the former but there is no language in the document to this effect.

Getting to the point, this is a small plan and the plan sposnor was perfectly happy with the age 60 NRA. I am wondering if simply adding an amendment clirifying that "all optional forms of benefit will be based on the age 60 unreduced accrued benefit" would in any way run afoul of the law. Basically then the change in NRA would only effect the issue of in-service distributions not being allowed until age 62 and other than that the plan would be the same as before the amendment changing NRA.

I would appreciate any thoughts on this. Thanks.

David, I'm not sure I understand your last paragraph, but you definitely have a point in your second. We have increased the accruals so that they have the same value, if we did not issue 204(h) notices. Of course this is not an issue for a frozen plan, except for "late retirement", i.e. what happens when somebody attains age 61 before versus after the amendment. But people seem to be ignoring that issue in the amendments that I have seen from others.

[Penman2006]

Andy, when you said "We have increased the accruals so that they have the same value, if we did not issue 204(h) notices", you mean that all future accruals will be adjusted as well (increased by the AE factor from old NRA to new NRA), right?

Per your question, regarding my last paragraph, for anyone that is not past NRA I was trying to keep the optional form calculation exactly the same as before the NRA amendment. I was trying to make it so that after the NRA amendment the only change in the plan is that the age for in-service distributions was moved up to the new NRA. Having thought about it some more it's probably too simple and a bad idea and I'm not going to consider it any further.

I already had one of the frozen plan age 61 late retirement situations pop up where the NRA was changed from 60 to 62. Nothing in the doc to help....fun. Wouldn't you think that if someone turned age 61 beofre the amendment that they would be enttitled to the actuarial increase to age 61 for late retirement? If you did not do that you would not be following the plan document, right?

Thanks for your help.

[AndyH]

Andy, when you said "We have increased the accruals so that they have the same value, if we did not issue 204(h) notices", you mean that all future accruals will be adjusted as well (increased by the AE factor from old NRA to new NRA), right?

Per your question, regarding my last paragraph, for anyone that is not past NRA I was trying to keep the optional form calculation exactly the same as before the NRA amendment. I was trying to make it so that after the NRA amendment the only change in the plan is that the age for in-service distributions was moved up to the new NRA. Having thought about it some more it's probably too simple and a bad idea and I'm not going to consider it any further.

I already had one of the frozen plan age 61 late retirement situations pop up where the NRA was changed from 60 to 62. Nothing in the doc to help....fun. Wouldn't you think that if someone turned age 61 beofre the amendment that they would be enttitled to the actuarial increase to age 61 for late retirement? If you did not do that you would not be following the plan document, right?

Thanks for your help.

Regarding your first paragraph, yes, we increased the new accruals actuarially.