Benefit Commencement Post NRA

[LIBERTYKID]

A participant terminates from a DB at age 45. He receives a letter from the plan at age 54 stating that he can commence benefits at early (age 55) or normal retirement age (age 65). The letter further states that if he does not apply for benefits at age 65, but later than 65, no actuarial adjustments and no retroactive payments will be made for the period from age 65 to the date benefits actually commence. Isn't the position taken by the plan a cut back of accrued benefits?

[Effen]

Probably. I think this is an area where common practice doesn't necessarily fit with the law. What you described is a relatively common practice; however I don’t believe it is defensible.

You can only suspend a person’s benefit beyond Normal Retirement if they are still employed. If they are not employed, the plan has no authority to suspend their benefit.

That said, I have seen many plans operate under the idea that if the person doesn't ask for their benefit, they don't have to pay it, but most attorneys will tell them that position is incorrect.