Benefits Commence Long After Annuity Start Date

[ERISA-Bubs]

We have a defined benefit plan. The plan calls for payments to begin in the month after Late Retirement. We had an individual retire at Late Retirement date, but he did not make an election until 6 months later. We have yet to make a payment, 8 months after his Late Retirement date.

The Plan only provides for one benefit calculation, which is based on his age, service and other factors as of the Late Retirement date.

Should I start making payments now based on that calculation even though he missed out on several months worth of payments? Would this be a violation of the actuarial adjustments rule under Treasury reg 1.411©-1(e)?

Should I recalculate the benefit even though it's not provided for in the plan?

Should I pay the several months of missed payments in a lump sum and go forward from there?

The plan allows for a “retroactive annuity starting date” but my understanding is that this is only used where the QJSA is not provided before the actual annuity starting date (in this case, the Late Retirement date). This is not the case. Am I right that this option is not available to me?

Thank you all.

[Guest Gnahzmap]

If you don't meet the RASD requirements under 1.417(e)-1, you should start the annuity subject to an actuarial increase.

[My 2 cents]

Can it be presumed that the person was given a proper suspension notice upon attainment of normal retirement age? If not, the plan must provide a benefit no less than the full actuarial equivalent of the amount payable at normal retirement age (and should provide at any subsequent date after the year of attainment of normal retirement age a benefit no less than the amount calculated recognizing subsequent accruals or the actuarial equivalent of what would have been payable at the end of the prior plan year).

Of course, once the later of attainment of normal retirement age or separation from service has occurred but payments have not begun, it is obligatory that the person either receive back payments or a full actuarial increase, since post-normal retirement benefits cannot be suspended in a month in which the participant works for the sponsor at least 40 hours. So if the person retired and 8 months have elapsed without any payments being made, the plan must either provide full back payments for the period since retirement or the amount that would have been payable with a full actuarial adjustment for deferral.

Don't forget that if the participant was given a QJSA notice and a retirement election form more than 6 months ago, they are now stale and you have to redo the benefit calculations. Offering a RASD back to when the person separated from service would seem reasonable enough, but the information concerning what would be payable based on a current commencement date will have to reflect actuarial increases appropriately.