Amendment to change procedure to apply for diability pension

[alexa]

We are slightly under 80% funding. A disabled employee (who is very ill and near death) did not apply for the disability pension under our DB plan within the one year period required. The plan requires eligiblity for SS disability as a criteria for elig for the disability pensio which is immediate no redcution. Social Security Admin had just determined his eligibility ; it took them more than a year.

This 1 year provision is indeed soemthing new to me. The Admin Committtee has recommended amending this out of the plan. However our actuary is saying that this is an increase in plan benefits since we are slightly under the 80% funding and we advised us to contribute the Present Value of his disability pension. I am also running by ERISA counsel who has not gotten back to me yet.

I wanted to get others opinions on this.

We are not increasing the disability benefit. Seems like a catch 22 that to be eligible for the disability pension you must be eligible for SS disability. Since this took the SS Administration over a year to determine this guy's eligiiblity , one would think this strange concept of applying within a year to get the disability pension be amended out withut compromise funding of the plan?

Any suggestion on how to maybe do this w/o triggering an increase in benefits?

Much thanks

Alexa

[Andy the Actuary]

What is the Plan's definition of disability and when is a disability determined under the Plan?

[alexa]

What is the Plan's definition of disability

Disability pension eligibility is 10 years of benefit service with total & permanent disability ; and when is a disability determined under the Plan?

total disability being determined by eligibility for SS disability

[alexa]

Severance from ctive employment is determined after 12 motnhs while disabled. The disability pension begins after severance. But one must be eligible for SS disbaility to get the diability pension. And in quite a few cases it can take over a year , as in our case, for SS Admin to grant you SS disability.

The 1 year window seems strange to me and the Admin Committee wants to amend it out of the plan but at a cost- PV of disability benefits expected to be paid, although the ex employee is on deathbed and not married so not

If our company has to put this into the plan ok but I just don't think that the intent of pPA would be for what I consider a plan administrative change and not ameaty increase in plan benefits. If the ex-employee had recieved SS eligiblity before the 1 year, he would have started his disability pension

[david rigby]

It's very common for SS disability to take a long time, sometimes with retroactive effective date. Most PP that provide a disability benefit recognize this, and accept a retroactive effective date of disability. The important thing is (usually) whether the effective date of disability falls within the employee's employment period. It's possible your plan does not need to be amended to recognize this. Review any precedence.

[alexa]

It's very common for SS disability to take a long time, sometimes with retroactive effective date. Most PP that provide a disability benefit recognize this, and accept a retroactive effective date of disability. The important thing is (usually) whether the effective date of disability falls within the employee's employment period. It's possible your plan does not need to be amended to recognize this. Review any precedence.

well that's my issue- the plan states that the disabled perso must apply for the pension within one year- this seems like a very odd provision but that's what I'm stuck with. I think it it is best to amend it out

I am new here so did ask about precedence- I guess so few disabled where it must not have been an issue

But I guess my question is would this plan change constitute an amendment to increase plan benefits which would then be disabllowbale since we are just under 80% funded

We did just freeze the plan as of 9/30/11 but actuary is saying that freeze won't help us until next year not 2011