Suspension of benefits notice

[Guest ERISAphile]

Is the plan required to send a suspension of benefits notice to all participants who reach normal retirement age, even those who continue to work past normal retirement age without stopping? CCH Pension Plan Guide states that notice must be given to employees who reach NRA but continue to work, and cites a DOL information letter dated 7-12-82 (which I can't access). Code Sec. 411(a)(3)(B) seems to pertain only to actual retirees who go back to work -- meaning they stopped work, and then resumed covered employment and so pension benefits were suspended. If a suspension of benefits notice was not sent to participants at NRA who continued to work after NRA (without stopping work and without receiving pension benefits), are these participants entitled to an actuarial adjustment for the time they worked after NRA, as well as the accrual of regular benefits while they worked after NRA? What is the sanction for not sending a suspension of benefits notice to participants who continue to work in covered employment after NRA?

[Effen]

Is the plan required to send a suspension of benefits notice to all participants who reach normal retirement age, even those who continue to work past normal retirement age without stopping?

Yes, unless your plan automaticly provides for an actuarial increase, however it is still probably good practice.

If a suspension of benefits notice was not sent to participants at NRA who continued to work after NRA (without stopping work and without receiving pension benefits), are these participants entitled to an actuarial adjustment for the time they worked after NRA, as well as the accrual of regular benefits while they worked after NRA?

Maybe, it depends on what the document says. You are permitted to give the greater of an actuarial increase or the age/service. In the past it was assumed that you could do this as standard practice, however the IRS has been saber rattling lately that you must have explicit language in your document for this, and lacking explicit language, you must provide both the rollup and the age/service benefit. Either way, you should make sure you are following the document, or amending the document to clarify.

What is the sanction for not sending a suspension of benefits notice to participants who continue to work in covered employment after NRA?

You must give at least the actuarial increase.

Obviously, these are legal issues and your fund counsel needs to make the call. I have seen a wide variety of interpretations, so make sure the attorney is presenting the solutions.

[Guest ERISAphile]

Where in the Code/Regs ERISA/Regs does it say that if you don't send the suspension of benefits notice to participants who continue working after NRA you must give the participants the actuarial increase plus credit them with service for the time they worked after NRA, or is there other authority for this? How has the IRS been saber rattling about having specific language to allow you to give the greater of an actuarial increase or the age/service? Are there any notices or anything else on this?

[Slider]

The rules regarding suspension of benefits and actuarial offsets are contained in a set of proposed regulations (1.411(b)-2(b) that were issued in the late 1980s. This shouldn't be confused with the proposed regulations with the same number issued in 2002 or 2003 and subsequently withdrawn.

Those regulations provide (and are illustrated with a number of examples) that if benefits are not suspended then the participant is enetiled to both the actuarial adjustment and the additional accrual. However, if benefits are not suspended, the plan can "provide" for an offset so that the end result would be that the participant would be entitled to the greater of the two. The work "provide" means that the offset language would have to be in the plan document.

With regard to the IRS requirement for notice, you might take a look at the following. Forgive me but I can't figure out from the bb code how to post a link.

IRS Notice Requirements

[Effen]

Also, look at Q/A 39 from the 2009 Gray Book.

Here is a link to previous discussion that contains the Q/A. prior discussion