LTD Benefits/Continued Accrual/Cutback

[Guest jgferrei]

DB Plan provides that employees who have at least ten YOS and who qualify for LTD will continue to accrue benefits under the plan until NRA or their earlier commencement, as long as they continue to qualify for LTD (i.e., they remain totally and permanently disabled). Joe Smith was employed at Plant X; Joe qualified for LTD three years ago and is currently collecting LTD benefits. Plant X is about to be closed and all its employees terminated. Assume that if employed, Joe would have been terminated (i.e., no possibility of a position at another plant, etc.)

(1) Can the DB plan cease giving Joe accrual credit, on the theory that Joe is no longer on LTD "leave" -- instead, he's been terminated?

(2) If we are not comfortable that the Plan language supports this position, would an amendment freezing Joe's accrual constitute a cutback prohibited by 411(d)(6)?

[Alonzo]

In answer to your second question, you can always cease future benefit accruals, and not violate 411(d)(6).

The answer to first question would depend on the precise wording of the plan and the precise circumstances of the individual. (After the plant closing, will the individual continue to receive LTD benefits?)

It strikes me that the consulting and legal fees needed to research this question thoroughly, draft an amendment, and defend against the inevitable lawsuit would be more than the present value of the disabled participant's future service benefit.