Late Retirement Benefit

[Dinosaur]

We have a DB plan that has actuarial equivalence factors based on 1971 GAMT @ 6%. There are a number of participants beyond NRD. Benefits, which are frozen, may be paid as lump sums.

We would like to change the actuarial equivalence (AE) interest rate to a lower level.

We are considering the following:

A participant’s late retirement benefit will be equal to the greater of:

1. Late retirement benefit determined according to the AE factors in effect as of April 1, 2013 (date of amendment), or
2. Late retirement benefit determined according to the application of the new AE factors as of the actual date of late retirement (after April 1, 2013) applied to the participant’s NRB.

Benefit 2 will not be greater than Benefit 1 for several years which would require a notice to be distributed.

What is the lowest interest rate basis that would pass muster? First segment rates? Other? Could you increase a flat .25% per month for late retirement? .1%?

[david rigby]

IMHO, this will not work. The 411d6 protection will apply to the accrued benefit at the date of change (frozen in this case), including the "old" definition of AE.

I think this is pretty similar to the Supreme Court decision commonly referred to as "Heinz".

However, since I have advocated simpler/lower late retirement AE for years, I would love to be proven wrong.

[Effen]

FWIW, I also agree with David.

[tymesup]

We had a similar issue and decided 411d6 applied.