Interpretation of Plan document definition

[Gary]

"Final Avg Earnings" means avg monthly amt of Compensation during 3 consecutive yrs, within the last 10 calendar yrs prior to termination, which shall produce the highest avg.

Participant works from 1977 till 9/1/97.

What period can be considered in determining avg pay?

[david rigby]

Interesting. Many plans modify the defintion of FAP if the participant has less than the number that usually goes in the denominator, such averaging actual pay over actual service. Does that apply here?

[M R Bernardin]

I'm not sure I understand the question. Why wouldn't the relevant years be calendar years 1987-1996, since those are the last ten calendar years prior to termination? (Obviously, using the three consecutive years which produce the highest average.)

[david rigby]

Apparently I misread the original question.

I would use a strict reading of the plan language if possible. Just as important is past history. That is, what administrative interpretations have been applied in the past? Hard to believe this has not come up before.

If this is a "takeover" where the TPA or actuary or administrator has changed and has not seen this situation before, then don't assume it has never happened. Better course of action would be to request several sample calcs from plan sponsor and/or prior administrative firm.

If that does not help, my interpretation has been to use the 3 (or five or whatever) years that are included in the definition. Then if the use of the fractional year will increase the FAP, then use it. But remember this is just my administrative interpretation.

[This message has been edited by david rigby (edited 08-18-1999).]