Assumed Retirement Age for participant beyond NRA

[dmb]

For an active participant who is beyond NRA (which is 65), where the assumed retirement age would otherwise also be 65, can we assume a later retirement age (maybe 3 or 4 years in the future) for only this particular participant if the feeling his he will not retire in the immediate future, rather than go year by year?? I believe this is fine, but just wanted to confirm my thinking and maybe get thoughts on anything I may have not thought about. Thanks in advance.

[FAPInJax]

My opinion is sure! You have a conversation with your client who is 65 and he tells you that he plans on working for another 5 years. There is no reason not to reflect this information in my opinion.

[david rigby]

Agree.

Are you the actuary? Likely, every actuary will tell you the purpose of all "actuarial assumptions" is to provide the best estimate of anticipated experience; a "best guess", in lay terms.

[dmb]

Yes, i am the actuary and yes, I knew that, just for some reason was hemming and hawing a little. Thanks for both responses.

[Guest D.W.]

Definitely Yes. If you assume that the participant in question is going to retire at the valuation date every year, if your decrement happens on the valuation date, you'll be short the normal cost the participant would have, and have a possible loss each year that he/she comes back (subject to whatever the benefit accrual circumstances are in the plan, of course).

6 or 7 years ago, most of my plans had an age 65 retirement assumption, some added a single year to have some carry-over to age 66, but we have revised assumptions on most since then to reflect that (especially in plans where the profession isn't physically taxing or disabling), and some of the plans have graded rates to age 70 now as long as experience and expectations support it.

Unless the plan is small and the assumptions immaterial (or prescribed), you should set it to be exactly what you think will happen.