Decreasing Benefit in Two-Plan Offset Arrangment

[Übernerd]

Employer has two DB plans--a Union Plan and a Non-Union Plan. For employees who transfer out of the union, and therefore accrue benefits under both plans, the Non-Union Plan benefit is calculated by counting all the employee's service as if it were non-union service and then reducing the Non-Union Plan accrued benefit by the benefit the employee accrued under the Union Plan. Because the plans have slightly different ERFs, this offset arrangement can cause the benefit actually payable from the Non-Union Plan (i.e., after the offset) to be lower at NRD than it was at some early retirement dates.

Does paying the lower Non-Union Plan benefit at NRD violate the requirement in § 411(a)(9) and Regs. § 1.411(a)-7©(6) that the normal retirement benefit be the greater of the benefit payable at (i) NRD or (ii) any early retirement date? If you consider the aggregate benefit payable from both Plans, the benefit doesn't decrease; nor does it decrease if you look at the Non-Union Plan's formula standing alone. It's just the offset arrangement that causes the Non-Union Plan benefit to decrease.

Any thoughts appreciated. Cheers.