Suspension of Benefits (What to do with contributions)

[Fielding Mellish]

Multiemployer defined benefit Plan.

Plan says that a Participant can return to work after retirement for up to 40 hours with no suspension of benefits (this Plan applies it to both early retirement and normal retirement).

So a Participant is receiving a retirement benefit of, say, $1,000/month. He goes back to work only 30 hours a month, so his benefit is not suspended. Per the CBA, the employer is required to make hourly contributions of $6.00/hour to the Pension plan.

My questions:

1) What does the Plan do with the $6.00/hour coming in from the employer for this retired Participant who is receiving $1,000/month? The administrator can't recalculate the Participant's benefit monthly because the Participant had more contributions coming in.

2) Can the Plan have a provision that says if a Participant returns to work, but for less hours than needed to kick in a suspension of benefits, that the Participant will not get an increase in his accrued benefit and, instead, the money will go into the Plan's operating fund?

Keep in mind that I don't feel this is a problem if the Participant returns to work for greater than 40 hours. His benefit would be suspended in that case, so any contributions coming in would go toward an increased benefit (which would be easy to re-calculate at the time he re-retires).

Thanks.

[Effen]

1) Why can't they recalculate the benefit? Typically it would be recalculated every year, on the anniversary date.

2) I suppose it could have this provision, but why would the union side agree to it? The participant worked additional hours, the employer is required to contribute, and the participant is entitled to the benefit.

Just because the benefit is not suspended doesn't mean it can't be increased. The plan may have some minimum number of hours required to earn additional benefits, but the additional hours are generally not just ignored.

[Fielding Mellish]

Thanks for your response.

1) Say the Participant is getting a Qualified Joint and 50% Survivor Annuity. Because of the mortality tables, applicable interest rates, etc., the Participant's benefit works out to $1,000/month. If we recalculate after a year, his life expectancy, his spouse's life expectancy, the mortality tables and/or the interest rates could have all changed. So, the actuary is going to have to take all those things into account when recalculating the new benefit from the new contributions. Does the actuary go back and recalculate the entire benefit, or just add on to the existing benefit?

2) Why would the Union ever put in a suspension of benefits provision to begin with? For many plans, it's trying to keep retired guys from taking away work from the active guys. So, this could be just another way to keep guys retired.

And I've run into several plans where the additional hours are essentially ignored. Keep in mind that generally only comes up when the guy is working pretty few hours during a month (stays below 40 a month). If it's more than 40, his benefit is suspended and then it's a pretty easy thing.

Thanks again. I'm just spitballing here, so feel free to shoot this all down.

[Effen]

1) A well written document would address this, but they are fairly rare. Typically, I would recalculate it and converted it to the form of payment previously selected, based on the current age, but I would make sure fund counsel is in agreement. And, yes - it can be a pain to do this calculation, especially for a few $1 of benefit change.

2) Suspensions are very common and in place to keep "retired" guys from taking jobs from younger guys, or from going non-union once retired. Generally "spendable service" includes any work in the same trade.

Personally, I think it is illegal to ignore service and not recalculate, but I don't doubt that some people ignore it. Funds often outsource benefit issues to TPA's who don't even know what they don't know.