RASD vs. ASD questions

[benefitz]

Apologies if this has been asked/answered before, but I did not see this specific question addressed on this message board when I searched:

The 417 regulations state that a defined benefit plan is not required to offer retroactive annuity starting dates (RASDs).

If a plan does not offer RASDs, how is the benefit calculated when a terminated participant who has attained normal retirement age does not receive the QJSA explanation prior to his annuity starting date? Is it calculated on the basis of the prospective annuity starting date, with no makeup payments for the time period between the original annuity starting date and the actual annuity starting date?

What if the plan never provides the QJSA explanation? Since the terminated participant has attained normal retirement age, and the 417 regulations say that consent is not required when a benefit is no longer immediately distributable (which occurs after the later of NRA or age 62), then does the plan have to provide the QJSA explanation? Or can it commence a QJSA distribution - calculated as of a prospective starting date - to the participant without the QJSA explanation and without consent?

[Effen]

I think you may be confusing the QJSA notice with the Suspension of Benefits Notice. Anyway, you really should discuss this with legal counsel as different attorneys have different opinions.

Since 411(d)(6) states you cannot reduce an accrued benefit, you either need to provide an actuarial adjustment, or a retroactive payment. Also, since the person is not employed, the suspension of benefits notice is not valid since you are only permitted to suspend benefits for active participants.

Some attorneys I work with take the approach that since you are not permitted to suspend a terminated participant's benefit, you must provide retroactive payments, even if the language isn't currently in the document. They would probably say to amend the plan to permit it.

I think the more common approach is to give an actuarial increase to account for the missed payments. The benefit should be actuarially increased from NRD to the actual benefit commencement using factors stated in the plan document.

[benefitz]

Effen, thank you.

I am not referring to the suspension of benefits notice. I am talking about the notice the plan has to provide to a participant 30 to 180 days prior to the participant's annuity starting date. The 417 regulations detail the requirements to provide a RASD when a participant does not get the required notice before his ASD, but the regulations also say that a plan is not required to provide a RASD, so I am asking about the procedure in a scenario when a plan does not have RASDs and it does not provide the required notice before the ASD for a participant who has attained NRA. I think you are saying that in that scenario, the plan has to actuarially adjust the participant's benefit because the actual annuity starting date is after the original ASD?

[Effen]

Sorry, maybe a jumped to a conclusion. Lets parse this out.

"If a plan does not offer RASDs, how is the benefit calculated when a terminated participant who has attained normal retirement age does not receive the QJSA explanation prior to his annuity starting date? " I don't see how this can happen? The annuity starting date is the date they receive their annuity payment. How did they make an election of the form of payment? Or, are you saying, their election form was faulty and did not contain the proper QJSA options and explanations? Or, are you saying you just commenced a benefit without any election?

"Is it calculated on the basis of the prospective annuity starting date, with no makeup payments for the time period between the original annuity starting date and the actual annuity starting date?" What is the "original" date and what is the "actual" date? Why do you have two dates?

Maybe a real life example would be helpful?

[SoCalActuary]

Since RASD is a benefit option provided by the plan sponsor, while QJSA is a qualification issue on the plan in practice, I would resolve this with either a VCP or a one-time amendment to pay the prior benefit - weighing the value of plan compliance to be most important. Others are welcome to suggest an alternative priority on remedies.