Sample letter - 10 year certain only coming to an end

[AdKu]

A retiree has been receiving a retirement benefit based on his election of the 10 year certain only optional form of benefit over 10 years ago.

Is there any sample letter out there to inform a retiree about the coming of the end the 10 year certain only optional form of benefit?

[Lou S.]

Dear retiree, Please note you only have x # of remaining payments from the Plan. Sincerely, The Plan.

[david rigby]

Certain only? Possible, but unusual.

Is this a qualified plan?

[jpod]

Yes, highly unusual, and a bad choice by him, unless there was no spouse and perhaps he thought he was going to croak very soon.

[Effen]

I agree, are you sure it is not a 10 year certain and life annuity? You should check the election form he signed and review the benefit calculation to make sure you are correct on the form of payment.

On the other hand, are you sure he is a retiree and not a beneficiary?

[AdKu]

Simplified version was posted earlier.

Detail as follows:

Yes, it is a takeover qualified DB plan.

The benefit payment had started long ago before the plan brought to us.

When the retiree deceased, his beneficiary started receiving the benefit.

Unfortunately, I couldn’t find any scanned copy of the signed election form on file at this time.

However, I was explained from one of my colleague that we could find the paper copy of the election somewhere in the storage.

[Effen]

What you just said makes more sense. This is a beneficiary receiving the remaining payments, not a retiree.

In this case, I think Lou S. has the best suggestion.

[Guest Xerxes]

Why all the concern about selecting or offering a certain only? I have seen many plans that offer these options (usually in lieu of a full lump sum) from 5 yr - 20 yr CO and we see many retirees select them. In a sense these are defacto installment lump sums...

In terms of notice I agree. Hey, you elected a certain only benefit and as you should know it will stop on xx/xx/xxxx date. Good luck with the rest of your retirement.

[My 2 cents]

I know of nothing in ERISA or the IRC that would prevent a qualified defined benefit pension plan from offering a certain only annuity as an optional form. If it is offered and a participant wants it (possibly because it pays a larger monthly amount than any form of lifetime annuity), then there are very limited circumstances under which they cannot receive it:

1. The plan's AFTAP is below 80%, so accelerated options like lump sums or certain only forms are restricted under IRC Section 436.

2. The certain period exceeds the participant's allowable life expectancy.

3. The participant is married and the spouse won't approve the election.

There is probably nothing in the law or regulations that requires the plan to notify the participant that payments are about to stop. So there is no set timeframe or contents for such a notice.

Important: It is a really good idea to have a copy of the election around, to prove to the former participant that the payments were properly stopped if challenged. Ideally, the election would have clearly indicated that payments would stop without regard to the survival of the participant.

[John Feldt ERPA CPC QPA]

If it was truly a certain only option, no life, is the calculation of such option subject to 417(e)?

[My 2 cents]

If it was truly a certain only option, no life, is the calculation of such option subject to 417(e)?

Absolutely!!! And, if the certain period is less than 10 years, each monthly payment is subject to the 20% mandatory withholding!

[david rigby]

...because it's eligible for rollover.

[AndyH]

On this latter subject, are we saying that any spousal beneficiary, for example, of a retiree who took a 10 C&C and died within the certain period can roll over all their payments, even if they are paid monthly? Or just if the payments were converted to a lump sum?