Delay in putting retirees into pay status

[CuseFan]

DB plan (takeover, data issues) requires QJSA notice given prior to NRD, and if election is not made or a written election to defer (no later than RBD) is not made, then benefits are required to commence in the normal form as of the 60th day of the year following the year in which NRD occurs.

Person's NRD was 7/1. Takeover data issues delayed calculation of benefit and delivery of QJSA forms until after 7/1. There is no RASD in the plan. Do we prepare QJSA for 9/1 ASD with two month actuarial increase or do a "corrective" QJSA back to 7/1? 

[fiona1]

I don't know that there is right or wrong answer. This is how I would approach it though...

• An operational failure has occurred for not following the terms of the plan.
• EPCRS correction principles indicate to put the plan in the position it would have been had the failure not occurred.
• Appendix A of the EPCRS provides a correction method for "failure to timely pay the minimum distribution required under §401(a)(9)" in which the plan distributes "the required minimum distributions, plus an interest payment based on the plan's actuarial equivalence factors in effect on the date that the distribution should have been made".
• Applying the late §401(a)(9) correction method to your failure (given that it also involves the delayed payment of a required distribution) seems logical.
• However the EPCRS allows other corrections - as long as they meet the correction principles and are reasonable. The plan sponsor could determine that a 9/1 ASD with 2 month increase is how they will correct the failure if they believe it is reasonable.