Ad hoc benefit increases for vested deferred participants

[Guest]

Has anyone ever been involved in a situation where benefits were increased for vested deferred participants? I have a client who would like some ideas and has asked me "what do other people do?" I told him it's not very common, but I would check around. I have asked most of my local colleagues but most of them have never done it either.

Has anyone done it? What type of formula did you use to arrive at the increase? Did you recognize how many years they have been terminated?

I'm interested in what has been done in practice

[david rigby]

I have never seen such an increase applied to VT's before commencement date. I have seen several COLAs where the plan sponsor did or did not make a distinction between those who retired and those who were VT's. When the sponsor did not make such a distinction, it was usually because the data was not good enough to positively identify these groups. Other sponsors keep careful track of these groups and have given different benefits.

[Guest Don N]

I'd also be interested in knowing what other practitioners are doing ! I've heard that it's common practice to give "ad hocs" to current retirees only & post retirement "colas" to all status types - actives, vested terms, & retirees;however, I could understand why an employer might not want to give a "cola" to term vesteds; pax, I'm not sure what your reply implied-could you clarify?

[Guest Brian4]

I have seen an increase applied to vested terminations before benefit commencement date. This was in a public plan. The plan applied a permanent cost of living increase to retiree benefits, and the increase, or a lower increase, also improved the deferred benefits to vested terminated participants.

Note that in the United Kingdom, deferred vested participants do receive cost of living improvements during the deferral period. This improves the portability of defined benefit plans. An international comparison ranked the United States below other countries with respect to pension portability.

[Gary]

I would imagine an ad hoc increase could apply to TVs as well and be drafted much like for retirees.