Can Money Purchase Plan Be Amended to Allow Distribution in Final stages of cancer??

[rocknrolls2]

A client has a money purchase plan in which distributions are permitted for the following reasons: normal retirement after 25 years of service, or at age 62 with at least 10 years of service or the later of age 65 and the fifth anniversary of commencing participation in the plan; early retirement at or after age 55 (but before age 62) and completion of at least 10 years of service; deferred retirement after 5 years of service; disability retirement contingent on at least 10 years of service and a Social Security determination of disability. If Social Security denies a benefit award, the trustees shall make a determination of disability in their discretion based on proof of disability through a physician of the employee's choice. The employee has stage 5 kidney cancer. While he could qualify for a trustee discretionary determination of disability, he only recently applied to Social Security and he might not live until after it has made its determination. The only other possiibility is a deferred disability. Could the plan be amended to allow any participant in imminent risk of death to apply for a distribution of his full account balance?

[Larry Starr]

5 hours ago, rocknrolls2 said:

A client has a money purchase plan in which distributions are permitted for the following reasons: normal retirement after 25 years of service, or at age 62 with at least 10 years of service or the later of age 65 and the fifth anniversary of commencing participation in the plan; early retirement at or after age 55 (but before age 62) and completion of at least 10 years of service; deferred retirement after 5 years of service; disability retirement contingent on at least 10 years of service and a Social Security determination of disability. If Social Security denies a benefit award, the trustees shall make a determination of disability in their discretion based on proof of disability through a physician of the employee's choice. The employee has stage 5 kidney cancer. While he could qualify for a trustee discretionary determination of disability, he only recently applied to Social Security and he might not live until after it has made its determination. The only other possiibility is a deferred disability. Could the plan be amended to allow any participant in imminent risk of death to apply for a distribution of his full account balance?

I would venture that such a description ("imminent risk of death") is not an adequate descriptor.  Based on the description, it would seem easy for the trustees to determine he is disabled with just a note from his primary or his oncologist, which would seem to be the right way to do this. FWIW.

[david rigby]

At the risk of stating the obvious, make sure all of his beneficiary designations are up to date.

[BenMgr]

A slightly related thought:  is there is a group life policy with an accelerated death benefit?  This does not help your compliance question but, if available, may help him financially.

[Luke Bailey]

Why don't they amend it to permit distribution on separation from service. Surely he's not still working?

[david rigby]

This EE might have a separation from service, or might be classified on some type of disability or LOA.  Likely, such distinction could be important w/r/t to eligibility for any group term life insurance, or some other employment benefit(s).

Please explore the possibility of an Early Retirement Window.  It may be possible to craft the definition to fit the exact circumstances (age/service/job classification/etc.).  However, note this will (probably) create a severance of employment, so any group term life insurance might be affected.  Most pension actuaries and ERISA attorneys have experience that can be relevant to you.

[Luke Bailey]

7 hours ago, david rigby said:

This EE might have a separation from service, or might be classified on some type of disability or LOA.  Likely, such distinction could be important w/r/t to eligibility for any group term life insurance, or some other employment benefit(s).

Agreed, and I have seen this many times, but you need to be very careful. The terms of the group insurance plan may not permit you to keep an employee on extended unpaid leave and still retain coverage as an "employee." May be safer to terminate and allow employee to convert to individual policy, which will cost more out of pocket, but coverage is then certain as long as premium is paid. Same for health plan, and then when the employee does leave and wants to go on Medicare as disabled there can be a gap in coverage if the employee was on extended unpaid leave that Medicare does not treat as active coverage.