204(h) Notice

[AdKu]

A plan freeze effective date is 3/15/2020.

Since participants haven’t accrued anything for 2020 yet, my understanding is the accrued benefit is based on  1-1-2020.

  In my case the 204(h) notice date was January 31, 2020 with the following information:

                   Effective for the Plan Year Beginning January 1, 2020, our company Defined Benefit Pension Plan will be amended to freeze Benefit Accruals. All prior accured benefits are not affected, and all actuarial valuation methods are the same.

If you disagree with me, how would you put it in the 204(h) notice.

[Bri]

I would have the date in the 204(h) notice reflect the date benefits are frozen as per the plan amendment.

Is that really January 1, or is it March 15?  With the only difference being nobody accrued anything additional between 1/1 and 3/15.

I'd expect the amendment to have turned off benefits as of a FUTURE date, not retroactively applied to an earlier date even though no benefits accrued in that interim.

[Jakyasar]

You cannot retroactively freeze a plan. Participants will not accrue a benefit anyway, assuming that the required service provisions for accrual within the plan document are not generous.

Do not forget to put in the old and the new formula as well.

[AndyH]

The accrued benefit post-freeze is not necessarily the same as the 1/1 accrued benefit.  Even if 1000 hours are required, if it is a traditional DB plan that uses average compensation, then a short service employee may have a slight increase in their average comp.  If it is a cash balance plan, the accrued benefit includes the interest credit which would likely not be the same as of the two dates.

So I think the proposed language is inadequate and should say that the accrued benefit is frozen as of x date.  And x date must be not less than a "reasonable time" which is generally 15 days for a small plan and 45 days for a large plan.