Actuarial adjustment for deferred benefits?

[Guest RBeck]

I'm drawing a complete blank on this issue. A participant in a DB plan meets the normal retirement requirement at age 59, terminates service, but does not apply for benefits until he's 62. Plan says he has to apply to get benefits. What happens to the accrued benefits in the years he's not getting benefits to which he's entitled? Is there an actuarial increase? A retroactive payment? Some kind of actuarial adjustment? By that I mean neither an increase or a decrease, just adjusting the benefit payments to accommodate a shorter period of time. How is this handled, and what's the authority for the answer?

[flosfur]

Actuarial increase must be provided - see IRC section 411(B)(1)(H)& Propsed Regs (never finalized) 1.411(B)-2 - this was brought about by the Age Discrimination Act in 1988 or so.

[rcline46]

Participant is to get actuarial increases, not to exceed 100% of hi-3 comp. Interesting problem occurs if AE increase is greater than 415 limit prior to Soc Sec Retirement age, or 415 limit as adjusted post SSRA.

[flosfur]

S415 limits override any or all other entitlements. So anyone on 100% Hi 3 limit is loosing money with each passing years if he/she doesn't take her distributions!

Another interesting situation occurs when Lump sum value on S417(e) interest rates exceeds S415 Lump Sum - e.g. when PBGC rate are 4% and S415 rate cannot be < 5% (and using 30 year treasury rates wmakes this even worse). S415 overrides S417.

Basharat