Early Retirement Program

[Guest Liz]

A company offered an enhanced early retirement program effective 2/1/97 - for ee's age 50 + with 5 years service. The retirement was enhanced 5+ years on age and service. Senior executives were not eligible.

In Aug 1997, company announces that it will liquidate in 1999. In 1998, a sale of assets document indicated that 2 officers will be given an early retirement like the one offered in 1997. (These were the same executives who were deemed not eligible in 1997 ) No offer was made to any other age 50 + who turned 50 subsequent to 1997. The 2 officers are also plan fiduciaries. Can plan fiduciaries set up an early retirement plan just for themselves??? Are there any requirements that an early retirement must also be offered to others similarly situated (others now age 50). Can excluded employees be retroactively offered an early retirement under an early retirement program where they were specifically excluded?. What if it's a new program(in '98 or '99) but only for those 50 as of 2/1/97. What if it was known in 1997 that the company might be liquidated and the officers were told that if anything happens, they'll get the early retirement (and the heck with the ones who turn 50 after 2/1/97). What if the officers weren't told, but someone decided that's what the plan would do. Is there any ruling that would require the company to also offer early retirement to others similarly situated. There has been a precedence that for every layoff there was an early retirement, now that there is the ultimate layoff, they are not offering ER to last group of 50+.. The pension is overfunded, although not enough to cover a last early retirement without additional contributions. The company has not contributed to fund in years. There is money available if they really wanted to offer it but they say it's too late. Any info or comments would be appreciated.

[Chester]

If the pension benefits are being paid entirely from the qualified plan assets for the two officers, and the officers are highly compensated, then this early retirement window would not pass discrimination testing and would be considered discriminatory by the IRS upon audit. However, if the enhanced portion of the benefits paid to the two officers is paid as a non-qualified benefit (paid out of general assets of the employer and not from the qualified pension fund) then this is legal, as the employer can choose to discriminate in favor of highly compensated employees on a non-qualified basis.