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Early retirement eligibility requirements upon plan termination

Guest meggie

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Annuities will be purchased in conjunction with terminating a DB plan. The plan has the early ret provision of age 55 and 10 years (1000 hrs= 1yr) The participants are not being terminated from employment.

Must the annuity contract contain the same early retirement provisions of the plan so that all participants can eventually reach ERD via age and service? Does the answer depend on whether or not there are ER subsidies? There will be no employer reversion.

Right now the annuity contract states that ER is available but only based on age 55 and 10 yrs of service. Service is the service earned as of the plan term date.

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The annuity contracts should contain all the provisions of the Plan, including (for example) early retirement rights, early retirement benefit factors, other factors for optional forms of benefit.

The only "simplification" I can recall is under IRS reg. 1.411-4: if the plan has three or more J&S optional forms, then the plan can be amended to remove those "in the middle" as long as the lowest and highest percentages are retained. For example, if the plan offers a J&S using 50%, 67%, 75% and 100% continuation, then it could be amended to remove the 67% or the 75% or both, but not remove 50% or 100%. The plan should be amended first to do this before annuity purchases.

If there are any other ways in which to simplify this, perhaps others will let us know.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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