Inconsistent/Incomplete Late Retirement Language - What's the Default?

Question on late retirement increases. Assume everything above board re: more recent DOL guidance (late retirement increase required for TVs, and for actives where plan either:

1) doesn't have suspension of benefits language

2) has the language but notice not provided

In this case, the plan has SOB language (touching only on the rehire circumstance and suspending benefits then but treating the benefits for actuarial adjustment purposes as if they've stayed in payment) and client has been providing notices to participants past NRD, but only restarted doing so in recent years. 

The case circulated through a few different actuaries, administrators after splitting from another plan eons ago. Other plan stayed with same counsel the entire time and language is clear (This is for background, not implying that another plan's language has bearing on this plan) - benefits suspended at normal retirement date if participant continues to work and benefits at a later date will be those earned at actual retirement, including service and pay). 

However, the subject plan has been "boilerplated" and sloppily so by previous actuary/administrator (I can't imagine legal counsel put the doc together). SPD and document only discuss rehire for SOB, and plan document says late retirement (again, boilerplate language) will be NRD benefit plus greater of new benefits earned or "Late Adjustment" required under the plan. 

capitalized, no verbiage elsewhere and assuming that's also boilerplate as it wasn't in the original doc before split. No definition of Late Adjustment method that's capitalized - assuming either the description was taken out elsewhere since no definition or detail refers to this anywhere else. 

SPD in this case is short, also boilerplate in nature (looks like bits and pieces thrown together). SOB language is old school "if you return to work, your benefit will be suspended", and no mention of what participant will get except for early and normal retirement. 

Please pick apart my conclusion (waiting for green light to get opinion from legal counsel). More important in this plan than some others (in terms of the decision) due to the proportion of over 65 participants.  

* SOB language only talks about rehires, but in general, that still counts in determining if plan allows SOB at normal retirement and no actuarial increase

* since the mother plan more clearly describes no late increase until 401a9 required, I'd like to see far more in terms of intentional adding of a late retirement adjustment (including an actual adjustment description or method that appears to be missing)

* with a combination of the two, applying actuarial increase through the date that SOB notices were restarted, and then for older participants who work well past 70, starting again at what would have been RBD (4/1 after CY that 70 1/2 is attained). 

What has the Plan done with late retirees? How have benefits been calculated? 

My own reaction, when I see a situation like this, is to figure out what has been done and then see if this comports with a reasonable interpretation of the plan documents, the SPD, the notices that are handed out, and what regulations require.  I don't think you gave us that in your question.

Actuarial increase before the SOBs were issued - from NRD. No late retirees other than former TVs since then but several from active service in the near future, so no direct comparison because SOBs were never issued before, and since they don't apply to TVs, no effect there. 

If you have late term vesteds, you have to pay in accordance with IRC 401(a)(14).  That means an initial payment of the aggregate payments missed since age 65. plus interest. There is no actuarial increase on the remaining payments.

If there are true late retirements, the payment should be actuarially increased, unless plan allows for annual offset of actual benefit accrual during period of late retirement. (It does not sound like it does.) Ask your lawyer if the distribution of a suspension of benefits notice that does not address a late retirement situation is sufficient for suspending the benefit of such a person.

On 1/30/2021 at 10:19 AM, DW said:

* SOB language only talks about rehires, but in general, that still counts in determining if plan allows SOB at normal retirement and no actuarial increase

I would disagree, and will not treat it as SOB at normal retirement.

On 1/30/2021 at 10:19 AM, DW said:

plan document says late retirement (again, boilerplate language) will be NRD benefit plus greater of new benefits earned or "Late Adjustment" required under the plan. 

So plan document states to proceed with late retirement actuarial increases year-by-year

For late terminated vested, you should either use "missing payments with interest" or "actuarial equivalent increase", depending on some language in the plan document related to payments, claim procedure, ability of terminated employees to defer until RMD date, and prior practice.

All TVs get increase without question. SOB doesn't apply to them. 

Prior versions of the document before split from another plan were clear about suspension of benefits and didn't provide an actuarial increase for actives (as long as SOBs issued). That is, rather than boilerplate "rehire" language that's typical in older plans, the language was robust and stated clearly that benefits for all participants past normal retirement would be suspended (both rehires and continuing actives). 

Whoever took over the plan restated the document with more boilerplate language and most of the original language was gone. The doc in place has extraneous information that doesn't apply (life insurance, etc, with boilerplate of "will be paid as required under the plan"). There's no life insurance in the plan, but those types of things are provided throughout the document (and not actually defined or described anywhere). 

The last two amendments (effective prior to restatement date) didn't make it into the restated document, either (so I'm assuming some element of this may be bad doc work). 

What did end up in the doc was a short passage that says "the benefit accrued each year after normal retirement will be the greater of ... (additional accruals) ... or the prior benefit with Actuarial Adjustment as required by the Plan". 

What's missing is anything matching the term Actuarial Adjustment or further definition (the actuarial equivalent definitions specifically address payment forms and lump sums, as usual) 

The revised document and SPD precede our tenure. 

I think the poor revision history here makes this territory for a legal opinion- fortunately, no situations have occurred prior except for TVs and since a late adjustment is required no matter what for them, there was no real issue.  

Thanks for discussion, by the way, folks. I figured it would come down to at the very least passing this off to someone else. If poor doc work caused an increase to apply when it didn't before (and a sizable one) in a prior version - I will leave it to legal counsel and the client to decide what they want to do. I can't in good conscience just tell them to play it conservative as that's not what they want to do, and it's not just reading a doc at this point (there are a couple of other little nits that would be good to clarify at the same time).