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  #1  
Old 03-01-2016, 06:12 PM
ctc005 ctc005 is offline
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Default Participant Request for Calculation

If a participant requests an estimate of their benefit, does the plan sponsor have to provide? Plan sponsor is client hoping to avoid cost of calculation for the following reasons:

Participant is 56
Earliest ret is 62 (participant wants to know amount at age 62)
Assumptions will vary from today to what is used at age 62 to determine reduction.

The question is basically, is a "high level" response acceptable and fulfilling of any sponsor duties? Something along the lines of "a reduction of X% is an estimate based upon rates today". Without completing the actual calculation process.

Thanks!
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Old 03-02-2016, 04:29 PM
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Do they want a lump sum or an approximate of the annuity due?

Normally, we do provide the projected annuity at retirement on the participant statement, but I believe it has something on there that the annuity is based on the current formula and average salary. I could be wrong, but that may be a statement requirement.

If someone asks me for a lump sum projection, I tell them that a) there's a cost, and b) there's no way in hell I know what assumptions will be used by the IRS to determine lump sums at the time that they retire. I go on to explain about how we just had a complete overhaul of calculations begin 8 years ago, and there's nothing saying it won't happen again.
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Old 03-02-2016, 04:47 PM
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Do they want a lump sum or an approximate of the annuity due?

Normally, we do provide the projected annuity at retirement on the participant statement, but I believe it has something on there that the annuity is based on the current formula and average salary. I could be wrong, but that may be a statement requirement.

If someone asks me for a lump sum projection, I tell them that a) there's a cost, and b) there's no way in hell I know what assumptions will be used by the IRS to determine lump sums at the time that they retire. I go on to explain about how we just had a complete overhaul of calculations begin 8 years ago, and there's nothing saying it won't happen again.
They're just looking for what the ERF would look like. Annuity at 62 vs 65. The ERF is based on 417(e) AE, so to your point, we won't know what it is.
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Old 03-02-2016, 05:05 PM
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Ah, yes. I'd just explain exactly that - we have no way to project what the IRS will require us to do 6 years from now.
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Old 03-02-2016, 06:41 PM
djtrifecta djtrifecta is offline
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Was it a written request? If so, you might need to prepare a benefit statement. ERISA section 105: benefit statement must be furnished upon participant's written request (although they can't request another one for another 12 months).

If it wasn't written, or if it was a vague request for an estimate (or some language similar), you could take the position that it was just an informal inquiry -- in which case I think you can provide whatever you feel is appropriate to answer the participant's question.
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Old 03-03-2016, 10:24 AM
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Was it a written request? If so, you might need to prepare a benefit statement. ERISA section 105: benefit statement must be furnished upon participant's written request (although they can't request another one for another 12 months).

If it wasn't written, or if it was a vague request for an estimate (or some language similar), you could take the position that it was just an informal inquiry -- in which case I think you can provide whatever you feel is appropriate to answer the participant's question.
This only applies if the sponsor is not providing regular annual statements. Most plans prepare statements along with the yearend Form 5500 and other disclosures. You are then not required to do a special estimate for a participant who requests one even if it is in writing.

If you are not producing annual statements, why?
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Old 03-03-2016, 11:52 AM
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Old 03-03-2016, 03:53 PM
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Originally Posted by Helen Sass View Post
This only applies if the sponsor is not providing regular annual statements. Most plans prepare statements along with the yearend Form 5500 and other disclosures. You are then not required to do a special estimate for a participant who requests one even if it is in writing.
Not sure where you're getting that exception -- even DOL's disclosure guide (which certainly isn't infallible) says there isn't an exception for the written request rule (page 9 of the guide): http://www.dol.gov/ebsa/pdf/rdguide.pdf

I suppose the exception could be inferred from PPA's legislative history, but I wouldn't personally take that position because the statutory text is pretty clear.

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Old 03-05-2016, 01:19 PM
Helen Sass Helen Sass is offline
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Originally Posted by djtrifecta View Post
Not sure where you're getting that exception -- even DOL's disclosure guide (which certainly isn't infallible) says there isn't an exception for the written request rule (page 9 of the guide): http://www.dol.gov/ebsa/pdf/rdguide.pdf

I suppose the exception could be inferred from PPA's legislative history, but I wouldn't personally take that position because the statutory text is pretty clear.

YMMV
The "statutory text" says that a DB plan must provide a statement at least once every three years or upon written request, but need not provide more than one in response to a request within any 12 month period. There is also an option to provide a notice of the statement's availability each year and then only provide the actual statement upon request.

It also says that the Commissioner will provide additional guidance within one year of the law's passage, and that in the meantime you can rely on a good faith interpretation of the law's requirements. That year having come and gone 10 years ago with no such additional guidance means that we may still rely on a good faith interpretation.

An extremely reasonable intepretation is that the law was not intended to require employers to provide statements more than once per year. Therefore, most employers who are preparing annual statements do not believe they are required to do another mid-year calculation just because someone asks for it in writing. The typical response to such a request would be to send them another copy of the most recent one and perhaps note that there will be another one coming after the end of the current year.
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Old 03-05-2016, 05:11 PM
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An extremely reasonable intepretation is that the law was not intended to require employers to provide statements more than once per year.
Gotcha. Change "provide" to "prepare" and I agree. I also agree that providing an estimate less than 12-months old is a good faith interpretation. I disagree that you are not required to provide the statement upon request even if you've provided annual statements--the law leaves little to interpret on that front. However, again, I think we agree that a response to written request is required, but doesn't necessarily need to be a brand new calculation (unless the annual statements weren't prepared).

My initial response was intended to note that a written request triggers ERISA 105, that the response needs to satisfy it, and a "high level" response may not. If the sponsor in the OP has been doing annual statements, providing that information should be the way to proceed. If the sponsor hasn't, the OP should prepare one. In other words, "you might need to prepare a benefit statement."

To the original question: Is a statement required? If it was a written request, yes. Does it need to be a brand new calculation? Not necessarily (assuming you prepare statements annually). The response--assuming it was an actual written request for a statement and not a more nebulous request for information--should satisfy ERISA 105.
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