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Old 08-22-2018, 09:22 PM
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Default Actuarial Increase when NRD is after age 70.5?

I have a unique situation. Well, in this day and age, probably not so unique anymore.

EE hired at age 69 at the end of 2009 and is about to retire. His NRD under the plan is 1/1/2013. However, he turned 70.5 in 2010. If he hadn't been hired so late and had received an SBN, actuarial increases would have started at 4/1/2011. Since the typical starting date for actuarial increases of 4/1/2011 is before his NRD, it is confusing though I think that the actuarial increase starting date is still 4/1/2011 regardless of when the plan's NRD is.

Thoughts? TIA
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Old 08-23-2018, 09:20 AM
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Originally Posted by IMP View Post
I have a unique situation. Well, in this day and age, probably not so unique anymore.

EE hired at age 69. His NRD under the plan is 1/1/2013. However, he turned 70.5 in 2010. If he hadn't been hired so late and had received an SBN, AI would start at 4/1/2011. Since his AI date is before his NRD, it is confusing though I think that the AI date is still 4/1/2011 regardless of when the plan's NRD is.

Thoughts? TIA
If by AI you mean the date he must begin required distributions, he does not need to start them before he terminates employment unless he is the owner.
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Old 08-23-2018, 01:13 PM
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If by AI you mean the date he must begin required distributions, he does not need to start them before he terminates employment unless he is the owner.
Thanks but thatís not what I am asking about. I am asking when would actuarial increases begin.

Note that what you said is not always correct. Some plans still do mandate required distributions begin at the 4/1 after the year of 70.5.
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Old 08-24-2018, 10:54 AM
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Since the typical starting date for actuarial increases of 4/1/2011 is before his NRD, it is confusing though I think that the actuarial increase starting date is still 4/1/2011 regardless of when the plan's NRD is.
You are correct. The starting date is based on the 04/01 of the calendar year following age 70 1/2.

This is the topic of Q&A-7 in the 1.401(a)(9)-6 regulation.
https://www.law.cornell.edu/cfr/text...8a%29%289%29-6
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Old 08-24-2018, 02:55 PM
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You are correct. The starting date is based on the 04/01 of the calendar year following age 70 1/2.

This is the topic of Q&A-7 in the 1.401(a)(9)-6 regulation.
https://www.law.cornell.edu/cfr/text...8a%29%289%29-6
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Old 08-27-2018, 03:39 PM
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A benefit that starts 4-2011 would be the actuarial equivalent of the normal retirement benefit, i.e., the reduction of the eventual benefit, but only if the plan provided for early retirement. Giving it actuarial increase only gets you to the normal retirement benefit in 2013. Then the late retirement increases would be computed for the delayed payments.

From the prior comments, I guess this is an active participant who is not required to start payment until separation from service, and that no benefit payments have been made yet.
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Old 08-27-2018, 03:42 PM
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Another point: looking at the A/E of the normal retirement benefit, you compare that with the benefit from the regular formula. Some plan documents require that comparison year by year, while some only compare to the A/E of the benefit at normal retirement. Check your document, because a year-by-year increase would likely come only after at least 8 years of normal accrual.
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