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Old 11-10-2017, 10:58 AM
aj496771 aj496771 is offline
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Default Late Retirement Increases

I am just wondering how other firms are dealing with late retirement increases on plans (assuming no more benefit accruals). Most of our Plans have the normal N / N approach for the increase but one of our plans (effective over 40 years) states that their Late Retirement increase we just take their 65 benefit, convert to a lump sum & increased with interest to the current age, and then divide by an annuity at the new age. This seems to fall in line with a letter from the Academy to the PBGC dated 1/13/15 from Michael Pollack but does anyone know if there ever was a response to this letter? Does anyone else have any plans where this is the increase? Our worry is that the benefits are smaller than the normal N / N approach because they are not getting increased for survivorship and all late retirees are not getting their full benefit when they are retiring
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Old 11-10-2017, 11:16 AM
Helen Sass Helen Sass is offline
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Originally Posted by aj496771 View Post
I am just wondering how other firms are dealing with late retirement increases on plans (assuming no more benefit accruals). Most of our Plans have the normal N / N approach for the increase but one of our plans (effective over 40 years) states that their Late Retirement increase we just take their 65 benefit, convert to a lump sum & increased with interest to the current age, and then divide by an annuity at the new age. This seems to fall in line with a letter from the Academy to the PBGC dated 1/13/15 from Michael Pollack but does anyone know if there ever was a response to this letter? Does anyone else have any plans where this is the increase? Our worry is that the benefits are smaller than the normal N / N approach because they are not getting increased for survivorship and all late retirees are not getting their full benefit when they are retiring
The plan document may or may not have a late retirement benefit or provide for increases after NRA. By law, however, you must provide the greater of whatever the plan says or the actuarially increased benefit after NRA. The only exception is if you have the participant sign a notice that the benefit is suspended once they reach NRA.
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Old 11-10-2017, 02:07 PM
StillCrazed StillCrazed is offline
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But the critical question concerns post-retirement and pre-retirement death benefits. If there is forfeiture on death benefit between NRD and actual retirement, then N/N makes sense. If there is a significant exposure to a death benefit between the two dates, then you should remove the component for mortality, leaving (1+i)^n x APR(nra)/APR(ara)
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