55. Suspension of benefits

Statement of Requirement: IRC 411(a)(3)(B) and IRC 411(d)(6); Treas. Regs. 1.411(d)3(a)(3), 1.411(d)-4, 1.401(a)(9)-6(g) and (h); DOL Reg. 2530.203-3

Document Provision: _____

Sample Plan Language:

(Note to reviewer: The accrued benefit in a defined benefit plan of an employee (other than a 5% owner) must be actuarially increased to take into account the period after age 70½ in which the employee does not receive any benefits under the plan. No suspension of benefits is allowed with respect to this actuarial increase. See LRM #51.)

Section _____: Suspension of Benefits.

(a) As elected by the employer in the adoption agreement, normal or early retirement benefits will be suspended for each calendar month during which the employee completes at least 40 hours of service with the employer as described in DOL Reg. 2530.203-3(c) (“section 203(a)(3)(B) service”). Consequently, the amount of benefits which are paid later than normal retirement age will be computed as if the employee had been receiving benefits since normal retirement age.

(b) Resumption of payment. If benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the employee ceases to be employed in section 203(a)(3)(B) service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume, and any amounts withheld during the period between the cessation of section 203(a)(3)(B) service and the resumption of payments.

(c) Notification. No payment shall be withheld by the plan pursuant to this section unless the plan notifies the employee by personal delivery, first class mail, or other delivery method permitted under DOL Reg. 2530.203-3, during the first calendar month or payroll period in which the plan withholds payments that his or her benefits are suspended. Such notifications shall contain a description of the specific reasons why benefit payments are being suspended, a description of the plan provision relating to the suspension of payments, a copy of such provisions, and a statement to the effect that applicable Department of Labor regulations may be found in DOL Reg. 2530.203-3. In addition, the notice shall inform the employee of the plan's procedures for affording a review of the suspension of benefits. Requests for such reviews may be considered in accordance with the claims procedure adopted by the plan pursuant to section 503 of ERISA and applicable regulations.

(d) Amount suspended.

(i) Life annuity. In the case of benefits payable periodically on a monthly basis for as long as a life (or lives) continues, such as a straight life annuity or a qualified joint and survivor annuity, an amount equal to the portion of a monthly benefit payment derived from employer contributions.

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(ii) Other benefit forms. In the case of a benefit payable in a form other than the form

described in subsection (a) above, an amount of the employer-provided portion of benefit payments for a calendar month in which the employee is employed in section 203(a)(3)(B) service, equal to the lesser of

I. The amount of benefits which would have been payable to the employee if he had been receiving monthly benefits under the plan since actual retirement based on a straight life annuity commencing at actual retirement age; or

II. The actual amount paid or scheduled to be paid to the employee for such month. Payments which are scheduled to be paid less frequently than monthly may be converted to monthly payments for purposes of the above sentence.

(e) This section does not apply to the minimum benefit to which the participant is entitled under the top-heavy rules of Article _______.

(Note to reviewer: Provisions may be added to the plan to provide for the benefit offset authorized by DOL Reg. 2530.203-3. However, these additional provisions must be in strict compliance with the said regulation and must apply only with respect to future accruals.)

Sample Adoption Agreement Language (for new plans, and for existing plans restating an identical suspension of benefits option):

The suspension of benefit rules in section _____ of the plan will apply to:

(Note to reviewer: The blank should be filled in with the section number of the plan corresponding to this LRM #55.)

( ) all participants in the plan.

( ) only those participants described in section _____ of the plan whose benefits, if

actuarially increased, would exceed the limitations of section _____ of the plan.

(Note to reviewer: The 1st blank should be filled in with the section number of the plan corresponding to LRM #42. The 2nd blank should be filled in with the section number of the plan corresponding to LRM #40.)

An Adopting Employer may select one of these options only if the plan is a new plan or an existing plan restating an identical suspension of benefits option.

Sample Adoption Agreement Language (for existing plans that are adding or expanding a suspension of benefits option):

The suspension of benefit rules in section _____ of the plan will apply to:

(Note to reviewer: The blank should be filled in with the section number of the plan corresponding to this LRM #55.)

( ) employees who commence participation in the Plan on or after the later of the

adoption date or the effective date of the suspension of benefit rules in section ____ of the Plan.

(Note to reviewer: The blank should be filled in with the section number of the plan corresponding to this LRM #55.)

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( ) the portion of participants’ IRC 411(d)(6) protected benefits (within the meaning

of Treas. Reg. 1.411(d)-4, Q&A-1(a)) that accrue after the later of the adoption date or effective date of the suspension of benefit rules in section ____ of the Plan.

(Note to reviewer: The blank should be filled in with the section number of the plan corresponding to this LRM #55.)

An Adopting Employer may select either of these options if the employer is adding a suspension of benefits option to an existing plan or expanding an existing suspension of benefits option.