1) The IRS has provided guidance as to when a change in actuarial factors will indirectly affect accrued benefits
, as well as acceptable methods for preventing a violation of the vesting rules as a result of such a change.
ERISA Section 203(a)(1) states that an employee's accrued benefit
derived from his own contributions must, at all times, be nonforfeitable.
cash balance plans since the accrued benefits
For cash balance or hybrid plans, the accrued benefit
may be expressed as an annuity payable at retirement age, the balance of a hypothetical account, or the current value of the cumulative percentage of the employee's final compensation.
If the salary increases of an employee are anticipated to be relatively small, the accrued benefit
will increase marginally because of the change in the employee's final average pay during the DROP period.
One of the most controversial issues arises when the accrued benefits
of the defined-benefit plan exceed the amount determined under the cash-balance formula.
With the hospital's deal, nearly 30 employees in the therapy services department will lose seniority, sick time and other accrued benefits
, though they will be able to cash out accrued vacation time and holidays.
The bond was placed in the worker's account and its amount was set so that, at retirement, it would be equal to the worker's accrued benefits
under the old system.
Employers must treat reemployed employees as if they had not incurred breaks n service for purposes of pension plans, include military service for purposes of vesting and benefit accrual, and provide accrued benefits
from employee contributions to the extent that employees pay them.
People who have no experience with benefit administration matters fail to understand that accrued benefits
are only a measure of what would be paid if the employees quit on the date of measurement.