Attachment_J_-_OBA_Policy_Manual.pdf

PBGC Operating Policy Manual- Applicable Chapters

Chapter 5: Benefit Determination and Valuation

Chapter 6: Benefit Calculation

Chapter 8: Miscellaneous

Attachment J

In This Chapter 5.2-2 Working Retirement

5.2-3 Benefits Requiring Employer Consent

5.2-4 Annuity Starting Dates

5.2-5 Required Beginning Dates

5.2-6 Erroneous Commencement

5.2-7 Late Retirement Benefits

5.4-3 Frequency of Benefits Payments

5.4-7 Annuity Benefit Forms

5.4-8 Paying and Converting Complex Benefit Forms

5.4-9 Lump-Sum Benefit Payments

5.4-10 Small Benefit Payments

5.7-2 Payment of Qualified Preretirement Survivor Annuities in Plans Terminating on and after August 23, 1984

5.7-3 Survivor Annuities - pre-REA Terminations - Payment of Certain Survivor Annuities in PBGC-Trusteed Plans Terminated before August 23, 1984

5.7-4 Marriage Requirements

5.7-5 Spousal Consent (Qualified Joint-and-Survivor Annuities)

5.8-1 Benefit Corrections

5.8-2 Limited-Scope Benefit Determinations

5.9-1 Disability Benefits

5.10-1 Benefit Liabilities in Priority Category 6

5.11-1 Calculation of Priority Category 2 Benefits

5.11-2 Payment of Priority Category 2 Benefits

5.12-1 Cash Balance Plans - Valuing and Paying Benefits

5.12-2 Statutory Hybrid Plans - Valuing and Paying Benefits

5.13-1 Aggregate Limit on Benefits Payable from PBGC Funds

5.14-1 Benefits in PPA 2006 Bankruptcy Plans

5.14-2 §436 Benefit Limitations Under PPA 2006

5.14-3 Plant Shutdown and Other Unpredictable Contingent Event Benefits . 198

5.15-1 Treatment of Benefits Earned During Military Service

5.15-5 Black Lung Benefits Offsets

65T UChapter

Chapter 5: Benefit Determination and Valuation

5.2-2 Working Retirement

Edition 5th Edition

Issue Date 01/30/2018

Transmittal Transmittal 2018-05

Last Review Date N/A

Signed Policy 5.2-2 Working Retirement

Contact

In this policy A. Background

B. Scope and Effective Date

C. Definitions

D. Policy

Appendix A

Concurrence, Endorsement, and Approval

A. Background

Participants in PBGC-trusteed pension plans sometimes want to receive pension benefits while working for the employer that sponsored the pension plan ("the DOPT employer"). Internal Revenue Service and Department of Labor regulations prescribe the rules under which a pension plan may pay in-service distributions or working retirement benefits. In addition to these regulations, PBGC’s policy on payment of working retirement benefits is based on the definitions of 21Tpension benefit21T and 21Tcovered employment21T provided in 29 CFR §4022.2 21TDefinitions21T.

This policy statement provides guidelines for payment of benefits to "working retirees" – participants who continue to work for, or are re-employed by the employer that maintained a plan at the time it was terminated (the "DOPT employer") or, in some circumstances, the entity that purchased the assets of the DOPT employer.

With this edition, to conform to changes in Policy 13T6.4-1 Repayment of Benefit Overpayments through Administrative Correction, Recoupment, and Recovery13T, PBGC removes the reference to a 25% temporary benefit reduction for working retirees who receive early retirement benefits while payment of such benefits is prohibited under this policy.

B. Scope and Effective Date

This policy applies to PBGC-trusteed plans and is effective upon issuance.

C. Definitions

1. The 54TDOPT employer54T is the employer that sponsored the pension plan as of DOPT. The DOPT employer includes any member of the plan sponsor’s controlled group, as determined by PBGC, even if plan provisions do not include the controlled group in its definitions of the employer.

2. The 54Tworking retirement suspension date54T is the first date on or after a participant’s annuity starting date (or the plan’s Overpayment Accrual Commencement Date (OACD) as defined in 13TSection C13T of Policy 13T6.4-3 Computation and Netting of Post-DOPT Overpayments and Underpayments13T, if later) for which payment of early retirement benefits to the participant is prohibited under this policy.

3. The 54Tworking retirement resumption date54T is the first date after the working retirement suspension date for which payment is due to a participant once payment of benefits is no longer prohibited under this policy.

D. Policy

1. 54TNormal Retirement Benefits

Regardless of plan provisions, PBGC will pay normal retirement benefits to a participant who continues to work for the DOPT employer. Benefits will become payable beginning on or after the participant's normal retirement date as defined by plan provisions and in accordance with Policy 13T5.2-4 Annuity Starting Dates13T. In addition PBGC will not suspend benefit payments to a retiree who is reemployed by the DOPT employer on or after his or her normal retirement date.

2. 54TEarly Retirement Benefits

PBGC will pay early retirement benefits to a participant only if the participant permanently leaves the employment of the DOPT employer before his or her annuity starting date, except as otherwise provided in this policy.

a. 54TDOPT Employer – Effect of Certain Transactions54T. Certain business transactions may affect whether an entity employing plan participants is considered the DOPT employer for purposes of working retirement restrictions:

i. 54TAsset Sale54T. If an unrelated entity (i.e., not member of the DOPT employer’s controlled group) purchases all or part of the DOPT employer’s assets, PBGC generally will pay early retirement benefits to a participant who is employed by the purchasing entity unless the plan provides otherwise, as described in 13TD.2.a.ii.13T below.

ii. 54TPlan Prohibition 54T. PBGC will not pay early retirement benefits to a participant who is employed by the purchasing entity if the plan provides that participants who work for a purchasing entity 1) must terminate employment in order to receive retirement benefits, or 2) are treated as if they were working for the DOPT employer, such as if the plan provides that service for the pension plan continues to accrue while working for the purchasing entity.

Example: A plan for union employees may provide for continued accrual of service while an employee works for a purchasing entity, and benefits based on that service are not payable until the participant terminates employment with the purchasing employer.

iii. 54TStock Sale54T. A sale of the DOPT employer’s stock generally does not result in a change in the employer for purposes of this policy. PBGC generally will not pay early retirement benefits to participants who continue working for the DOPT employer after such a stock sale.

iv. 54TOther Transactions54T. PBGC will make a facts and circumstances determination regarding payment of early retirement benefits as a result of the above and other transactions (e.g. mergers, formation of joint ventures or limited partnerships, etc.) in which it may not be obvious whether the entity for which participants work continues to be the DOPT employer.

b. 54TAge 62 Exception54T. For plans that terminated on and after January 01, 2007, if plan provisions allow for in-service distributions beginning at age 62 or later, as provided under IRC §401(a)(36) 21TDistributions during working retirement21T, PBGC will pay a working participant early retirement benefits beginning the month after he or she attains age 62 or later, as provided under the plan.

c. 54TEmployment by DOPT Employer After Retirement54T.

i. 54TSuspension of Benefits54T. PBGC suspends payment of early retirement benefits:

• to a retiree who left employment with the DOPT employer and returns to work with the employer before reaching normal retirement age unless the plan specifically provides for continued payment of early retirement benefits during a period of re-employment or as provided in 13TD.2.b. Age 62 Exception13T.

• to a participant who is put into pay while prohibited from receiving early retirement benefits under this policy.

PBGC suspends payments on the working retirement suspension date, or as soon as practicable thereafter.

ii. 54TResumption of Benefits54T. PBGC resumes making payments to a retiree whose benefit has been suspended and who notifies PBGC that he or she is no longer employed with the DOPT employer.

In two situations, PBGC resumes making payments to a retiree whose benefit has been suspended even though he or she has not separated from service:

• If the exception in 13TD.2.b. Age 62 Exception13T applies, payments resume on the first day of the month on or after the date provided under the plan.

• Payments resume on a retiree’s normal retirement date (regardless of plan provisions to the contrary).

PBGC resumes making payments on the working retirement resumption date, or as soon as practicable thereafter. If payments resume on a date after the working retirement resumption date, payments will be made retroactive to the working retirement resumption date.

If the participant dies before the working retirement resumption date (e.g., before his or her normal retirement date and while still employed with the DOPT employer), and the elected form of benefit includes survivor benefits, PBGC will begin paying the survivor benefits as of the first of the month following the participant’s death. The benefit payable to the beneficiary will be the survivor benefit payable under the benefit determined in accordance with 13TD.2.c.iii.13T below.

iii. 54TBenefit Payable upon Resumption of Benefits54T. Upon resumption of benefits, PBGC will resume paying the participant the benefit amount payable as of the working retirement resumption date based on the original election and annuity starting date unless an adjustment to the benefit is needed to preserve the actuarially equivalent value of the participant’s normal retirement benefit, taking into account payments made before the working retirement suspension date, based on 29 CFR §2530.203-3 21TSuspension of pension benefits upon employment21T.

1) PBGC will calculate the actuarial equivalent of the participant’s normal retirement benefit as of the working retirement resumption date in the elected form of benefit. This benefit will be reduced by an annuity amount that is actuarially equivalent to benefits paid before the working retirement suspension date.59TP

P59T If the resulting benefit is larger than the benefit payable in accordance with the original election, PBGC will pay the resulting benefit as of the working retirement resumption date.59TP

P59T If not, PBGC will resume payments in accordance with the original election. Actuarial equivalents will be calculated using the plan’s definition of actuarial equivalence. See 13TAppendix A13T for an example determination of the benefit payable upon resumption of benefits.

54TNote 1:54T If the plan paid early retirement benefits that should have been suspended under the provisions of the plan due to the participant’s employment, contact for guidance in determining how PBGC will treat the payments that were made before the plan’s overpayment accrual commencement date but that should have been suspended.

54TNote 2:54T In some cases, a direct comparison of the monthly benefit amounts payable as of the working retirement resumption date may be sufficient to determine whether the actuarial equivalent of the normal retirement benefit (offset for benefits paid before the working retirement date) is larger than the benefit payable under the original election. But with more complex forms of benefit, such as non-level benefits, it may be necessary to compare the present values of 1) the benefits payable on and after the working retirement resumption date in the form of benefit elected calculated as of the original annuity starting date, and 2) the actuarial equivalent of the normal retirement benefit as of the working retirement resumption date in the form of benefit elected and offset by the actuarial equivalent of the benefits paid before the working retirement suspension date, in order to determine which benefit is larger.

2) The participant will not be entitled to a new annuity starting date or form of benefit election. If the elected form of benefit includes a certain period (e.g. a 10-Year Certain and Continuous annuity), the end of the certain period (for both the benefit based on the original election and ASD and the recalculated benefit based on the actuarial equivalent of the NRB as of the working retirement resumption date) is based on the original annuity starting date and is not extended to account for the period of suspension.

3) Any payments made on or after the working retirement suspension date and before the working retirement resumption date are subject to recoupment in accordance with Policy 13T6.4-1 Repayment of Benefit Overpayments through Administrative Correction, Recoupment, and Recovery13T. In accordance with 13Tsection I.2.c13T of that policy, if a participant fails to provide PBGC with timely notice of his or her employment (or re-employment) with the DOPT employer, PBGC may apply unlimited recoupment (i.e., an actuarial reduction not capped at 10%) for any benefit overpayment resulting from a delayed suspension (i.e., payments made on or after the working retirement suspension date and before the resumption date), but only if PBGC has inquired about such employment or notified the participant that the early retirement benefit is subject to suspension during periods of employment with the DOPT employer.

d. 54TOther Exceptions

i. 54TLump-sum Payments54T. If a participant applies for a de minimis lump-sum or residual lump-sum distribution for which he or she is otherwise eligible, PBGC will pay the lump sum regardless of continued work with the DOPT employer. However, this exception does not apply if the participant chooses to receive annuity payments in lieu of the lump sum as provided under Policy 13T5.4-9 Lump-Sum Benefit Payments13T.

ii. 54TReturn of Employee Contributions54T. PBGC will return employee contributions to a participant who continues working for the DOPT employer and elects such a return as provided under Policy 13T5.11-2 Payment of Priority Category 2 Benefits13T.

Appendix A

Example: Determination of the Benefit Payable upon Resumption of Benefits

Three post-DOPT retirees, Casey, Leslie, and Robin, are receiving early retirement benefits from the same plan. They are triplets and retired on the same date, 03/01/2012, having attained age 55. Each was entitled to a normal retirement benefit (NRB) of $1,000 per month starting at age 65.

A year later Casey, Leslie, and Robin returned to work for the DOPT employer. When the retirees reported that they had returned to work, their benefits were suspended. They worked for two years and again separated from service before their normal retirement date.

65T UEarly Retirement Benefits as of 03/01/2012:

• 65T UCaseyU65T worked for 30 years and was eligible for an unreduced early retirement benefit of $1,000 per month.

• 65T ULeslieU65T worked for 25 years and was eligible for an early retirement benefit, reduced by 3% per year from age 65, of $700 per month.

• 65T URobinU65T worked for 20 years and was eligible for an early retirement benefit, reduced by 5% per year from age 65, of $500 per month.

Benefits paid: 03/01/2012 – 02/01/2013

Reemployment date: 02/28/2013

Working retirement suspension date: 03/01/2013

Working retirement resumption date: 03/01/2015

65T UBenefit Adjustment Methodology

Line To determine if a benefit adjustment is needed, and if so, the amount of the adjusted benefit, PBGC will:

1 Begin with the benefit payable as of the working retirement resumption date based on the original annuity starting date.

2 Determine the equivalent of the NRB as of the working retirement resumption date in the elected form of benefit using 21Tplan factors21T and the participant’s age as of the working retirement resumption date.

3 Accumulate the benefits paid before the working retirement suspension date with interest through the working retirement resumption date.

4 Determine the annuity equivalent of the amount determined in line 3 in the elected form of benefit.

5 Reduce the NRB equivalent from line 2 by the annuity equivalent of the accumulated amount of the benefits paid before the suspension from line 4 (line 2 – line 4).

6 Pay the greater of the resulting amount (line 5) and the monthly benefit that was in pay status before the suspension (line 1).

65T UBenefit Adjustments for Casey, Leslie and Robin

Line Description Benefit amount ($)

Casey* Leslie Robin

1 Benefit in pay status at suspension (based on age 55 as of 03/01/2012)

1,000 700 500

2 Benefit at working retirement resumption date of 03/01/2015 (based on age 58)

1,000 790 650

3 Accumulated payments 02/01/2012 – 02/01/2013 with interest through working retirement resumption date of 03/01/2015

13,917 9.742 6,959

4 Annuity equivalent of amount in line 3 calculated with 21Tplan factors

96 67 48

5 Benefit at working retirement resumption date reduced by annuity equivalent of payments received (line 2 – line 4)

904 723 602

6 Monthly benefit due beginning on the working retirement resumption date (greater of lines 1 and 5)

1,000 723 602

*In Casey’s situation a calculation is not actually needed as the benefit in pay prior to suspension is an unreduced (i.e., fully subsidized) benefit. The value of the early retirement benefit is clearly greater than the value of the normal retirement benefit. Casey’s benefit of $1,000 resumes on 03/01/2015.

65T URecoupment Reminder

If Casey, Leslie, and Robin were paid benefits after the working retirement suspension date, for example, if payment suspension was delayed until 04/01/2013 and payment was made on 03/01/2013, PBGC will recoup the overpayment as provided in Policy 13T6.4-1 Repayment of Benefit Overpayments through Administrative Correction, Recoupment, and Recovery13T.

Concurrence, Endorsement, and Approval

54TPolicy 5.2-2 Working Retirement, 5th Ed.

54TConcurrence 54TInitials 54TDate

54TOBA/ASTD/ASD:54T Jarred Scott, Supervisory Technical Reviewer J.S. 01/17/2018

54TOBA/PSD/PPD:54T Laura Stephens, Supervisory Policy Advisor L.S. 01/17/2018

54TOBA/PSD/CSD:54T Michelle Gray, Division Manager M.G. 01/18/2018

54TOBA/PSD: 54TJennifer Messina, Director J.M. 01/23/2018

54TOGC:54T Joseph Krettek, Assistant General Counsel J.K 01/18/2018

54TEndorsements

54TGeneral Counsel: 54TJudith R. Starr J.R.S. 01/24/2018

54TChief Financial Officer: 54TPatricia Kelly P.K. 01/29/2018

54TApproval

54TChief of Benefits Administration: 54TCathleen Kronopolus C.K. 01/24/2018

21TThis policy may not take effect without the written and dated endorsements of the General Counsel and Chief Financial Officer and the written and dated approval of the Director of the Office of Benefits Administration on 13T 21TTransmittal 2018-0513T21T.

RIssued by Pension Benefit Guaranty Corporation. Rights are in public domain. Cite as follows:

Pension Benefit Guaranty Corporation, R21TRPBGC Operating Policy ManualR21TR, Washington, D.C., Author.

http://intranet/standards_manuals/manuals/policy/5_2_2_5th.htm (01/30/2018).

5.2-3 Benefits Requiring Employer Consent

Edition 2nd Edition

Issue Date 05/28/1998

Transmittal Transmittal 53

A. Background

B. Scope

C. Definitions

D. Employer Consent

E. Policy Statement

F. Consultation

In 1988, the Treasury Department issued regulations, generally effective for plan years beginning on or after January 1, 1989, that prohibited plans from making the availability of a benefit, such as an early retirement benefit, conditional on the employer’s consent (Treas. Reg. § 1.411(d)-4 Q-4 through Q-9).

Under the regulations, a plan sponsor had three choices:

54T1)54T eliminate the consent requirement

54T2)54T eliminate the benefit conditioned on the consent,59TP

P59T

54TNote 154T: The regulations provided that elimination of the benefit would not violate the anti-cutback rules of Internal Revenue Code section 411(d)(6) if the benefit was eliminated within the time period permitted by the regulations.

– or –

54T3)54T condition the availability of the benefit on objective criteria set forth in the plan. A plan amendment to do one of these three things was not necessary by the effective date of the regulations if: the plan sponsor selected (as reflected by plan operation) one of the options, the plan consistently operated according to the selection, and the plan was amended consistent with the selection retroactively to the effective date of the regulations. The amendment must have been adopted by the earlier of plan termination or the end of the time period for making Tax Reform Act of 1986 amendments.59TP

P59T

54TNote 254T: The TRA '86 amendment period did not end until the mid-1990s.

B. Scope

This policy statement applies to PBGC-trusteed plans that condition entitlement to a benefit on the employer’s consent.

1. "54TBenefits54T" include benefits and optional benefit forms that are protected by the anti-cutback rules of section

411(d)(6) of the Internal Revenue Code. In addition, ancillary benefits such as social security supplements and certain disability benefits are included in this definition.

2. "54TEffective date of Treasury regulations54T 54Trestricting employer consent54T" (Treas. Reg. § 1.411(d)-4 Q-4 through Q-9) is generally the first day of the first plan year beginning on or after January 1, 1989. However, a plan that was either adopted or made effective on or after August 1, 1986 — i.e., a "new plan" — is prohibited from having an employer consent provision, unless the plan applied for an IRS determination letter prior to July 11, 1988. The new plan rule also applies to amendments of existing plans to add benefits with employer consent.

In addition, a plan could not be amended on or after January 30, 1986, to add a consent requirement to a benefit that was in the plan prior to January 30, 1986.

The new rules applied on a delayed basis to collectively bargained plans that were operating pursuant to collective bargaining agreements ratified before March 1, 1986, and not due to expire until after the first day of the first plan year beginning on or after January 1, 1989. Such plans received an extension on compliance to the earlier of expiration of the agreement or the first day of the first plan year beginning on or after January 1, 1991.

3. "54TEmployer54T" means an employer, plan administrator, fiduciary, trustee, actuary, or other person or entity whose consent is a condition to receiving the benefit.

D. Employer Consent

Employer consent provisions permit an employer, either directly or indirectly, through the exercise of discretion or the use of subjective conditions, to deny or limit the availability of a benefit for which the employee is otherwise eligible.

Under the Treasury regulations, a plan may not provide, for example, that only employees who are designated by the employer, plan administrator, fiduciary, or other person, are eligible to receive a subsidized early retirement benefit.

Limited discretion with respect to the ministerial or mechanical administration of the plan, including the application of objective criteria specifically set forth in the plan, is not impermissible employer consent.59TP

P59T For example, a plan may leave it to the employer, plan administrator, fiduciary, or other person to determine whether age, service, disability, or other objective criteria for a benefit have been met.

54TNote 354T: See Treas. Reg. section 1.411(d)-4, Q&A-4 (b).

E. Policy Statement

1. 54TTerminating Before Becoming Subject to the Restrictions on Employer Consent

If a plan’s termination date precedes the effective date of the Treasury regulations, the previous policy applies.

2. 54TPlans Terminating After Becoming Subject to the Restrictions on Employer Consent

a. 54TPlan Provisions that Require Employer Consent

If a plan’s termination date is on or after the effective date of the Treasury regulations (see section C.2 above), and if the plan provision conditions entitlement to a benefit (e.g., a subsidized early retirement benefit) on employer consent or the mutual consent of both the employer and employee, PBGC will treat a participant as entitled to the benefit under the plan if the conditions for the benefit other than employer consent were satisfied before the plan termination date.

54TExample 1 - Subsidized early retirement benefit with employer consent

The plan reads as follows:

45T"A participant shall be eligible for subsidized early retirement benefits if the participant has attained the age of 55 but not the age of 62, has at least 15 years of continuous service, and, upon application, the participant receives the consent of the employer."

In this example, PBGC will deem the consent requirement to have been eliminated and will treat as entitled to the subsidized early retirement benefit any participant who, at the plan termination date, had attained the age of 55 but not 62, and had worked at least 15 years for the employer.

54TExample 2 - Subsidized early retirement benefit with mutual consent

The plan reads as follows:

45T"Any participant who has at least 15 years of credited service and

(i) attained the age of 55 years and whose combined age and years of credited service equals 70 or more, or (ii) whose combined age and years of credited service equals 80 or more, and who meets one of the following requirements:

54Ta)45T54T the participant’s continuous service is broken by reason of a layoff;

45Tor

54Tb)45T 54T the participant’s continuous service is broken by reason of permanent shutdown of a plant;

45Tor

54Tc)45T 54T the participant cannot work by reason of physical disability;

45Tor

54Td)45T 54T the participant considers that it would be in his interest to retire and the Company considers that such retirement would likewise be in its interest and it approves an application for retirement under mutually satisfactory conditions shall be eligible to retire and receive subsidized early retirement benefits."

In this example, PBGC will deem the consent granted in subsection (d) above and will treat as entitled to the subsidized early retirement benefit any participant who, as of the plan termination date, had at least 15 years of credited service and (i) had attained the age of 55 years and had combined age and years of credited service equaling 70 or more, or (ii) had combined age and years of credited service equaling 80 or more.

b. 54TAmendments Eliminating Plan Benefits that Had Been Subject to Employer Consent

Generally, if a plan previously had provided a benefit conditioned on employer consent or the mutual consent of employer and employee, PBGC presumes that the amendment eliminating the benefit was proper and timely and that the plan does not provide the benefit on plan termination. However, if PBGC finds evidence that the plan paid the discretionary benefit after becoming subject to the Treasury regulations, the amendment eliminating the benefit may have been improper. In addition, if PBGC finds evidence that the amendment eliminating the benefit was adopted after the end of the permissible amendment period under the Treasury regulations, the amendment is untimely. In the case of a possibly improper or untimely amendment, the participant may be entitled to the benefit under the plan if the conditions for the benefit other than employer consent were satisfied before the plan termination date. Consult PPD before making an entitlement determination in these situations.

F. Consultation

Applying the rules regarding employer consent can be complicated. If questions arise about whether the Treasury regulations apply, whether a plan operationally provided the benefit after becoming subject to the Treasury regulations, how a plan applied a consent provision, or other technical matters, OBA staff should refer the matter to

PPD.

RIssued by Pension Benefit Guaranty Corporation. Rights are in public domain. Cite as follows:

Pension Benefit Guaranty Corporation, R21TRPBGC Operating Policy ManualR21TR, Washington, D.C., Author.

http://intranet/standards_manuals/manuals/policy/5_2_3_2nd.htm (05/28/1998).

5.2-4 Annuity Starting Dates

Edition 8th Edition

Issue Date 07/28/2016

Transmittal Transmittal 2016-05

Last Review Date N/A

Signed Policy 5.2-4 Annuity Starting Dates

A. Background

B. Scope and Effective Date

C. General Rule

D. Retroactive Annuity Starting Dates

E. Exceptions for Certain Late Retirement Benefits

F. Alternate Payees Under QDROs

G. Changes in Annuity Starting Dates

Concurrence, Endorsement, and Approval

PBGC is revising its policy on annuity starting dates to remove restrictions on retroactive annuity starting dates for benefits that do not increase with deferral, such as early unreduced retirement benefits and funded PC3 benefits.

Under the previous edition of this policy, the benefit determination provided a final opportunity for payees to elect such retroactive benefits. Under this eighth edition of the policy, eligible payees may elect the retroactive annuity starting date at any time, regardless of any previous notifications of eligibility for the benefits. With this eighth edition, PBGC is also making clarifications, including:

• Clarifying that a request for a benefit estimate for an annuity starting date within 180 days from the date the request is made is considered documented contact requesting an annuity starting date whether or not the payee specifically requests an application for that date (13Tsection C13T);

• Combining the retroactive annuity starting date exceptions for unreduced early retirement benefits and benefits level due to Title IV (in sections13T D.413T and 13TD.5 13Tof the previous edition) into one exception for benefits that do not increase with deferral (13Tsection D.413T); and

• Explicitly allowing retroactive annuity starting dates for surviving spouses of participants who were eligible for retroactive annuity starting dates under 13Tsection D.413T, but who died before applying for benefits (13Tsection D.413T).

PBGC will continue to impose timeframe restrictions for electing retroactive annuity starting dates in cases where the benefit increases with deferral (e.g., in the case of a plan-wide determination that there was an inability to apply for benefits or a voluntarily deferred QPSA.)

This policy applies to all payees in PBGC-trusteed plans and is effective upon issuance.

C. General Rule

The annuity starting date is the date on which the first benefit payment is due. It is a prospective date requested by the payee in a documented contact with PBGC, if the payee is eligible for a PBGC benefit on that date. Except as provided in sections 13TD13T, 13TE13T, and 13TF13T, below, the annuity starting date cannot be earlier than the first of the month following such contact. Examples of a documented contact are:

• PBGC’s receipt of a completed application for benefits;

• PBGC’s receipt (by letter, e-mail, telephone call, or MyPBA) of a request for a benefit estimate for an annuity starting date within 180 days of the date the request is made;

• The initiation of an electronic benefit application that is subsequently completed and mailed to PBGC.

In order for the payee to retain the requested annuity starting date, PBGC must receive the completed application, including all required documentation, within 180 days of the date of the letter sending the application to the payee (or, if applicable, the date of the initiation of the electronic benefit application).

Annuity starting date rules for alternate payees with separate interest QDROs are contained in 13Tsection F13T of this policy.

D. Retroactive Annuity Starting Dates

A retroactive annuity starting date (i.e., an annuity starting date before the date of a documented contact with PBGC) will be permitted only if one of the situations described below exists. Except as noted below, retroactive annuity starting dates can be before DOPT. If PBGC permits a retroactive annuity starting date, the participant’s marital status for QJSA payment purposes will be determined as of (a) the application date for participants not yet in pay, or (b) the original application date for participants already in pay.

Working retirement rules will apply in determining the earliest eligibility date for a participant. See Policy 13T5.2-2 Working Retirement13T for the rules applicable to participants.

1. 54TRequired beginning dates

For any payee who applies for a benefit after the required beginning date as defined in Policy 13T5.2-5 Required Beginning Dates13T, the annuity starting date is the required beginning date, unless the payee is eligible for an earlier retroactive annuity starting date under one of the other exceptions below.

2. 54TPlan retroactivity

If a payee’s plan specifically allows for or requires retroactive annuity starting dates and the payee meets the conditions in the plan document, PBGC gives the payee the choice of retroactive payments or prospective payments of an increased benefit. A plan provision requiring that a participant apply for a benefit at a particular age (e.g., normal retirement age) will not be considered a provision requiring retroactive payments.

3. 54TInability to apply

If PBGC makes a plan-wide determination that participants and beneficiaries were without sufficient information or opportunity to apply for a benefit (e.g., an abandoned plan), PBGC allows a payee to elect an annuity starting date that is retroactive to the later of the payee’s earliest eligibility date or the date that PBGC determines payees became unable to apply for benefits from the plan. A retroactive annuity starting date will be granted only if (1) the payee contacts PBGC to begin benefits as of the retroactive annuity starting date within 90 days of the date PBGC advises payees of the opportunity to apply for retroactive payments, and (2) PBGC receives the completed application, including all required documentation, within 180 days of the date of the letter sending the application to the payee. Contact PPD if it appears that payees were without sufficient information or opportunity to apply for benefits.

4. 54TBenefits that do not increase with deferral

Plan provisions, Title IV limitations, and/or the plan asset and 4022(c) allocations may result in a PBGC termination benefit that does not increase – or does not increase substantially – with deferral. For example, a fully guaranteed early unreduced retirement benefit payable as a straight life annuity does not increase with deferral during the period from the early unreduced retirement date through the normal retirement date; the monthly benefit remains the same for any annuity starting date during that period. And for a participant whose funded PC3 benefit exceeds the guaranteed benefit at DOPT, the termination benefit may increase with deferral – but not substantially – due to the 4022(c) allocation, until the guaranteed benefit eventually exceeds the PC3 benefit.

If a payee (including, in some cases, an alternate payee under a separate interest QDRO) applies for benefits after the first date at which his or her benefit stops increasing with deferral, PBGC will allow the payee to elect an annuity starting date retroactive to his or her earliest eligibility date on or after DOPT for which the benefit does not increase with deferral. This date will be determined using the normal single form of benefit for participants not yet in pay, and the elected form of benefit for participants already in pay.

The surviving spouse of a participant who was eligible for a retroactive annuity starting date under this 13Tsection D.413T but died before applying for benefits may elect the retroactive annuity starting date as described above for the participant’s benefit. If the surviving spouse elects the retroactive annuity starting date, the benefit will be paid in the plan’s normal form of benefit for married participants. The surviving spouse will receive a back payment for benefits owed to the participant from the retroactive annuity starting date until the participant’s date of death, and benefits owed to the surviving spouse from the participant’s date of death until the date the monthly survivor benefit payments begin.

A payee may elect to receive a retroactive annuity starting date under this 13Tsection D.413T at any time, regardless of whether he or she has been previously notified of eligibility for unreduced benefits or denied a retroactive annuity starting date under a previous edition of this policy.

Exceptions:

If the benefit does not increase with deferral for reasons other than a plan-provided early unreduced retirement date, this exception to the general rule in 13Tsection C13T applies only if the benefit does not increase with deferral for a period of at least 12 months beginning on or after DOPT.

Payees will not be eligible for retroactive payment of benefits for any month for which the working retirement rules in Policy 13T5.2-2 Working Retirement13T prohibit the payee from receiving benefits.

If a payee is entitled to a benefit that increases with deferral, but the increase does not appear to be substantial, or is entitled to a benefit that, for reasons other than a plan-provided early unreduced retirement date, does not increase with deferral over a period of fewer than 12 months, refer the situation to PPD for a determination.

5. 54TDisability benefits

The annuity starting date for a participant who becomes disabled prior to DOPT will be determined under the terms of the plan document. If, after DOPT, a participant is determined to be entitled to a disability benefit from PBGC in accordance with Policy 13T5.9-1 Disability Benefits13T, the annuity starting date will be determined under the terms of the plan document as if the participant had applied at the time of disability. Participants already in pay under another type of retirement who meet the conditions above may be eligible to elect a retroactive annuity starting date under this exception. See13T section G.313T for details.

6. 54TQualified Preretirement Survivor Annuity (QPSA)

A QPSA benefit may be paid retroactively to the first of the month following a participant’s death, if the completed application, including all required documentation, is received within 180 days from the date of the letter sending the application to the surviving spouse. However, the QPSA may not be paid prior to the earliest QPSA commencement date, as defined in Policy 13T5.7-2 Payment of Qualified Preretirement Survivor Annuities in Plans Terminating on and after August 23, 198413T.

54TNote: 54TIf PBGC determines that the surviving spouse was previously offered the opportunity to commence QPSA benefits and deferred, the surviving spouse will not be eligible for a retroactive annuity starting date under this 13Tsection D.613T.

E. Exceptions for Certain Late Retirement Benefits

With the issuance of the first edition of this policy on 04/25/2003, PBGC changed its policy on annuity starting dates for late retirees to provide generally for prospective annuity starting dates. Before the policy change, late retirees were generally put into pay status with retroactive annuity starting dates that were their normal retirement dates.

This section contains transition rules that apply to late retirees to whom the pre-04/25/2003 retroactivity rules had been (or may have been) communicated and an exception for participants who are unlocatable until after their normal retirement dates. In no event may the annuity starting date for such a participant be later than the required beginning date under Policy 13T5.2-5 Required Beginning Dates13T.

The surviving spouse of a deceased participant will be offered the choices described below for the annuity starting date of the deceased participant’s benefit. If the surviving spouse elects a retroactive ASD for the participant’s benefit, the benefit will be paid in the plan’s automatic form of benefit for married participants.

1. 54TBenefit determinations issued before 04/25/2003

A late retiree whose benefit determination was issued before 04/25/2003 will be given the choice of (a) a benefit retroactive to the normal retirement date stated in the benefit determination or (b) an actuarially adjusted late retirement benefit with a prospective annuity starting date determined under 13Tsection C13T, above.

2. 54TBenefit determination not issued as of 04/25/2003

If a late retiree applies for a benefit on or after 04/25/2003 but before receipt of a benefit determination, the annuity starting date will be determined under 13Tsection C13T, above, unless the participant was notified that PBGC would pay benefits retroactive to normal retirement date, and the participant requests retroactive payments.

3. 54T"Unlocatable" participants

Participants and beneficiaries whom PBGC first contacts after the participant’s normal retirement date, e.g.

participants who were unlocatable when trusteeship notices or benefit determinations were issued, will be given the choice of (a) a benefit retroactive to the participant’s normal retirement date or, if later, the first of month following DOPT or (b) an actuarially adjusted late retirement benefit with a prospective annuity starting date determined under 13Tsection C13T, above.

F. Alternate Payees Under QDROs

Annuity starting dates for alternate payees will be determined under this section and will be based on the type of QDRO. An alternate payee with a shared payment QDRO, or an alternate payee with a separate interest QDRO whose annuity starting date is restricted under 13Tsection 2.(a)(2)13T, below, or otherwise tied to the participant’s annuity starting date will also be restricted by the working retirement rules applicable to the participant’s benefit. See Policy 13T5.2-2 Working Retirement13T for the rules applicable to participants.

1. 54TShared payment QDRO

The annuity starting date for an alternate payee under a shared payment QDRO is determined as follows:

(a) if the participant is in pay status on the date PBGC receives the QDRO that is ultimately qualified, the annuity starting date is the first day of the month after the date the QDRO was received, unless the order requires a later annuity starting date; and

(b) if the participant is not in pay status on the date PBGC receives the QDRO that is ultimately qualified, the annuity starting date is the participant’s annuity starting date, unless the order requires a later annuity starting date.

2. 54TSeparate interest QDRO

The annuity starting date for an alternate payee under a separate interest QDRO is determined under the following rules.

54T(a) General rule54T. The annuity starting date for an alternate payee named in a separate interest QDRO is a date chosen by the alternate payee. The annuity starting date generally may be only a prospective date that cannot be any of the following:

54T(1) Earlier than participant’s EPRD54T. See Policy 13T6.1-2 Earliest PBGC Retirement Date13T for complete rules.

54T(2) Earlier than receipt of the domestic relations order54T. An alternate payee’s annuity starting date cannot be earlier than the first of the month following receipt of the order that is ultimately qualified. Submission of draft orders does not affect an alternate payee’s annuity starting date.

54T(3) Earlier than documented contact by the alternate payee54T, as described in 13Tsection C13T of this policy.

54T(4) Contrary to the terms of the QDRO54T, except as provided in 13Tsection (b)13T, below. A separate interest QDRO may contain rules on when the alternate payee can or must begin receiving his or her benefit. For example, a QDRO may state that payments to the alternate payee will begin when payments to the participant start, or that payments to the alternate payee may not start before the participant’s annuity starting date. PBGC will enforce any such restrictions for orders that are qualified by PBGC on or after 09/21/2009, the date the fourth edition of this policy was issued. (For orders qualified by the plan administrator and for orders qualified by PBGC before 09/21/2009, PBGC will enforce such provisions based on the facts and circumstances of the case. Contact PPD for further guidance.)

54T(b) Exception54T: Participant entitled to retroactive payments. If the participant whose benefits are assigned by a QDRO is permitted a retroactive annuity starting date under 13Tsection D13T or 13Tsection E13T of this policy and the retroactive payment has not yet been made, the alternate payee will also be entitled to retroactive payments unless the QDRO specifically provides otherwise. This is true even if the annuity starting date is earlier than the date of PBGC receipt of the order. The alternate payee’s annuity starting date may not be earlier than the later of DOPT or the payee’s earliest eligibility age for an unreduced or level benefit.

3. 54TApplication requirement and retroactive payments

An application for benefits is required for an alternate payee’s benefits to start. If an alternate payee is permitted a retroactive annuity date or has a required annuity starting date under this section, PBGC will pay benefits retroactively to the required annuity starting date upon receipt of a valid application.

4. 54TNon-disclosure or administrative error

If a participant does not disclose the existence of a QDRO on a General Information Form or Payee Information Form or when applying for benefits, or if either PBGC or a prior plan administrator fails to administer a QDRO, the alternate payee will be entitled to a retroactive annuity starting date no earlier than the date which would have been permitted had the QDRO been properly disclosed and administered. See 13Tsection E.413T of Policy 13T6.6-3 Qualified Domestic Relations Orders13T.

G. Changes in Annuity Starting Dates

Generally, PBGC will not allow a payee to change the annuity starting date after he or she has filed a valid benefit application. However, PBGC will allow such changes in the following circumstances.

65T URecoupment of overpaymentsU65T. An overpayment that results from a change made under the rules in this section is subject to recoupment under Policy 13T6.4-1 Repayment of Benefit Overpayments through Administrative Correction, Recoupment, and Recovery13T unless payments are returned pursuant to a PBGC request.

1. 54TWithdrawal of application

a. 54TFor a change in annuity starting date54T. PBGC will allow an applicant to withdraw the benefit application and defer receipt of the annuity benefits if he or she contacts PBGC before the first payment date. PBGC will confirm such a request in writing at the time the request is implemented and request the return of any payments made to the payee.

When PBGC honors such a request, PBGC will:

1. not require a new application if the new annuity starting date is within 180 days of the date of the original application and there is no change in benefit form or beneficiary of a joint-life benefit; or

2. require a new application if the new annuity starting date is more than 180 days after the date of the original application. The new annuity starting date will be determined under this policy.

b. 54TFor a change in annuity benefit form54T. Under 13Tsection H.1.a.13T of Policy13T 5.4-7 Annuity Benefit Forms13T, an applicant may also withdraw an application before first payment date in order to change the benefit form. The applicant may retain the original annuity starting date and be paid in the new benefit form elected if a valid new application is filed within 180 days of the date of the original application and the payee requests there be no change in the annuity starting date. If the new application is filed more than 180 days after the date of the original application, the applicant will be paid in the new benefit form elected, but with a new annuity starting date based on the date of the new application.

54TNote54T: If a married participant dies after submitting a valid plan application but before first payment date, see the rules in 13Tsection H.313T of Policy13T 5.4-7 Annuity Benefit Forms13T.

2. 54TChange for incorrect early retirement estimates

If PBGC erred by 10% or more in the early retirement factor used to provide a benefit estimate to a participant (or a surviving spouse being paid a QPSA benefit), and solely as a result of the error, the actual early retirement reduction for the annuity starting date chosen is a greater reduction than the estimate indicated, PBGC will allow the payee to come out of pay and reapply for benefits later with a new prospective annuity starting date. The magnitude of the error is determined by subtracting the correct early retirement factor from the incorrect early retirement factor originally applied. A difference of 0.10 or greater indicates an error of 10% or more.

Example: PBGC’s benefit estimate quotes a participant an early retirement benefit of $85 based on the application of an early retirement factor of 0.8500 to an estimated normal retirement benefit of $100 per month. The payee applies and begins receiving this benefit. Later, PBGC advises the payee in a benefit determination that the correct early retirement factor at his chosen annuity starting date is 0.7000, and that his monthly benefit will be reduced to $70. The benefit determination will give the payee an option to come out of pay status and elect a later annuity starting date.

When an annuity starting date may be changed under this section, PBGC will notify the participant, who will be allowed 30 days from the date of the notice with the correct benefit information (typically in the benefit determination) to contact PBGC to request a change in the annuity starting date. If the participant had a spouse at the time the original application was filed, and the spouse is still alive, that spouse must consent in writing to the annuity starting date change.

PBGC will respond in writing to the request. If the request is approved, the payee will be taken out of pay status and must submit a complete new application (including required consent) for the new annuity starting date. Any benefits paid before the payee comes out of pay will be treated as overpayments in accordance with Policy 13T6.4-3 Computation and Netting of Post-DOPT Overpayments and Underpayments13T.

3. 54TRetroactive annuity starting dates for participants already in pay status

If a participant already in pay status is eligible…