| FAQ 817: Coding a Postponed Retiree |
How do I code the system to handle a postponed retiree?
In the ASC system, late or postponed retirees are handled by changing their Normal Retirement Date to the day AFTER the valuation date and making sure the accrued benefit coded in their 'Prior Accrued Benefit' field is correct. The 'Date NRA Attained' should remain the date at which they reached the normal retirement age and completed the plan's service/participation requirement. This coding will cause the system to calculate the increased retirement benefit based on the way the Postponed Retirement Benefit is coded in Plan Specifications: General \ Benefits \OTHERBEN screen. This is of course dependent on plan provisions, but many small plans define the late retirement benefit as the 'Greater of 1 and 2' where 1 is the actuarial equivalence of the Prior Accrued Benefit, and 2 is the plan formula benefit increased for salary and service. You will also need to enter salary in both the 'Current Compensation' and 'Current Annual Compensation Rate' fields.
If you are assuming the person will postpone retirement to a future year then both Date NRA Attained (NRA) and Normal Retirement Date (NRD) will need to be set to the assumed postponed retirement date. The system will not calculate the projected actuarially equivalent (AE) benefit with this setting. If the projected AE benefit is larger than the salary and service benefit, the projected AE benefit will need to be input in the add-on to projected and funding benefits fields and the current AE benefit input in add-on to accrued benefit field on the individual's Projected Benefit screen. In addition, set plan specs General \ Compensation \ COMPAVG \ Benefit Add-ons = 2 - Forced Minimum Benefit.
Please note that if the participant's current status is 'B' or 'C', their status must be changed to 'A' prior to running Calculations > Valuation. 'B' or 'C' status participants will have their retirement dates recalculated if not changed to status 'A'.