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Under the second approach, a plan could provide for proportionate benefits with respect to each distribution option equal to the pro rata portion of the amount of the distribution option that would be determined if that distribution option had been applied to the entire accrued benefit.
In Tomlinson, the plaintiffs argued that the plan violated the ERISA requirement that the amount a participant accrues in any given year should be no more than 133 1/3 percent of the annual rate at which he accrued benefits in the previous year.
In 2001, current and former CIGNA employees filed a class action alleging that the cash balance formula was age discriminatory, violated ERISA's back-loading rule, and resulted in a forfeiture of accrued benefits.
Under current standards, the unfunded accrued benefit obligation can be amortized over as many as 30 years.
4) An employee's rights in his accrued benefit derived from his own contributions must be nonforfeitable.
In computing the period of service under a qualified plan for purposes of determining the nonforfeitable percentage of an employee's accrued benefit, all of an employee's years of service with the employer maintaining the plan must be taken into account, except that the following may be disregarded:
Current GASB standards include such factors in the calculation of the employer's unfunded accrued benefit obligation for benefits already earned.
This accrual will create a charge to earnings, and unfunded accrued benefits will create a growing balance sheet liability.
To meet the rules for statutory hybrid benefit plans, a plan would have to give the participant with 3 or more years of service a nonforfeitable right to 100% of the participant's accrued benefits.
Section 508(a) requires that the benefit statement (1) be based on the latest available information; (2) include the total benefits accrued or the vested accrued benefit, or indicate the earliest date on which the accrued benefit will become vested; and (3) include an explanation of any permitted disparity or floor-offset arrangement that may be applied in determining accrued benefits under the plan.
Furthermore, an age discrimination test will be satisfied if a participant's accrued benefit is not less than the accrued benefit of any otherwise identical younger employee.