Expert: Allen - 4/11/2008

Question
I AM 75 AND AM WORKING UNDER A DEFINED DEFERRED PENSION PLAN FOR OVER 50 YRS. AS I READ 'SMALL BUSINESS JOB PROJECTION ACT OF 1996 'SECTION 1404 AND IRC 401 (a)(9)(C)(iii) MY PENSION MUST BE ACTUARALLY INCREASED FROM THE TIME I REACHED 70 1/2 .RIGHT ? NOT APRIL 1 FOLLOWING THE YEAR YOU  TURN 70 1/2

Answer
Hope the following is understandable. If it isn't write back.

The law states that if an employee continues to work past the normal retirement date stated in the plan document, then his or her benefit is increased by the greater of 1 or 2:
1. An actuarial increase of the benefit that would have been paid at the normal retirement date. The increase is made to reflect the delay in payment
or
2. A recalculated benefit which takes into account the additional service and pay.

In most plans the increase is determined on an annual basis after reaching the normal retirement date (usually age 65). This has nothing to do with reaching age 70 1/2. The reference to 70 1/2 is that when a participant reaches this age what are known as minimum required distributions may have to begin.