- Published: Thursday, 30 June 2016 19:11
When Mary Grason, the new third party administrator of the Maryland Thoroughbred Horsemen’s Association’s Backstretch Pension Plan learned the MTHA board wanted to make helpful changes to the Plan recently, she saw it as a confirmation of what she has found during the year since Pollard and Associates took over the Plan’s administration.
“The MTHA Board really cares about the people on the backstretch,” Grason says. “They want this plan to be meaningful to them and every change they’ve made is designed to make the Plan more accessible to its participants.”
Grason says when MTHA executive director David Richardson approached her with issues the board wanted to improve, she was delighted to be able to tell them, “We can make some minor changes that will address your concerns without changing the basic structure of the plan, which is meeting your objectives.”
At the recent June 23 MTHA board meeting, the following changes were approved:
1. Minimum age for participants in the Plan will now be age 18.
2. The installment payout option will be replaced with a “partial” withdrawal provision.
Regular monthly payouts are more common in annuity and IRA plans, than in one like the Plan in place for the backstretch workers. The change makes it possible for participants to make partial withdrawals when needed, which the MTHA board saw as being the more important benefit.
3. Participants can now get a distribution from their accounts on March. 31, June 30, September 30 or December 31, at 80 percent of the last valuation balance with a “true-up” after the current year valuation is completed.
Originally, participants were allowed to take a distribution from his/her account only between Oct. 15 and Dec 31 of any year.
“It was very restrictive,” says Grason. “If someone put in a claim any other time of the year, they would have to wait for the Oct. 15 – Dec. 31 window to get their money. The change now allows funds to be distributed at the end of any quarter.
Because the plan is only valued once a year, when a snapshot of the plan investments is taken on Dec. 31, it means that when a payout is made any date thereafter, a participant’s account could be worth more or less than the year-end balance.
“We will be paying out based on the December 31 balance of the previous year because we don’t know what the accounting will be at the end of the current year. At that time we will “true-up” the participant’s account based on the actual fund earnings for the year,” Grason says. “We will pay the remaining balance after that has been done.
The administrator explains the 80 percent payout protects the Plan if their has been a market decline since the last valuation date. “If we paid out 100% of a participant’s balance and their was a decrease in the plan’s investment value, it would cause an overpayment, which could affect the plan as a whole. We feel a 20% hold-back should be an adequate cushion even in a serious market decline because of the diversity of the Plan’s investments.”
4. The Plan will now allow in-service withdrawal provisions for early retirement age participants. The previous rules allowed only those at the full retirement age of 65 and still working to make in-service withdrawals. Now, if a Plan participant is still working at the early retirement age of 55 and has 25 years of service, he/she also can make an in-service withdrawal.