For a participant past NRD, does the law require you to give the

greater of actuarial increase vs. continued accrual,

or

just continued accrual ?

Yes and no. The plan must give the greater if the participant did not receive the a notice of "suspension". Another method to avoid this "greater of" process is to pay the benefit to the participant even though not yet retired or separated from employment.

However, consider a VT who reaches NRD, requests commencement of benefit one year later. I think the Plan is required to give an acturial increase.

Well in this scenario, the participant gets 1.5% per year of service. Let's say there's a guy who's 70 with an accrued benefit of 832 per month according to the formula. If he works another year, he'll get another 1.5% tacked on to his benefit, although computed at a new average pay. If the actuarial equivalent of last year's benefit is now higher than the new formula, is the participant automatically entitled to the higher number?

I think there are two schools of thought on this (and I'm no expert on this).
The first is that you look at the benefit at the final termination of employment (retirement or death) after NRA, using the plan formula and definitions in effect at that date, and compare this to the actuarial equivalent of the NR benefit. Take the greater amount.

The second is to do this same comparison one year at a time, which would probably be on each anniversary of NRA, taking the greater amount at each age.

Very easy to get different answers under these two methods. Sorry, I don't know if there is a right answer.

I agree with pax that the two approaches can give different results.

But I think that there is some guidance on this, and that it says that you have to do the comparison a year at a time. I'm not current on it because we use the suspension of benefits notice, but if I get the chance will try to find something.

RCK

This is a fuzzy memory, but I seem to remember an ASPA study manual teaching the "year at a time" approach.

The one year at a time approach comes from the proposed regulations in 1988 implementing the OBRA'86 changes to require continued accrual.

4/11/88, 1.411(B)-2 Accruals and allocations after a specified age.

The only reason there are two schools of thought is that there are people that stubbornly ignore proposed regulations that have not been finalized. There is very good theoretical justification for the year-by-year approach whether or not the regulations say it. The point is that you must preserve the value of the accrued benefit that a person could receive if they retired. This does not mean "retired at NRA", it is retired at any time. That is what is driving the year-by-year approach.

MGB -
I enjoy reading your posts (I learn a lot) but I have to vigorously disagree with your comment that people "stubbornly" refuse to follow proposed regulations.
Taxpayers are never required to follow proposed regulations, that is why they are "proposed."
I frankly agree that the proposed section 411(B) regs make sense and that a year-by-year adjustment is conceptually correct. However, I believe that existing guidance (regulations, rulings, etc.) provides some support for the other position.
It is inexcusable that the IRS has left these regs in proposed form for over 10 years.