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Plan restatement and 411(d)(6)


Lori H

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a 401(k) is in the process of being restated for EGTRRA and one question the AA has is regarding to protected benefits. It asks...."The following are Code Sec 411(d)(6) protected benefits that are preserved under this plan:____________(specify the protected benefits and the accrued benefits that are subject to the protected benefits).

Well it would seem the plan would retain all the protected benefits that were in the plan prior to restatement. I am a bit confused as to what should be in that space. There has been nothing that reduces accrued benefits (i.e. vesting, etc) You could possibly put a too much in that space (or perhaps not enough). The plan does not have early retirement or optional forms of benefit. Would someone give an example of what could be specified in that space.

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Lori:

I think that refers to a situation where you are cutting a protected benefit and want to do it legally. For example, you want to take out the hardship withdrawal provisions. This can only be done prospectively. You must protect the benefit for current account balances.

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Guest Sieve

I agree with Jim that the protected benefit section of the AA that you reference is for inserting those benefits which are being retained for past accruals even though they are being eliminated prospectively (such as prospective elimination of in-service distributions at age 59-1/2).

I disagree with Jim, however, about hardship distributions being a protected benefit. They can be eliminated entirely--even to the extent accrued. (Treas. Reg. Sections 1.411(d)-4, Q&A-2(b)(2) [introductory paragraph] and -4, Q&A-2(b)(2)(x).)

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