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Scott

"Accrued" Protected Benefits

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Plan B is merging into Plan A. Plan B allows in-service distributions from all vested accounts upon attaining age 59½. Plan A does not allow any in-service distributions. None of the current Plan B participants have attained age 59½.

Generally, in-service distributions are a protected benefit. The regulations allow the elimination of protected benefits with respect to benefits not yet accrued. Since none of the Plan B participants have attained age 59½, can the in-service distributions be eliminated in the merger of plans on the basis that this benefit has not accrued for any of the Plan B participants?

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Guest Sieve

No. Optional forms of benefit also may not be eliminated, so the option to take a benefit at age 59-1/2 cannot be eliminated for benefits that already have accrued.

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No. Optional forms of benefit also may not be eliminated, so the option to take a benefit at age 59-1/2 cannot be eliminated for benefits that already have accrued.

I guess that's my question--what does it mean for a protected benefit to "accrue"? If I understand you correctly, you're saying that "accrual" relates solely to the distribution options available under the plan when the dollars go into the account and that eligibility for the benefit is not considered. In other words, even though none of the Plan B participants have satisfied the eligibility requirements to take an in-service withdrawal, the future ability to take an in-service withdrawal cannot be removed with respect to their current account balance?

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Guest Sieve

Basically, that's what I'm saying (although, if I remember correctly, there are some twists & turns in the regs re: earnings). It's like trying to increase NRA from 62 to 65--to the extent someone had already earned a benefit (or account balance) which will be payable at age 62, that benefit (including the fact that it is payable at 62) cannot be eliminated; only benefits earned after the amendment can be held back until age 65. (The regs are convoluted, but see, in general, Treas. Reg. Section 1.411(d)-4, Q&A-1.)

Does some else see it differently?

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