ad hoc distributions - protected benefit?

[AlbanyConsultant]

Unless there is a compelling reason, whenever we take over a 401(k) plan we at least discuss the topic of removing installment or annuity distribution options because they are not protected benefits and I like things easy.  In this latest plan document I'm taking over from, the language suggests that the "ad hoc" distributions it allows are a protected benefit.  This one, I'm less sure about.

First of all, I'm presuming (since I can't get a copy of the basic plan doc, only the adoption agreement) that by "ad hoc" distributions, they mean amounts allowed to be taken out by a terminated participant in any amount at any time.

Any thoughts as to if this might actually be protected somehow?  Thanks.

[david rigby]

Make no presumptions until obtaining a copy of the basic plan doc.

 

[AlbanyConsultant]

 Waiting in my email this morning was the BPD!  Perfect timing!

Here is the entirety of the discussion of "ad hoc" (I have edited out language that clearly has no bearing):

Quote

6.03 POST-SEPARATION (SEVERANCE), LIFETIME RMD, AND BENEFICIARY DISTRIBUTION METHODS.

(A)  Plan Available Methods.

(1)   Participant methods. The Employer in its Adoption Agreement will elect one or more of the following distribution methods applicable to a Participant: (i) Lump-Sum; (ii) Installments; (iii) Installments but only if the Participant is required to receive lifetime RMDs under Section 6.02(A); (iv) Alternative Annuity; (v) Ad-Hoc...

(2)   Beneficiary Methods. ... The balance of this paragraph shall apply after a Participant's death in all other situations, except to the extent the Employer makes a contrary election in Appendix B. If the only distribution option available for Participants is a lump sum distribution, or the Employer elects in the Adoption to require immediate distribution of the Participant or distribution on or before the end of the year following the year of the Participant's death, then the Lump-Sum method shall apply to distributions to the beneficiary. Otherwise, (i) a Beneficiary may elect to receive a distribution either as a
Lump-Sum or in Installments, (ii) if the Plan permits Ad-Hoc distributions to Participants the Beneficiary may elect to receive Ad-Hoc distributions, and (iii) any Installments or Ad-Hoc distributions in a DCY* must be at least equal to the RMD for the DCY.
 

* DCY "is a distribution calendar year for which an RMD is required."

...

(6)   Definition of Ad-Hoc. Ad-Hoc means the Participant or Beneficiary may at any time after Separation from Service (or Severance from Employment) elect distribution of all or any part of his/her Account or of specified Accounts under the Plan. The Plan Administrator may adopt a policy regarding Ad-Hoc distributions imposing a reasonable minimum distribution amount, frequency limitations or other reasonable administrative
conditions.
 

This sounds like just another form of option benefit payment that can be eliminated to me, but of course, that's what I want it to sound like, so maybe I'm biased...
 

[Belgarath]

Agree.

[Luke Bailey]

It's been a long time since I read the 1.411(d)-3 regs from start to finish, but I am not sure that this would not be protected. Am I right that you would be changing from a situation where, before the amendment, a termed vested who had not yet reached NRA or RMD can elect to take any amount he or she wants from his or her account, and leave the rest in, to one where, after the amendment, the participant would have to take everything in a single lump sum?