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There is no question that when you go out and buy an annuity from a commercial provider, the cost of the annuity is generally going to exceed the lump sum hypothetical account value calculated by the actuary. There is also no question that the determination of the annual benefit is measured by the amount paid under the annuity contract, without regard to the expense of the contract itself. Are you asking if the plan can buy an annuity instead of paying the lump sum and pay for the expense of that annuity with the excess assets? The answer is yes. I think what is confusing me (and maybe others who responded to this question) is why anyone would intentionally pay the extra cost for the annuity solely because they want to eat up the excess assets. If they want to pay the extra expense to transfer the mortality risk (as Mike Preston suggested), that is one thing. But to pay the extra expense for the sole reason of finding some way to spend the surplus does not seem to be rational economic behavior. There are plenty of other things you could do with that money instead of handing it over to an insurance agent just to get rid of it. That dovetails back to what David Rigby suggested. If the plan is trying to game the system with something like a springing cash value or wear away of the surrender charge, I think everyone agrees that is not going to work; such an arrangement does not, however, seem to be the intent here.

MoJo, I really have no preference. I was just pointing out a possible way to go. BTW, it was worth the length of this thread just to see that someone had actually written a law review article on the topic. Sooner or later, you see everything.

What Austin said - same for us. Doing a VFCP for a situation where there is 9 dollars of lost interest seems like overkill... But, your way is certainly safe - can't get into trouble that way.

I use it all the time, VFCP or not. I only do VFCP in really significant situations.

I think it is 30 days.

Right - the opposable thumb may have helped lift us out of the primeval jungles, but too many of them makes typing a challenge.

Yep. One of the first issues I dealt with as a young associate (back before dirt was invented) involved this. I think I spent a month figuring out the question, then another month figuring out the answer, then a third month saying "OMG!!"

How could this ever happen? The only employers that can maintain a 403(b) are employers tax-exempt under 501(c)(3) and public schools. And no one can "own" either of those.

Under the expanded PBGC program, unresponsive participants in a terminating DC plan count as missing.