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First, let's not discount the opportunity to let participants request distributions on line. This removes constraints of limiting explanations to one page and the process can limit the ability to input information that is required for a particular type of distribution. Also, let's not overlook requirements like the need for 402(f) notices, 30-day waivers and special considerations if the distribution will come for taxable, Roth or after-tax accounts. If you want the participant to read the description, it has to attract attention of the eye and the mind. This typically translates into the use of colors and varying fonts and text size, and should avoid jargon. For example, ask "Do you need money related to a birth or adoption?" instead of asking "Is the for a Qualified Birth or Adoption?" A plan can call for liberal use of self-certification, limit the need for spousal consent, and delegate approval or acceptance to a service provider or 3(16) administrator. I suggest that there is not a universal acceptance of this approach among plans and service providers, and there is a need for a significant amout of flexibility.

I would not recommend putting all of the different kinds of distributions available under the plan on one election form. It may, however, be helpful to the participant if there is a single description of all of the kinds of distributions that are available along with highlighting some of the decision points the participant should consider in choosing the type of distribution. The description would then point to the appropriate form tailored to each kind distribution. This is an approach that is similar to existing procedures for requesting a distribution, although as you note, the number of choices has expanded significantly. Arguably, the SPD should fulfill this function, but we should acknowledge that SPDs can be unwieldy, or blandly generic and less detailed than may be needed if there are many choices available to the participant. Some reasons for keeping forms separate are: Different types of distributions can require different information. Often a participant looking to take a distribution fills out question of every section on a form in fear of leaving out something that causes the request to be denied or delayed. Some distributions may require attachments providing additional information. For example, a disability payment may need a physician's statement, a death benefit may a death certificate, or if self-certification is not allowed for hardships, documentation of the financial need may be needed. The tax circumstances can be different, and the tax rates and excise taxes can vary by the kind of distribution. Any tax election accompanying the distribution election would need to be coordinated with the selected kind of distribution. The plan will need to decide how far it will go to inform the participant of the consequences of the participant's choices. Personal tax circumstances will vary from one person to the next. Personal financial circumstances also will vary. An individual who has reasonably stable finances may be more inclined to use a kind of payment that allows for repayment or restoration of the distribution to the plan. If the plan attempts suggest to the participant how to optimize the consequences of a distribution and the suggestions result in otherwise avoidable taxation or penalties, the plan can expect some participants to seek to be made whole because the plan did not fully inform them.

Paul I, thanks again! Yes, I presume most distribution claims are submitted online, not paper. I hope that allows more opportunity to present the idea that a plan might allow more than one kind of distribution on the same facts, and that a participant might choose which kind fits her needs and interests. Electronic claims also allows quicker and cleaner use of information already known and suppression of information that cannot apply in an individual’s circumstances. I think almost not at all about § 402(f) notices, waivers of that notice period, § 3405 withholding explanations, § 3405 elections (to the extent allowed), and other communications tax law requires. No matter how bad the writing in the IRS’s norms, it’s too hard to ask a recordkeeper to customize those elements. And anything I might imagine about ways to streamline claims might see no use. None of my plan clients brings a recordkeeper enough profit that it would change a general method it decided on. Rather, my hope is that some recordkeepers, especially those that program one’s own software or build overlays and interfaces to improve uses of a supplier’s software, might consider designing systems not only for wholly computerized processing of claims for voluntary distributions but also for friendliness to participants in informing choices. Paul I, thank you for indulging me with this thought exercise.

I would think any change to the terms of the agreement would constitute entering into a new agreement for these purposes. So I would work with the TPA to remove those gag clause provisions asap. They'll probably be more than willing to given the CAA provisions at play here. My guess is they would even be willing to date the change back to 12/27/20 and certify that they have not enforced such terms since that date. It's not perfect, but it still should be good enough at this point--not really sure what else could be done. Here's the actual attestation language: https://www.cms.gov/files/document/hios-gcpca-usermanual-03_00_00_062823.pdf The following will then display: Group health plans, including non-federal governmental plans, and health insurance issuers offering group health insurance coverage. I attest that, in accordance with section 9824(a)(1) of the Internal Revenue Code, section 724(a)(1) of the Employee Retirement Income Security Act, and section 2799A-9(a)(1) of the Public Health Service Act, the group health plan(s) or health insurance issuer(s) offering group health insurance coverage on whose behalf I am signing will not enter into an agreement, and has not, subsequent to December 27, 2020, entered into an agreement with a health care provider, network or association of providers, third-party administrator, or other service provider offering access to a network of providers that would be directly or indirectly restrict the group health plan(s) or health plan(s) or health insurance issuer(s) from—...

No. You have to use the same elections for all purposes. From the 2023 premium filing instructions:

Firms such as financial service firms or brokerage houses offer SIMPLE plans that the firms offer using their own adoption agreements/basic plan documents. (These companies typically will not hold accounts for SIMPLE plans set up using the IRS Forms 5304 or 5305.) It is possible one or more of these firms has plans is marketing SIMPLEs with Roth contributions, although I have not seen any firms advertising that they offer them. Perhaps some of our BL colleagues are aware of firms that do.

This is the type of situation where you need to read the plan document carefully to sort out three different topics, each of which can have its own rules that may look very similar or very different from each other within the document. The topics are: Eligibility Vesting Benefit accrual (for a PS plan, allocation conditions) It is possible, for example, for a rehired participant in a plan that uses rules of parity for determining eligibility to not be eligible. If the same plan uses elapsed time for vesting service, that participant could be vested. Within the rules of parity, there can be a distinction between pre-break service and post-break service. It is best to see what the plan document says for calculating eligibility service and vesting service. Be on the lookout one of the trickiest provisions where a rehired participant gets retroactive credit for pre-break service only after the participant completes one year of service after returning to service. Another tricky part of applying the rules of parity is that the rules use a Break-in-Service to determine when a participant counting consecutive One-Year-Breaks-in-Service. A participant may, under the plan provisions, have worked more or less than 500 hours (particularly in the year of termination or year of rehire) which can impact the count. Note this count also can be impacted when the participant's Eligibility Computation Period shifts from the first 12 month's of employment to the plan year. What is amazing is these rules been in existence since 1975 and somehow have survived. Good luck!

Good point. I think the difference is that an election to use the yield curve would also require a revocation of the prior election to use an alternate applicable month. It would have been nice if the IRS had addressed this in the rev proc, as it's not really clear either way.

Your comment made me curious, as I almost never see plans with a lookback month election. I went and downloaded the 2021 schedule SB data set from EFAST and did a quick pivot table on the applicable month code. The blanks are probably yield curve elections, I don't know how the other numbers got in there. Anyway, it seems like an election to use the 4-month lookback is not entirely uncommon, which I suppose makes sense—the benefit of using a lookback month is that you can determine your funding liabilities earlier in the year, so why not go as early as possible? But still, use of the month containing the valuation date is the overwhelming popular favorite. And for those plans, they could switch to the yield curve without IRS approval.

If the plan sponsor has not previously made an election to use the segment rates for a month other than the month containing the valuation date, then they may make an election to use the yield curve without IRS approval. Once they have made an election—either to use a lookback month, or to use the yield curve—that election can only be revoked or changed with IRS approval. See also rev. proc. 2017-57.

RBG is spot on, compliance testing is accrual basis and aligns with corporate and individual tax reporting. Cash basis accounting just impacts how it all is reported on the 5500.