CuseFan

Agree with @Bri that if amounts were not forfeited from accounts when they were required to be under the terms of the plan then you have an operational defect(s). Then, if defect(s) #1 resulted in forfeited amounts not being applied timely pursuant to plan provisions then you have operational defect(s) #2. If those forfeitures were supposed to be allocated or reduce expenses, then participants would have been harmed. If they were supposed to reduce future contributions, yes, maybe only the employer was impacted, but that also enabled them to contribute and deduct more. Regarding IRS thoughts - I would suspect they'd want the defects corrected in accordance with the plan's provisions and not fully vest amounts that should have been forfeited years ago.

OMG, that was awesome Tom. And crossword puzzle aficionados certainly know what a yegg is!

The question to answer first is what does the plan say for timing? Was the benefit REQUIRED to commence at an earlier time without regard to any election by the spouse, in which case you are correcting an operational defect and and option 1 seems appropriate. Maybe paying the greater of 1 and 2 could be justified but I probably wouldn't go that route if there are NHCEs in the plan. If the plan does not specifically require that earlier distribution, then you are looking at a current annuity starting date after all conditions needed to pay out are satisfied, and then you are looking at option 2, provided those actuarial increases do not cause the benefit to exceed 415.

If that was a change in plan provisions driven by a change in corporate governance, there should have been a plan amendment for which you should have received a Summary of Material Modifications (SMM) no later than the middle of the following year. I suggest reading through your Summary Plan Description and then directing specific questions to the Plan Administrator. That's about all I have to offer, good luck.

I don't know what the rationale would be unless that timing has been in the plan all along, which is often the case with ESOPs. What may have changed was an underlying requirement regarding stock ownership. Some companies through their by-laws restrict stock ownership to employees and maybe it was that sort of change in corporate governance that triggered redemption. Also, plans sometime use special early distribution windows to reduce head counts for various reasons, but couldn't guess why they would want/need to hold assets no longer in company stock for years after termination.

If under the terms of the plan and prior to the termination (maybe too late now if process started/NOITs issued) you could do auto rollover as a function of normal plan administration then I think it would be permissible.

Agree with your assessment.

So now I'm told this was a different plan versus my original question which still remains relevant - so the $64,000 question is whether the plan termination distribution date for all benefits (the ASD) is essentially a PYE and therefore creates an Interest Credit Period under the terms of the Plan? If so, then an interest credit should be provided. Does the presence of excess assets which will be transferred after all benefits are paid make a difference? Technically the plan has not ended because assets are not zero, but there is nothing on which to credit interest so does that still create a (short) Interest Credit Period. These are relevant AA items. The BPD does not elaborate other than say that the ICR will be prorated for any ICP < 12 months. 15. Interest Credit Period: a.  Each Plan Year 22. If a Participant's annuity starting date occurs before the end of an Interest Crediting Period, the Interest Credit for the partial Interest Crediting Period will be: a.  Zero I welcome any further thoughts or direct experience you may have had with this issue. Happy Friday afternoon for a holiday weekend!

Pennies! If you can find enough of them.

Thank you everyone for your input. I could see interpretation here that the earlier plan termination ASD is tantamount to the last day of the plan year and therefore requires an interest credit allocation. There are some other factors (allocating excess assets up to 415 limit) in my case that make this a moot point now that I think about it. As Emily Litella said after her diatribe on eagles' rights, "never mind."

It's a pre-approved document provision so IRS has no issue with it.

Great advice from @Paul I

CBP has fixed 6% interest crediting rate and (per pre-approved plan document selection) does NOT provide interim interest to the annuity starting date. Plan terminated, effective 12/31/2025 (also PYE) and will pay out on 6/1/2026, the ASD - there is no requirement to override the plan provision and provide interim interest (5/12 of 6%), correct? That's true even if we had to average prior 5 years of variable ICRs, yes? I see in the basic document the averaging requirement but nothing requiring an interim credit. Thanks

It isn't. DCPs must have vesting at the TH schedules or better - 3-year cliff or 6-year graded.

Agreed.