Can participant direct that her lump sum distribution be payable to a

[R. Butler]

We have a terminated participant who will be eligible for a lump sum distribution next month. The participant wants the check payable jointly to herself and a third party. I am fairly certain that this would be an assignment of her benefits. Since she is in pay status this would be permissable only if it is voluntary and only up to 10% of the total benefit.

Am I missing anything?

Thanks in advance for any guidance.

[david rigby]

I'm no expert, but it sounds right to me.

Even if it were paid (rather than using the problematic word "assigned") to another party, I think the Participant would be taxable recipient.

[M R Bernardin]

Look at TR 1.401(a)-13(e), which contains an additional exception for "certain arrangements," which may permit you to do what the participant is asking here. You would, of course, want to be comfortable that your plan document would not prohibit following the regulations.

[R. Butler]

M R Bernardin,

Thanks for the input. I don't know how I missed that, I derived my original conclusion from 1.401(a)-13(d).

It looks to me that it is permissable for the check to be cut to the third party, provided the request is revocable and the third party acknowledges in writing (within the prescribed time frame) that he/she has no legal right to the money.

The document doesn't prohibit it "per se". It basically says lump sum distributions will be made "at the participant's election".

If the Plan Administrator ultimately allows this arrangement, will the distribution still be taxed to the participant? I think so since the participant directs the distribution and it will be revocable up until the check is actually cashed.