Required Minimum Distributions - is election to defer trumped by 2001

[John A]

When would a participant in the following situation be required to start receiving Required Minimum Distriubtions?

Plan doucment defines Required Beginning Date as April 1 following age 70 1/2 for all participants.

Plan document will be amended by the end of the GUST remedial amendment period to leave the Required Beginning Date the same, but to state that participants reaching age 70 1/2 between 1/1/97 and 12/31/01 (or possibly 12/31/02) will be given the option to defer their distributions until termination of employment (in accordance with IRS guidance).

If a participant that turned age 70 1/2 in 2000 elected to defer distributions until termination of employment, and the participant terminates employment in 2004, would the participant be required to start distribution prior to 2004?

Under the 2001 proposed regulations, a plan document can specify that the Required Beginning Date is Age 70 1/2 for all employees. Under SBJPA, the Required Beginning Date had to be defined as the later of age 70 1/2 or termination of employment for non-5% owners. However, plans that were not amended for SPJBA could give participants the option to defer distributions.

So which takes precedence, the employee's option to defer under SBJPA, or the 2001 proposed regulations? Would a participant who had made the election to defer be required to start distributions as soon as the 2001 proposed regulations become effective (in 2002 unless the model amendment is adopted)?