Optional Form of Benefit Eliminated

[Dougsbpc]

We administer a (non-PBGC) 20 participant DB that provides a lump sum and installment payments from the plan as optional forms of Benefit.

Our concern is that the plan will terminate soon, optional forms of benefit cannot be eliminated per 411(d)(6), an therefore we cannot eliminate installment payments from the plan. What happens if a participant has 20 years to NRA and chooses the installments? Does that mean the plan must be maintained for 20 years after termination?

Has anyone run into this?

Thanks.

[david rigby]

It means the plan has to purchase the promised annuity, with all of the appropriate provisions, including early retirement, optional conversion forms, etc.

However, it is likely that NO insurance company will sell an individual deferred annuity, at least not if the deferral period is over a year. Then you have to decide what other option you have. I had this problem once, and we were instructed by legal counsel to calculate and purchase an immediate annuity (J&S, if the employee is married). Obviously, the monthy amount can be greatly reduced.