"nonincreasing annuity" requirement for Required Minimum Distributions under 401(a)(9)

[Guest rtriche]

A client's plan states that an unmarried participant will be paid in a single life annuity. In addition, he/she can qualify for a death benefit equal to 48 monthly payments which is payable to his/her beneficiary in a lump sum after his/her death.

Q/A 1 of regulation section 1.40(a)(9)-6T (new regs) states that distributions from a defined benefit plan (ignoring insurance products) must be paid in the form of periodic annuity payments for the employee's life (or the joint lives of the employee and beneficiary) or over a period certain... In addition, all payments must be either nonincreasing or increase only in accordance with one of 4 exceptions (listed in Q/A 1). (None of the exceptions prove to be helpful here.)

Further, paragraph (e) of Q/A 1 states that the rules prohibiting increasing payments under an annuity apply to payments made upon the death of an employee, unless the increase is due to an ancillary death benefit. (The ancillary death benefit rule does not apply here.)

Does anyone have a client with a similar provision in a defined benefit plan? If so, I would appreciate any guidance on how this benefit structure satisfies the above regs (or any other 401(a)(9) reg).

Thanks

[Guest Harry O]

Why doesn't this form of payment satisfy the requirements you cited? During the employee's life the annuity payments are non-increasing. The lump sum payment upon the employee's death appears to be an incidental death benefit. What am I missing?