401(a)(9) - Distributions from DB plan

[Gary]

Regarding the final regs.

Do they provide for the annual recalculation (for an ACTIVE employee over 70 1/2 and required to begin RMD at 4/1 > 70 1/2) of RMD based on PVAB each year and the uniform dist period?

ANd does this qualify for eligibility for a change in form of benefit to say a lump sum at actual retirement?

It appears to, but it isn't entirely explicit to me.

Thanks.

[SoCalActuary]

My reading is that they disallowed this option for traditional DB benefits. The plan accrued benefit is to be paid in an annuity form, presumably QJSA. You also have a very short time after year end to make this calculation of the annuity benefit.

If you transfer the PVAB to an individual account plan, then you can use the life expectancy method.

New accruals of benefit will start a new annuity starting date on the added benefit.

(Bitter political comment here: The IRS did a bad thing here. This forces business owners with DB plans to take higher income now. I don't see any positive value from their hard-nosed attitude.)

[Blinky the 3-eyed Fish]

My understanding for the transition period 2003-2005 is that the account balance method is allowed but disallowed after that. I agree with the bitter political comment.

An option I will give to clients is to take an in-service distribution and roll over the PVAB to an IRA. This of course won't be feasible where the HCE distribution restrictions apply.

[Guest dsyrett]

Two comments:

Might a "414(k) conversion" within the DB plan allow for the individual account method (if otherwise permitted by the terms of the plan and selected by the participant)?

I haven't looked into it in detail yet but Mike Preston indicates that the new regs allow for an increasing annuity form which provides a minimum distribution (at least initially) which is not much higher than under the individ account method.