Can Terminated Participant Change Mind about Deferring Money Purchase Benefit

[Guest 2stressed]

A terminated participant in a governmental money purchase plan signed a waiver (for another TPA) in 2000 "irrevocably" deferring her benefit until her early retirement date. The money just changed vendors -- she got a statement, remembered her account, not the waiver and wants her money. Can she change her mind?

We checked the document and there is nothing about irrevocable waivers of benefits. Is this an IRC rule with which I'm unfamiliar?

Any comments would be appreciated.

[Lame Duck]

This was frequently done in 457 plans under the old rules. The plan was treated as a non-qualified plan and the benefits became taxable at the time the participant first had an immediate right to receive the benefits. In order to avoid immediate taxation, a participant would irrevocably elect to receive the benefits at a later date. Since the benefits were not immediately available, the participant would not be taxed until the benefits were actually distributed. This was pre-EGTRRA when distributions from 457 plans were not eligible for rollover to an IRA. Since EGTRRA, most plans permit an immediate distribution and rollover into an IRA.