If a participant in a 401(k) plan terminates at age 60 with an account

[Guest TWR]

If a participant in a 401(k) plan terminates at age 60 with an account balance of 300,000.00 and elects to take an installment payment of 1,000.00 per month or 12,000.00 annually until his account balance is depleted, would this be considered a substantially equal periodic payment that would exclude the distributions from the definition of eligible rollover distribution? Would the answer change if the installment election was revocable?

[david rigby]

Not an attorney, but my read of IRC 402© would lead me to answer "yes".

Note however, if at some point, the EE (with agreement of ER and the plan) received the value of all remaining payments, then that lump sum would probably not be one of the "substantially equal periodic payments".

[Guest TWR]

Thanks Pax! That is how I read it as well but what happens if the participant revokes the installment election after only a couple of years? Do we have a problem in that we did not withhold 20% on the installment payments which ceased before 10 years had elapsed?