Lump Sums

[Guest PAUL DUGAN]

We have taken over a frozen DB plan that only allows lump sum payments to individuals that have meet the early retirement requirements (55 and 10 yrs service). The client has asked if they can remove the lump sum option my answer was NO it is a protected benefit. However they have indicated that another party has told them that they can amend the plan to remove the lump sum option for anyone who has not meet the early retirement provisions as of the the date of the amendment.

Comments PLEASE

[AndyH]

No way. The distribution option is protected with respect to the accrued benefit.

Using that logic, nothing would ever be accrued until NRA. Pre-ERISA or Non-ERISA thinking.

[FAPInJax]

Well, there are the regulations which permit the removal of various settlement options. I do not have a copy handy but it may offer you an out.

[AndyH]

Those regs do not allow any plan changes such as suggested here. Those regs simply allow disposal of some options that are similar to others. Kind of like a company follows the yellow brick road and picks up and merges plans of subsidiaries along the way and wishes to shake off some of the collected de minimum debris. They can'd ditch the scarecrow, just the bugs that accumulated on both the scarecrow and lion so that they can fit into the Wizard's platform.

[Effen]

Someone was watching TBS last week. If only they could have shaken off those flying monkeys!

[RCK]

I think that I understand. The wicked witch represents congress, and the flying monkeys are reform legislation proposals. But who's the wizard?

[Effen]

Jim Holland

[AndyH]

I actually had a much less sinister thought process in mind (for once).

I handle a plan that is a spinnoff from a plan (trekkies think "Viger") that must have travelled the universe including the yellow brick road for quite some time because it managed to absorb every kind of optional form of benefit know to mankind as it presumably acquired more and more plans and attempted to maintain each option. Clearly this was at least in part a very dark forest because some of the forms are brutal. A real collection from hell including levelling options on each form, often payable at different starting dates, etc. (with all kinds of early retirement provisions and bridging conditions) And some of the provisions involving dates seem to require a decipher key to understand.

My thought process is who would want to administer this? Surely no investment company (e.g. Fidelity) would be able to fit it within any kind of normal document or administrative platform.

Along come these regulations that look like a godsend. The investment house is my Wizard for the moment. With their lobbying powers maybe they have created an ability to prune away some of the more nasty denizens and debris. Or maybe there is an open field day for flying monkeys to take away some of these provisions by such and such a date.

But look to the detail of these regs and they don't have much beef at all to them. In fact they are quite wimpy. Time to get back to work on that case. A couple of Board members are familiar with that of which I speak.