Restricted Distributions beyond NRD

[Guest BDZ]

I am trying to understand the meaning behind the phrase “(or would have been made)” in Revenue Ruling 92-76 with respect to calculating accumulated amounts. We have historically calculated the restricted amount based on the first date that payments are made (“commencing when distribution commenced to the employee”) rather than when payments could have been made.

Participants who could have started receiving the straight life annuity payment (or, for example, a single sum distribution capped by the amount that could have been paid as a straight life annuity or paid into an Escrow account) at NRD but elected to defer their payments until the plan was funded, can find themselves in a significantly worse position with respect to the amount of Escrow needed if the plan continues to be insufficiently funded. Is anyone aware of justification to calculate the accumulated amount of the nonrestricted limit based on when the participant could have begun receiving payments? If not, does anyone utilize a plan provision to have such a participant elect annually to receive a partial withdrawal (not in excess of maximum payment) to start the clock ticking and/or lock in 417(e)(3) rates?

Thank you very much!