Lump sum distribution

[Guest Nini]

Is a qualified plan required to offer an annuity form of payment anytime a lump sum if offered (other than a mandatory cashout)?

Plan offers an immediate lump sum at termination, regardless of age, and the earliest retirement age under the plan is 55 - does an annuity also have to offered at termination?

Please cite any Code/Reg sections - trying to figure out with respect to a church plan.

Thanks.

[John Feldt ERPA CPC QPA]

Well, if the plan was subject to ERISA, a quote from Reg. 1.401(a)-20, Q&A 17 and from 1.417(e)-1(b)(1) would do the trick!

However, a nonelecting church plan is not subject to 417 nor are they subject to 401(a)(20). A nonelecting church plan has not made an election under 410(d) to be covered by the rules of ERISA.

I may be going out on a limb, but I think a nonelecting church plan could offer an immediate lump sum benefit without being required to offer an immediate annuity. However, my lack of experience on this specific issue raises a caution flag.

I am curious to hear additional words of wisdom from others.

[Guest Nini]

Thanks for the cites - that is the road I was headed down, but I couldn't put my finger on it!

I too would be interested in other comments.

Thanks again!

[david rigby]

No dispute about that reg. cite, but be sure to follow the terms of the document.