Undisclosed benefit

[lexi]

We have a DB Plan that offers several distribution options upon retirement, with the usual suspects (single life annuity, QJSA, lump sum distribution and a hybrid lump sum and annuity).

The client wants to eliminate the last option (the hybrid lump sum and annuity). It never advertised this benefit under the plan (guess there was no SMM) and I don't believe anyone has taken his/her benefit as a hybrid payout. This leads me to two questions:

1) Eliminating this option certainly would violate 411(d)'s anti-cutback provision; and

2) How do you correct the failure to advertise a benefit offered under a plan?

It isn't like you can cut a benefit on the grounds that since no one knew about it, no one will be penalized. Have any of you ever come across a situation like this?

[AndyH]

Revise and reissue the SPD, start including the options on all future election forms, and then consider the past exposure. One option is to cross your fingers. Did someone else do prior election forms? Whoever did them clearly has some fault in this. If you are taking it over and run across this, refer the client to an ERISA attorney.

1) is not a question. Clearly it is a cutback to eliminate it.

[david rigby]

Possibly this "hybrid" is already a prior change; perhaps the plan offered unlimited LS until X date? If so, that is defacto evidence that 411(d)(6) was considered when it was changed.

You may not like the option, but if it's there for 411(d)(6) reasons, you've got it (unless all affected participants are now gone).