One Time One Form of Payment Rule

[Guest mbw]

The regs require that a plan designate only one time and one form of payment for a distribution event. Based on a strict reading of this rule, it is arguably a problem to provide a benefit (which is clearly subject to 409A) at separation from service with 33% of the benefit payable with the first payroll followng the separation (essentially a partial lump sum) and 66% of the benefit payable in equal monthly installments for five years beginning the first day of the month following termination. This looks like a lump sum and installment payment, which are two forms of payment. However, I interpret the regs to allow this type of a payment, looking at the payment "package" as the form of payment. Instead, it would not be permissible under this rule to provide that if you separate from service on Monday, you get the 33%/66% structure but if you terminate on Friday, you don't get the 33% but take all in monthly installments. Do you agree with this interpretation or do you think the rule requires the strict construction?