Single Time/Form - Separate elections for each year?

[Guest kodle]

As you all know, the final regulations include that confounding statement that "a plan may designate only one time and form of payment upon the occurrence of each event described in paragraph (a)(1) [separation from service], (2) [disability], (3) [death], (5) [change in control], or (6) [unforseeable emergency]. While I still am not sure what the IRS was trying to accomplish with this new rule, I am concerned that this effectively prohibits the long-standing ability to make different payment elections for each year's deferrals. For example, an employee elects that his 2009 deferrals elected in 2008 will be paid in a lump sum upon separation from service, and elects that his 2010 deferrals elected in 2009 will be paid in three annual installments upon separation from service.

If you parse through the language of all of the applicable sections relating to payment elections, the regulations inconsistently refer to "a payment", "a payment amount" and "an amount" as being subject to deferral and payment elections. I am hoping to hang my hat on the position that the deferrals for each year are each separate "payments" for which separate payment elections may be made.

Any thoughts?

[Guest Perseo]

You are looking at it the right way. A given payment -- which could be the payout of one deferral year's deferrals plus appreciation/earnings -- has to comply with the one form rule, but a different payment can have a different form. Look at the rules regarding designation of separate payments for comfort on this. You could even whack up amounts from a single year with different payout "forms", as long as it is documented properly.