changing distribution options

[Santo Gold]

We are taking over a plan that had as a distribution "non-cash" distributions. Our VS document does not allow for this option. Is non-cash distribution a protected benefit and therefore cannot be eliminated from the plan when we update for EGTRRA document? If true, then either we alter our plan document to allow for this option, turning it into an individually designed plan document. Or, go to a service provider who utilizes this option and keep it as a prototype/VS.

Any thoughts?

Thanks

[masteff]

See 1.411(d)-4 Q&A-2(b)(2)(iii)

--(A) In-kind distributions payable under defined contribution plans in the form of marketable securities other than employer securities. If a defined contribution plan includes an optional form of benefit under which benefits are distributed in the form of marketable securities, other than securities of the employer, that optional form of benefit may be modified by a plan amendment that substitutes cash for the marketable securities as the medium of distribution.

If the plan includes employer stock, then the way I read example 1 is that you have to first eliminate the er stock as an investment option, get everyone moved out of that investment, and can then eliminate it as a distribution option.

[QDROphile]

To be really sure you can eliminate employer securities, the plan needs to say that the right to distribution of employer securities is the right to distribution of employer securities in the account at the time of distribution. Then you can eliminate the employer securities as an investment option in the first step. Once the employer securities have been eliminated, the distribution option can be eliminated. I am uncertain about a plan that provides a blanket right to distribution in employer securities (i.e. the plan has to obtain employer securities for distribution no matter how the account is invested up to the time of distribution).

[Guest Sieve]

You'd only be protecting on a prospective basis for benefits that already have accrued--all new $$ would be subject to the provisions of the restated document. Even prototype documents are permitted to protect benefits from prior documents on a prospective basis without doing anything other than noting the protected benefit on an Addendum or by reference to the prior Plan--even if the protected benefit is not something that the protype permits by its terms--so you should be able to do the same in your volume submitter document without making it individually designed.