Transition Rules for Time and Form Elections

[Guest CAG1]

Help! Client wishes to freeze future contributions to an account balance NQDC Plan. To avoid future administration costs, client wants to "terminate" the plan. Client maintains other NQ Plans so would not meet the requirements to distribute accounts upon "discretionary" termination (as opposed to termination by operation of law). Under the 2007-86 transition rules, can the client amend the plan to freeze future contributions and also provide that all accounts will be paid in lump sums by say, 3/15/09 regardless of any prior employee elections?

Alternatively, in lieu of a unilateral ER mandated time and form of payment, can the client allow participants to make elections to receive distribution of their accounts as early as 1/2/09, as long as the elections are made by 12/31/08?

Thoughts and comments are most appreciated.

[Guest Sieve]

Yes. And yes.

[Guest TooMuchFreeTime]

WHOA! Slow down!

Strictly speaking, a 12/31/08 election for a 1/1/09 distribution would comply with the transition rules. However, all that gets you is 409A compliance. There are still a few other pesky things out there like constructive receipt. Neither 409A nor the transition supercede the rest of the IRC.