415(b)(2) conversions

[Guest shaul]

If a defined benefit provides only a single life annuity (for unmarried participants) and a QJSA (for married participants) as possible forms of payment, along with a lump sum mandatory cash-out for benefits with a present value not in excess of $5,000, is there any need for the complicated 415(b)(2)(B)/415(b)(2)(E) language regarding benefits paid in a form subject to 417(e)(3)? Although, conceivably, a $5,000 cash-out could exceed the participant's high-three compensation, when converted to a single annuity form, that appears unlikely, but I haven't found any affirmative IRS comments allowing the 415(b)(2)(B) language to be omitted where the only possibility for a lump sum payment is a mandatory cash-out.

Thanks.

[Andy the Actuary]

Would suspect it is in the examiners checklist and even if you have a flat benefit of $1/month year/service, they may be looking for the 415 language.

[tymesup]

This is similar to top-heavy language being required, even if it will never apply to a large plan.

Even if you were willing to contest this with the feds for this particular plan, are you willing to take the chance you will leave this out of another plan where it does apply?

I was hoping you'd post here someday.

[jpod]

You don't need unncecessary language. If your goal is to draft the tightest and shortest plan document possible, don't put it in. On the other hand, if your goal is to maximize the odds of avoiding silly and time-wasting debates with an insufficiently-trained IRS reviewer, put in the language.