411(d)(6) ?

[david rigby]

Reviewing two documents for the same plan.

1. Original document states that under $5K lump sums will be distributed within 90 days after end of plan year of termination of employment.

2. Proposed document states that under $5K lump sums will be distributed after a break-in-service.

Does 2 fail 411(d)(6)?

[AndyH]

You know the answer.

[Andy the Actuary]

You know the answer.

Oh yeah? Chapter and verse please.

[rcline46]

There must be a dozen threads on this issue, four in the last year.

[david rigby]

You know the answer.

Yeah, I was just hoping someone may have seen something I did not. Wishful thinking. <Sigh>

[AndyH]

If you're missing something, so am I.

AtA, do you know something we're not thinking of?

I do remember years ago inheriting a plan that provided for distributions the next day or something similarly unreasonable. Then came the direct rollover rules and the 7 day notice periods, etc., plus the plan required spousal consent, so that was another conflict. Some legal conflict might create an exception to 411(d)(6) perhaps, but that does not seem to be the case in this situation.

[Andy the Actuary]

AtA, do you know something we're not thinking of?

I know you can eliminate deminimis cashouts at a whim, so why can't you make a #2, even if it is in two steps (eliminate, then reinstate as modified)?

[AndyH]

My apologies. Some how I read "under" 5K to be "over" 5K.

I agree - maybe you can. It would require some research, but I agree that it is probably permissable.

[Belgarath]

Can you explain how the de minimis rule is applied to extending the timeframe under which a cashout distribution is made in the situation described? I'm not getting that under 1.411(d)-3(e) - or anywhere else for that matter. I'd have said you could not so amend the plan for option #2 as you describe, with respect to benefits already accrued. (These regs are less than a model of clarity, by the way, IMHO)

Is there additional guidance from the IRS addressing this issue? Or is it just there in the regs, and I'm missing it, which seems the most likely answer...

[Andy the Actuary]

411(d)(6) protects distribution options. A forced cashout is not a distribution option.

[david rigby]

True it's not an option.

Not necessarily correct, I'm focusing on the timing. For example, 411(d)(6) would prevent changing NRA from "age 65" to "later of age 65 and fifth anniversary", except with respect to future accruals. (I don't know if this example is relevant.)

[AndyH]

I think AtA's comments are on point. 1.411(d) -4 does allow both the addition of and modification to an "involuntary distribution" provision. The cite looks like (b)(2)(v).

1.401(a)(4) would require that the timing of the amendment be nondiscriminatory.

Also, I would think that the change would need to avoid causing an available payment to go above or below $5,000 if the payment conditions differ at $5,000.

[Belgarath]

Andy the Actuary - I'd argue, for now at least, that this IS an "optional" form of benefit, as the term "optional" form of benefit includes the "normal form of benefit" under 1.411(d)-3(g)(ii). As such, then extending the timing of the payout to the extent discussed would seem to be an impermissible cutback. Do you have specific support for your contention, or is it just that you disagree with my interpretation of the same citations? (And mind you, I'm by no means certain that I'm interpreting this correctly)

AndyH - it seems to me that your cite applies to adding an involuntary cashout distribution where non existed before, or changing the threshhold amount, but not to the timing of such distribution??

The de minimis exceptions to changing the timing would not seem to be satisfied in the situation that David discussed.

[Andy the Actuary]

Andy the Actuary - I'd argue, for now at least, that this IS an "optional" form of benefit, as the term "optional" form of benefit includes the "normal form of benefit" under 1.411(d)-3(g)(ii).

Contention the normal form of benefit no longer applies -- the forced cashout has eliminated the defined benefit feature.

Further, you can eliminate the forced cashout provision and you can add the forced cashout provison where none existed. Conclusion: In two steps at the very least you could get to Sir Riggiford's #2.

[AndyH]

Andy the Actuary - I'd argue, for now at least, that this IS an "optional" form of benefit, as the term "optional" form of benefit includes the "normal form of benefit" under 1.411(d)-3(g)(ii). As such, then extending the timing of the payout to the extent discussed would seem to be an impermissible cutback. Do you have specific support for your contention, or is it just that you disagree with my interpretation of the same citations? (And mind you, I'm by no means certain that I'm interpreting this correctly)

AndyH - it seems to me that your cite applies to adding an involuntary cashout distribution where non existed before, or changing the threshhold amount, but not to the timing of such distribution??

The de minimis exceptions to changing the timing would not seem to be satisfied in the situation that David discussed.

Geez B. Guess you're not thrilled with having Casey Kotchman at first base?

[Belgarath]

Hmmm - AtA - FWIW, I decided to check to see what Sal has to say on the subject. While he's not necessarily correct, he seems to take the approach that it is an optional form of benefit. See pg. 6.51 of the 2009 edition. Or maybe I'm even misinterpreting what he has to say! Anyway, I'll now bow out of the discussion - it has been in interesting question to consider.

AndyH - I hear rumors that they are considering Bucholz, or Ellsbury, or both in a trade. If they trade Ellsbury, I'm going to officially sever my loyalty and find another team to root for.

[Andy the Actuary]

Hmmm - AtA - FWIW, I decided to check to see what Sal has to say on the subject. While he's not necessarily correct, he seems to take the approach that it is an optional form of benefit. See pg. 6.51 of the 2009 edition.

What, please, is the title of TEOB section. I do not have the 2009 edition. Thank you.

[Belgarath]

Let's see... Chapter 6 Plan Distributions. Part D - protected benefit options. 1a - definition of optional form of benefit, wording in bold at the bottom of the paragraph 1a.

[Andy the Actuary]

Let's see... Chapter 6 Plan Distributions. Part D - protected benefit options. 1a - definition of optional form of benefit, wording in bold at the bottom of the paragraph 1a.

Thank you. IMHO, I would place my faith in Sol and not a,t.a. On the other hand, the cite AndyH provided appears you could accomplish Sir Riggiford's #2 in two steps.