DB Termination - Rollover Question

[Guest ebailey]

We are planning on terminating a DB plan. A question came up that I can not pin down. I get that if we have an "eligible rollover distribution" that it must be allowed to be rolled over. however the plan does not allow for lump sum distributions other than for small annuity amounts. Currently only annuitys (QJSA etc) are permitted - no lump sums - all not eligible rollover distributions as they are "series of substantially equal periodic payments over a period specified". We don't want to give everyone the option of getting a lump sum. We do want to allow people to rollover if they wish. Are we REQUIRED to allow people to rollover the lump sum "value" of their annuity? Can we allow them to? Would we have to do an "elective transfer" to permit them to rollover?

Any thoughts...

[david rigby]

The plan's termination provisions may have an alternative payment form (lump sum) that applies. If not, then the plan has to find some other way of completing the termination. What does the plan say in that case?

[Guest ebailey]

Interesting - a different option form (lump sum) only allowed if plan is to terminate. Can I do that... Any cite? The plan doesn't say anything different upon termination but we could amend it....

thanks

[david rigby]

... a different option form (lump sum) only allowed if plan is to terminate. Can I do that?

It's pretty common. The plan can no longer pay monthly benefits, so it has to either pay lump sums or but an annuity.

[Guest ebailey]

Can I make it more complicated? Can I condition the lump sum on requiring a direct rollover? We don't want folks to just spend the money and lose their retirements...

[rcline46]

I don't think it works. A rollover implies there was a lump sum option. Otherwise it becomes a transfer, and the DB taint stays. This is not permitted if the next plan is a profit sharing type plan. The benefits are still subject to PBGC and other problems - I dont think this is even permitted.