Annuity option with a COLA

[John Feldt ERPA CPC QPA]

A DB plan has an optional form of payment that is a monthly installment not to exceed 20 years (or if less, the participant's life expectancy), increased by a fixed annual COLA of 4.99%.

Is this in there so that the RMD from the plan can be calculated on that type of annuity or would additional plan language be needed to make the RMD be based on that optional form?

Would the participant have to elect that form of payment for the RMD to be calculated under that form?

[Effen]

I always felt the MRD from a db plan was simply a payment of the accrued benefit as of a specific date. The participant isn't really making an election of the form of payment, they are just receiving the MRDs which are calculated based on plan provisions and government regulations. They aren't electing a "retirement" option because they haven't retired.

What I am suggesting is that optional forms of payment would have no impact on the amount of the MRD because there should be no "election" - the benefit should just be paid.

Although I'm sure there are those who would disagree.

[david rigby]

My understanding is as stated by Effen.

However, I'm not sure the plan must make payment on that basis. Could include a provision that permits the EE to elect from all avialable options? It would not be surprising to learn that most administration has been done this way.