required min distributions

[Gary]

it seems clear that 401a9 allows a participant to receive their distribution at age 70 1/2 (if 5% owner and employed) over a certain period equal to life expectancy and with an annual fixed increase of less than 5% (i.e. 4.99%).

in order to accomodate such a desire does the plan have to provide such a form of distribution or is the fact that it complies with 401a9 acceptable?

And I presume that a formal benefit election to support this form of payment while actively employed is required as opposed to computing the amount and paying it each year?

thanks

[Effen]

I generally look at MRDs as a completely seperate calculation. It is a required distribution, not the commencement of retirement benefits. Therefore, I would argue that no participant elections are necessary. You simply pay the benefit in accordance with the plan document.

They elect their form of payment and obtain spousal consents at the time of termination. If they die while active, the standard death benefit would be payable.

I'm not sure I answered your question, but I think the answer to your question is in the plan document. Most DBs simply call for the commencent of the accrued benefit. In fact, I'm not sure if there are any options anymore. If the document is not clear, ask the attorney who drafted it.

[QDROphile]

Compliance with 401(a)(9) is all that is required. An extreme example would be a plan that allows lump sum distributions only. Come required distribution time, the entire balance is distributed. The other extreme is automatic distribution of only the amount required by law at the time. The plan could allow election of an in-service distribution form of benefit as long as the payments covered at least the required amounts at the required times.

[Gary]

say the accd ben is 1,000 per month.

of course that amount can be paid for a total of 12k for the calendar year.

but if we compute actuarial equivalence based on an annual increase in benefit of 4% and a certain period of say 27 years (age 70 uniform table life expectancy) the actuarial equivalent payment for first year may be as low as say $500 per month.

Thus a much lower payment.

So question is:

can that amount just be paid out and comply with 401a9 or

1) does an election for such a form need to be made and

2) does plan doc have to allow for such a payment form

thanks

[SoCalActuary]

say the accd ben is 1,000 per month.

of course that amount can be paid for a total of 12k for the calendar year.

but if we compute actuarial equivalence based on an annual increase in benefit of 4% and a certain period of say 27 years (age 70 uniform table life expectancy) the actuarial equivalent payment for first year may be as low as say $500 per month.

Thus a much lower payment.

So question is:

can that amount just be paid out and comply with 401a9 or

1) does an election for such a form need to be made and

2) does plan doc have to allow for such a payment form

thanks

Election would be required, and it becomes enforcable for future payments. The plan can only pay out what the document permits. So yes to both questions.

[Effen]

So question is:

"can that amount just be paid out and comply with 401a9" - I think I would say generally "no", unless it is the Normal Form. The exception would be if your document allows for in-service distributions where the participant elects the form of payment before actual retirement. Most documents I work do not allow for in-service distributions other than those required under 401a9. If that was the case, I think the only option is to commence the accrued benefit, in the Normal Form - i.e.: $1,000/month.

If the document permits participants to elect the form of retirement benefit while in-service, then

"1) does an election for such a form need to be made" - obviously yes

"2) does plan doc have to allow for such a payment form" - obviously yes

3) Would the participant get to make a new election upon separation from service - probably not. They would be stuck with the 27 year certain.