DB plan term optional forms

[ombskid]

When a DB plan terminates, participants are offerred lump sum, which has always been an option.

If they choose another form as allowed in the plan, i.e. J&S or Life with 10 yrs guaranteed, and are still employed, do they have to have the lump sum option still available to them in the future? Any difference if they have terminated employment? Or are working past NRD?

[Effen]

What does the plan say? If the lump sum always existed, then it seems to me that the annuity you purchase for them must always contain that option - as well as other immediate options in the future.

Because the plan is terminating they have the option to receive an immediate lump sum or an immediate annuity. If they decline the lump sum and immediate annuity, they are just deferring their election to some point in the future. They are NOT electing a J&100 or J&50 to commence at some point in the future. When they decide to actually make their election to commence their benefits, the annuity contract purchased for them must preserve all of the plan's optional forms of payment. Therefore, if the lump sum always existed, it must continue to be an option.

You do raise an interesting question regarding separation from service, but it seems that since the lump sum was payable due to the plan's termination, that it should continue to be available. However, if the lump sum was never an option, or was only added as a one-time option due to the plan's termination, then I think the annuity purchased could/should require separation from service in order to receive a payment. I am not a lawyer and these are legal issues.