Service Recipient Discretion

[Guest ebenny]

409A seems clear that a plan may specify only one time and form of payment for each payment event. Is there any exception to allow a service recipient to retain discretion as to the time and form of payment upon a service provider's death? For example, if a plan provides for installment payments to the service provider that commence upon retirement, but further states that upon the provider's death the remaining balance will be paid to the beneficiary either in continued installments or in a lump sum, at the sole discretion of the service provider.

If there is no exception permitting discretion in the event of death, it seems that Section VII.D of Notice 2010-6 would require the service recipient to 1) correct the plan provision to designate a single time and form of payment (in this case, installments?), and 2) furnish a statement to the IRS as well as any affected participant (and report any payments triggered by the pre-correction provision within a year of the correction). Does that sound accurate? Additionally, if a service provider under this plan has already died triggering the discretionary provision, does this complicate the service recipient's ability to correct the provision under Notice 2010-6? Must the beneficiary of the pre-correction payment report the entire amount as income under 409A(a)?

Thanks!