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A nonqualified plan allows participants to elect to receive payment (1) at termination, or (2) at the later of termination or a specified date.

If (2) is elected, and the participant later wants to change the specified date, what is your view as to the date payment may be made under the subsequent deferral rules of 409A? Five years after the later of termination or the originally-specified date? Or the later of termination or 5 years after the specified date?

Would your answer change if the participant wanted to change the form of payment rather than simply change the specified date, given that a change to the form of payment would affect both what is payable at termination and what is payable at the specified date, regardless of which occurs last? Thoughts?

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If alternative (2) were originally elected -- that is, the later of a specified date or termination of employment -- the further deferral election could push out the specified date by five years but leave the termination date untouched, with the understanding that it still would be the later of the newly specified date or termination. Inherently, the distribution date will be pushed out by five years in this case, because a termination before the newly specified pushed-out date will not trigger a distribution. It need not be termination plus five years as well as specified date plus five years.

I base my view on the fact that if the election is two "earlier of" events, only one of them need be pushed out five years, and in that case it remains possible that the distribution would in fact be less than five years in the future from the distribution date that would have applied originally. If that is OK, then pushing out one of two later-of events must be OK, because there there is no chance that the distribution will be within less than five years after the originally applicable distribution date. See In Treas Reg 1.409A-2(b)(9) - Example 15 and related examples

In other words, the rule is that if an election is the earlier of two events, you can push one of them out five years without changing the other. A "later of" election is not addressed in the examples (as I recall), so an interesting question in your example (originally participant elected later-of termination or specified date) would be if you could push out the specified date by five years but change the election to be the earlier of termination if after the originally specified date or the newly specified pushed out date. I do not know if this would fly.

If the election were to change form of payment from lump sum to installments, for a "later-of" type original election, well, I do not know the answer. I think that because the distribution will in fact definitely be at least five years later under the modified election than it would have been under the original election, even if you do not require it to specify that five years is tacked on to the termination-triggered distribution, you will be OK.

I am not a regular on this forum but just dropped in due to a Google search. All of the usual cautions about information gleaned over the Internet not being equivalent to legal advice apply.

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