Distribution method protected benefit?

[BG5150]

We have a DC plan that allowed terminated participants to take partial withdrawals (separate from installments). They may want to eliminate that, allowing for only installments and lump sums (and the QJSA already there).

Can they? I thought you could eliminate all other forms of distribution if a lump sum was available.

[Kevin C]

The rule you are thinking of is in 1.411(d)-4 Q&A 2 (e). If the plan has any money purchase balances, you can't eliminate the QJSA option.

[John Feldt ERPA CPC QPA]

Under that same Q&A, can the plan that offers a lump sum and allows payments in cash or in-kind be amended to eliminate the "in-kind" payment option?

[Kevin C]

John,

If you are referring to in-kind distribution of marketable securities that are not employer securities, yes.

1.411(d)-4 Q&A 2 (b)(2)(iii) In-kind distributions—(A) In-kind distributions payable under defined contribution plans in the form of marketable securities other than employer securities. If a defined contribution plan includes an optional form of benefit under which benefits are distributed in the form of marketable securities, other than securities of the employer, that optional form of benefit may be modified by a plan amendment that substitutes cash for the marketable securities as the medium of distribution. For purposes of this paragraph (b)(2)(iii)(A) and paragraph (b)(2)(iii)(B) of this Q&A-2, the term marketable securities means marketable securities as defined in section 731©(2), and the term securities of the employer means securities of the employer as defined in section 402(e)(4)(E)(ii).