Restriction on Accelerated Distributions

[Cloudy]

DB plan with a 70% AFTAP. Plan document allows lump sum payments to term vesteds, but now restricted to 50% of the otherwise payable LS.

The 436 amendment says that there is no new ASD when restrictions no longer apply.

Does that mean that you cannot allow someone to elect to receive the 50% LS now and delay receiving the rest of there benefit to a later date...because that would require a new election which would be a new ASD....or is the new election not a new ASD?

[My 2 cents]

No, I think what it means is that if the participant elects a lump sum now for 50% and the remainder as an immediate lifetime annuity such as a straight life annuity or the plan's QJSA, then when the plan stops being restricted, the already-elected form sticks.

If the plan allows a 50% lump sum with the rest deferred, you would have whatever options the plan would then permit when it comes out of restriction under Section 436. It is even possible that the plan would not permit a half-now, half-later annuity election. They are permitted under the regulations but I don't think they are required.

If someone elects an unrestricted annuity form for the entire benefit, then no ASD when the restrictions are lifted means that they don't get to switch then to a lump sum. The original election is irrevocable. Allowing participants to bide their time with a non-accelerated form and then switch to an accelerated form is permitted but not required, and this plan does not offer such a choice.