401(k) Lump Sums and Spousal Consent. Increasing $3,500 limit to $5,00

[Guest W J Parks]

If a 401(k) only allows a lump sum distribution, are lump sums paid to married Participants in excess of $3,500/$5,000 subject to spousal consent? My understanding is that if there is no annuity option then a PSP is not subject to the spousal consent rules PERIOD.

Must a plan be formally amended in order to increase the $3,500 limit to $5,000?

[david rigby]

This is the way I try to summarize this rule:

1. Any benefit whose value exceeds the involuntary cashout limit may not be distributed prior to Normal Retirement without the *participant's* approval.

2. Any plan where the benefit is payable in an annuity form must offer (at least) one J&S option, and the spouse's approval then gets added to (1) above.

Yes the Plan must be formally amended to change the limit. Note that the $3500 or $5000 is the largest amount that a plan can use to define its involuntary cashout limit. Smaller amounts are permitted.