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Plan Amendment to Change Default Form of Payment


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I think the answer to my question is that this cannot be done but I just want to be sure!  I have a fairly new NQP plan (started in 2022) that allows both participant (limited to only the CEO) and employer contributions (open to other select employees).  No participant contributions were elected in 2022 but employer contributions were made.  At the time the plan was established, the plan sponsor elected to pay benefits only at separation from service (with the allowed limited acceleration exceptions) with a lump sum payment option as the default.  The plan document did also allow for a 5-year installment option.  The plan sponsor failed to collect payment option elections on the employer contributions made in 2022 thinking that none were necessary so I believe these deferrals have all technically "defaulted" to the lump-sum payment default at separation from service. 

In order to avoid having to get any elections on the employer contributions and to have the plan operate more closely like an older NQP they had in place several years ago, the plan sponsor would now like to only provide for a 5-year installment at separation from service for all contributions - including those made in 2022.  Because no participant contributions were made in 2022, I think this may be an allowable amendment and would not serve to delay anything as no benefit currently exists for this contribution source.  I don't think, however, that this would probably be able to apply to the 2022 employer contributions already made as the change from a lump sum payment to an installment payment would seem to be a delay under the 409A rules.

I am looking to see if anyone has any thoughts on (1) if my beliefs are correct or incorrect; and (2) any possible ideas for structuring this to accommodate the plan sponsor's wishes.

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