Elimination of Annuity Options in a 401(k)

We are taking over a plan that has an insurance company document.  The document indicates spousal consent is not required for distributions (unless the plan includes a source that requires such - and there is no such source in the plan.)  The plan offers 5 annuity options as alternative forms of benefit.   We never have those in plans and I'd like to eliminate these with our restatement effective 1/1/2023.  It's been awhile since I looked at this.  Upon some quick research it appears that yes these can be eliminated prospectively with a 90-day advance notice and provided the plan has the lump sum option.  

I like to get the opinion of this group which is very trustworthy - more so than my own "research." 

Thank you, Tom

Agreed

seconded

"Back in the day" you could not eliminate forms of benefit, such as annuities, with respect to accrued benefits.  The so called anti-cutback rules prohibited that.  I've been out of the business for over 10 years so I don't pretend to know the current rules and I'm not interested in looking them up.  So, I would suggest to Tom, just be sure to make sure that this sort of change is now permitted.  I will say this, as a policy matter I think it should be allowed, subject to adequate safe guards to protect what participants have earned.  What I'd be concerned about, again from a policy standpoint, is getting rid of some arguably favorable annuity terms under the insurance contract that could not practically be replaced.  Maybe the IRS has determined that the lump sum option is "good enough."

On 11/18/2022 at 2:40 PM, Roycal said:

Maybe the IRS has determined that the lump sum option is "good enough."

Yes, the Treasury Department changed the 411(d)(6) protected benefit regulations during the first decade of this century.  For forms of payment made to terminated employees, if a lump sum form of payment is allowed to defined contribution plan participants, the other forms of payment may now be eliminated.  Of course, see the regulations for details.