Subsequent Elections for Separation from Service

I believe the answer to this question is going to be broader than I'd like it to be, however here goes.   At the highest level, my question is "does a pending subsequent deferral election for a separation from service distribution event expire upon separation from service"?

Example:

The plan document allows for the following:   Time of Distribution as a lump sum or annual installments either a) stated month and year; or b) following separation from service.  For a separation from service, the payments commence the first of the month following the one-year anniversary of the date of separation of service.  

Participant submits a subsequent deferral election to change from lump sum to installments 1 month prior to separating from service.

What's the right answer?

A. Separation from service is the payment event, and since it is not a fixed date, the pending election is not honored.

B. The plan does define when the payment would be made, so the participant knew the date would be over a year away, thus the subsequent election stays pending and becomes effective before the actual payment, at which time the payment schedule is pushed 5 years and changed to installments.

I appreciate any thoughts on this, as well as items to consider if this might be a plan by plan decision.

My vote is answer A. The subsequent election cannot take effect for 12 months. The employee separates less than 12 months after the election change. The terms in effect on the date of separation (the payment event) control, and they call for payment one year following separation from service. 

Interestingly, the Section 409A Handbook lists this scenario as an uncertainty, suggesting an interpretation that the one-year delay in payment following separation from service under the original schedule might allow the employee to make a subsequent election up until the day before separation from service. It gives the example of a lump sum payment on the 10th anniversary of the employee's separation from service, and reasons that forcing an election change 12 months prior to separation from service is, in reality, an election-change deadline of 11 years before payment, which is far longer than the regulations' regular 12-month deadline. I get the logic, but I'm not sure I'd be comfortable with that approach.

Would like to hear others' thoughts as well. 

The Answer is B, one year before the time of scheduled payment, unless Plan language is unduly restrictive. Were that not the case it would not be possible for separated employees to make later postponement elections, and I see that all the time with installment elections when each payment is deemed a separate payment. 

 I am assuming that the initial election was for a separation from service payment or for the first to occur of the two, fixed date or separation.  That plan language allowed for two different payment events, separation from service OR fixed date.
Check the election he made. Which was it?  Then double check the plan's postponement language. 0ne year before payment date is all you need. 
(Not legal advice, etc.,etc.)

After additional research, I have a follow up to this original question.   I'm now leaning to Answer A, but would like to hear if anyone has other references to support B.

IRC 409A (a)(4)(C)(iii) states the requirement for 12 month prior to date of first scheduled payment is for a payment described under (2)(A)(iv), and IRC409A(a)(2)(A)(iv) is defined as a specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation.    

also

IRC 409A-2(b)(iii) requires any election related to a payment described in 409A-3(a)(4), and 409A-3(a)(4) is "A time or fixed schedule specified under the plan in accordance with paragraph (i)(1) of the section.  409A-3(i)(1) Specified time or fixed schedule states the date must be nondiscretionary.   

It seems to me that because the payment is due to the separation from service, which is a discretionary date, then the election to change it must be done 12 months before they separate from service, thus the re-deferral 5 more years is not honored.

The only other thought is that this subsequent change is considered a separate "deferral" and since they are aware of the approximate timing of when it will be paid, then they see it as a fixed/specified date. However, the participant doesn't have the date "scheduled" until the separation actually happens, and that separation is discretionary, thus I don't see how it's permissible.

Curious to see what others think.