Governmental 401(a) plan and no lump sum option

What are the consequences if a Gov. 401(a) plan has only partial lump sum and installments as distribution options for terminated employees? I assume no ability to roll their account balance out of the plan? Thanks! 

Annuity payments over life or life expectancy are not R/O eligible, nor are installments over a period exceeding 10 years (don't remember if 10 is the under or over cutoff). Any portion that is a RMD is also not R/O eligible, and there are a few other exclusions - but an ad hoc partial LS or installments over 5 years for example would be R/O eligible.

32 minutes ago, CuseFan said:

 ... but an ad hoc partial LS or installments over 5 years for example would be R/O eligible.

Probably.  If this is a real question, the plan sponsor might be smart to get an opinion from its benefits counsel.

I guess what I was questioning is that there will be no ability for a rollover of the entire account balance? Just period rollovers of certain partial payments or installments of less than 10 years?

Some of us remember when many retirement plans, of nongovernmental employers too, and not only defined-benefit pensions but also individual-account (defined-contribution) plans, were designed so no form of benefit would be what now we call an eligible rollover distribution. Under some plans, the only forms of benefit were life-contingent annuities. Under a few, there was no choice at all.

So possibly the current recordkeeper set the plan up this way on purpose to force annuity payouts. We are taking this plan over, and I just noticed this unusual provision.

Thanks!

While that’s possible, don’t assume the plan’s design was the predecessor recordkeeper’s doing.

Plan design is the plan sponsor’s choice.

If you have doubts about whether the plan’s design is truly what the sponsor intends or desires, consider asking the government agency or instrumentality that administers the plan.

What Government.  If it's the Federal Government it would be a Thrift Savings Plan that is similar to but not a 401(k).  TSP was created pursuant to 5 U.S. Code § 8437 and 5 U.S. Code § 8351 and subject to 5 CFR Part 1601. 

So it must one of thousands of State, County, or Municipal 401(k) plans.  It seems unlikely that a 401(k) plan that can be distributed in a lump sum is not able to be rolled over to an IRA or other eligible retirement account.  I would bet that it could be rolled over to a former spouse pursuant to a QDRO.  So the answer must be found in the underlying plan documents.  But who knows what Secure 2.0 has wrought.

I see nothing a thttps://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions  that suggests that a rollover is not possible. Take a look at the "Rollover Chart". 

And see  https://www.irs.gov/taxtopics/tc413

If you have some documentation from the plan in question that limits the ability to implement a rollover (unless it's because the balance is under $7,000) post it here. 

What is your relationship to this matter.  Are you the participant or the Participant's lawyer or financial advisor or accountant?  

David

By governmental I do not mean the federal government. It is a healthcare plan funded/controlled by the local state municipality. It is not 501(c)(3) - they have a 401(a) plan and a governmental 457b plan. The 401a allows partial lump sum and installments, but not lump sum. I just thought that was strange. They are deconverting to the recordkeeper I work for. That's all really,

The partial lump sum could be rolled.  It does not have to be the whole account as was required 30 + years ago.  As a government plan, it is possible that it has not been updated in this century.