We would like to eliminate lump sum option effective 1-1-03.
Normal form is life only.
Actuarial equivalence for lump sums is 417(e)

What future benefits must be offered to participants?

An example:

on 12-31-02 we have a participant with an accrued benefit of $1,000 per month


on 12-31-06 the participant terminates with accrued benefit of $1,500 per month


Which of the following options is the participant entitled to?

1. A lump sum based upon $1,000 accrued benefit as of the amendment date
plus
life only benefit of $500 payable at retirement ($1,500 - 1,000).

2. The choice of:
lump sum based upon $1,000 accrued benefit as of amendment date
or
life only annuity of $1,500

3. Life only annuity of $1,500. Clearly we have to provide this option.


My hope is that we would only have to provide options 2 and 3 and that the protected benefit would work in a manner similar to the changing of actuarial equivalence.

What amounts have to be protected?

Thanks

None of the above.

"(4) The choice of

- Lump sum (using factors applicable in the future) of the 1000, PLUS 500 annuity, or

- 1500 annuity."

This is the same as (2), except you need to add the additional 500 annuity to the lump sum.

This is a multiple choice question, what option(s) have to offered.

So, you believe we would have to offer (1) and (2).


Is there no way to effectively eliminate lump sum option without having to carry the accrued benefit as of the amendment date for the entire career of all participants eligible for lump sum at amendment?

This result requires that we carry the prior optional benefit form and prior accrued for potential the entire future career of participants!

We are not changing the value of the "protected" accrued benefit payable at the normal retirement age.

Do we have to provide the option to receive distribution in more than one form? Can we provide for a benefit election that requires the election of a single benefit form? e.g. choose annuity option or lump sum?


If we change actuarial equivalence under the plan, we can use a wearaway approach and phase out prior
definition because the prior definition only applies to the accrued benefit as of the amendment date.


Considering the high cost of currently providing lump sums and the administrative nighmare of maintaining this prior accrued and lump sum option there has to be a better answer.

I understand the necessity to "protect" benefits and wonder if this type of amendment would fall into the same category as changing the plans normal retirement age?

No, because changing the retirement age does impact the value of the "accrued benefit".

We are supposed to be getting regs latter this year.