The following 1.401(a)(4)-4(b)(2)© gives an automatic pass of the benefits, rights, and features test for mandatory cash outs:
"In the case of a plan that provides for mandatory cash-outs of all terminated employees who have a vested accrued benefit with an actuarial present value less than or equal to a specified dollar amount (not to exceed the cash- out limit in effect under Sec. 1.411(a)- 11©(3)(ii)) as permitted by sections 411(a)(11) and 417(e), the implicit condition on any benefit, right, or feature (other than the mandatory cash-out) that requires the employee to have a vested accrued benefit with an actuarial present value in excess of the specified dollar amount is disregarded in determining the employees to whom the benefit, right, or feature is currently available."
The above can be read not to give an automatic pass where optional forms of benefit other than a lump sum are unavailable to employees whose accounts or benefits are $5,000 or less and more than $1,000 and are not subject to mandatory cash out (because the cash out limit has been lowered to $1,000).
Any thoughts?