Company X has a 401(k) plan permitting participants to elect, among other options, distribution in the form of an annuity contract. The plan language lists three or four available options. Under the annuity contract provided by Insurer I, more annuity options are available than are described in ths plan document but because of the plan's language, annuities offered to X's participants have been limited to thos specified in the plan. X would like to adopt a more flexible provision, basically allowing a participant to select any form of annuity offered by Insurer I.
However, I see two problems with amending the X plan to state "and any annuity form of benefit provided under the annuity contract with Insurer I at the time of the Participant's Termination of Employment." They are: (1) The IRS consent regulations require that the plan furnish a participant "a general description of the material features of the optional forms of benefit available under the plan." Reg. Section 1.411(a)-11©(2). and (2) IRS regulations provide that it is a violation of the anticutback requirement if the availability of an optional form of benefit is conditioned upon the exercise of discretion by the employer or a third party. See Reg. Section 1.411(d)-4, Q&A-4 and 5.
Does anyone have any suggestions on how to deal with these issues in this context? Could the plan be amended to state that an annuity contract will be purchased to provide an annuity in form X, Y or Z and such other forms as are then provided under the annuity contract between the insurer and the plan." The description required to satisfy the consent requirement would have to be updated to reflect the addiion of optional annuity forms.