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Full Version: Can a plan add a mandatory cashout provision if it has not had one bef
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WMW
Can a plan add a mandatory cashout provision if it has not had one before or does this violate 411(d)(6)?
Dave Baker
Perfectly OK to add such a provision -- the following excerpt is from the preamble to the final and temporary regulations regarding the increase of the maximum involuntary cash-out amount from $3,500 to $5,000 issued in 1998 -- it describes regulations issued earlier, and seems to nail down your concern:

Section 1.411(d)-4, paragraph (B)(2)(v) of Q&A-2 provides that a plan may be amended to provide for the involuntary distribution of an employee's benefit to the extent such distribution is permitted under sections 411(a)(11) and 417(e). In accordance with that provision, a plan may be amended for plan years beginning on or after August 6, 1997, to permit the involuntary distribution of an accrued benefit using a cash-out limit of $5,000, with respect to benefits accrued before the amendment was adopted and effective. Such an amendment is permitted even if the plan, prior to amendment, did not permit involuntary distributions (as well as if the plan permitted involuntary distributions if the present value of the participant's benefit did not exceed the prior cash-out limit of $3,500). Such an amendment will not violate the anti-cutback rules of section 411(d)(6). [Emphasis added.]
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