Distribution Options to the High-25 (Posted September 8, 2004) Technical Tip 128: The following question and answer were from the IRS Q&A Session at the 2003 ASPPA Annual Conference: Assume a participant is part of the high-25 highly compensated employees and is restricted to the single life annuity payment annually. Can the plan pay less than the single life annuity amount (e.g., zero up to maximum), through mutual agreement between the plan administrator and participant? (Note: Regulation 1.401(a)(4)-6(b)(3)(i) states, ". . . shall not exceed . . ." It does not say it must be equal to the single life annuity amount.) For example, assume that the plan is expected to be sufficiently funded in the following year such that the restriction would not apply and the participant wants to take a rollover-eligible lump sum distribution. Can he forego the payments this year and take the entire distribution in the next year (assuming no longer restricted) to accomplish the rollover and not be currently taxed on any part of the distribution? (Note that this is different than waiting a year and electing an annuity starting date for the lump sum at that time, which would lose any early retirement subsidies that were in the original lump sum.) If the answer is yes, does the plan document need to specifically state what optional amounts are allowed, or can it be discretionary? Response: The provisions of the plan must be followed. Mutual agreement between the plan administrator and participant may not change the terms of the plan. Regulation 1.401(a)(4)-5(b)(3)(i) does include the statement "shall not exceed." Therefore, any distribution made in accordance with the plan, and not in violation of 411(d)(6), which is less than the otherwise single life annuity, would comply with the regulation. View all Tips © 2012 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.