Accordingly, employers will not be able to simply amend their plans to conform to the new law, because the elimination of the right to receive the in service distribution would be a cutback in an optional form of benefit. In order to assist employers in determining how and when their plan should be amended, the IRS has issued certain guidance in the forms of notices, announcements and proposed regulations. The important guidance issued to date is discussed below. The IRS has indicated that any employer who permits employees to defer distributions in this manner would be required to amend the plan retroactively, pursuant to future IRS guidance, to include the deferral option. It should be noted that employers are not required to give employees the right to defer the distribution of benefits.
Employers can continue to adhere to the provisions of the plan currently in effect.
If an employer determines to offer the deferral election, the employee must make the election no later than December 31, 1997. If the employee does not make a deferral election, then the employer must pay a make-up distribution. The make-up distribution must place the employee in the same position as if the employee received minimum distributions in accordance with the terms of the plan. Make-up distributions must be completed by December 31, 1997. The IRS has warned employers that offering such an election could violate qualification requirements.