The Treasury Department and the Service are considering further guidance exercising this authority to provide exceptions to this provision, and are inviting comments on possible approaches before the Service proposes such regulations. Notice 98-29 states that Treasury and the Service recognize that the accumulation of a variety of payment choices under plans may increase the cost and complexity of plan operations.
Similar issues arise where employers merge with or acquire other businesses.
The goal of the Treasury Department and the Service is to balance the interests of participants and the practical needs of employers, including the need to adapt plans to changing circumstances, and to propose regulations that would allow greater flexibility with respect to plan payment forms. One approach under consideration is to permit defined contribution plans to adopt amendments eliminating alternative forms of payment if, after the amendment, each affected participant could elect between a single-sum distribution form and at least one extended payment form. In addition to comments on this approach, comments are invited on possible variations, which might include providing that the extended payment form condition could be satisfied by installments for a fixed number of years or by a provision under which a participant could elect to receive any amount of the participant's account balance at any time, or not requiring an extended payment form. Treasury and the Service are also considering whether it would be appropriate to develop additional relief for elective transfers between defined contribution plans. Such relief would apply under certain conditions, for example, where employees are transferred to a new controlled group in connection with an acquisition.