The Service and Treasury are inviting comments on possible approaches before regulations are proposed. This authority does not extend to a plan amendment that would have the effect of eliminating or reducing an early retirement benefit or a retirement-type subsidy. The Service and Treasury recognize that the accumulation of a variety of payment choices under plans may increase the cost and complexity of plan operations. For example, an employer that initially adopted a plan form offered by a prototype sponsor may now be using a different prototype plan that offers a different array of distribution forms. The requirement to preserve the preexisting optional forms for benefits accrued up to the date of change in the prototype plan may present significant practical problems in certain cases.
Similar issues arise where employers merge with or acquire other businesses.
These employers often face issues of whether to maintain separate plans, terminate one or more of the plans, or merge the plans. If an employer chooses to merge the plans, the resulting plan may accumulate a wide variety of optional forms, some of which may differ in insignificant ways or may entail special administrative costs. Furthermore, it has become easier for individuals to duplicate the various payment choices available from qualified plans through other means. Individuals who receive single-sum distributions from qualified plans frequently roll those distributions over directly to IRAs, under which distributions can be made in a wide variety of payment forms. There are also indications that the vast majority of participants in defined contribution plans who have a choice of options elect single-sum distributions, which are often rolled over to IRAs.