44. Cash-outs and plan repayment provisions

Statement of Requirement: Code §§I RC 411(a)(11), IRC 417(e ), ) and IRC 401(a)(31)(B); Treas. Reg. §§ 1.411(a)-7(d)(4),

269 | Defined Benefit Plan LRM Package 08/2020 06/2026

1.417(e)-1(d); Notice 2005-5 , 2005-3 I.R.B. 337

Document Provision: _____

(Note to reviewer: This sample provision applies to plans that provide for distributions of lump sum benefits prior to normal retirement age and disregard service attributable to such distributions upon subsequent reemployment.)

Sample Plan Language:

If an employee terminates service, and the present value of the employee’s vested accrued benefit derived from employer and employee contributions is not greater than $ 57 ,000, the employee will receive a distribution of the present value of the entire vested portion of such accrued benefit and the nonvested portion will be treated as a forfeiture. For purposes of this section, if the present value of an employee’s vested accrued benefit is zero, the employee shall be deemed to have received a distribution of such vested accrued benefit.

If an employee terminates service, and the present value of the employee’s vested accrued benefit derived from employer and employee contributions exceeds $ 57,000, the employee may elect, in accordance with section _____ of the plan, to receive a distribution of the present value of the entire vested portion of such accrued benefit and the nonvested portion will be treated as a forfeiture.

(Note to reviewer: For purposes of determining the present value under IRC 417(e)(3) with respect to the portion of the accrued beneft derived from employee contributions (the employee-provided accrued beneft) that is computed in accordance with the rules of IRC 411(c)(2), the probability of death before the assumed commencement date may not be taken into account.)

(Note to reviewer: The blank should be filled in with the plan section number that corresponds to LRM #45.)

If elected by the employer in the adoption agreement, a participant’s vested accrued benefit shall not include the portion that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Code §§ IRC 402(c), IRC 403(a)(4), IRC 403(b)(8), IRC 408(d) (3)(A)(ii), and IRC 457(e)(16).

For the purpose of the foregoing provisions, present value shall be determined in accordance with section _____ of the plan.

(Note to reviewer: The blank should be filled in with the section number that corresponds to the requirements of LRM #42.)

If an employee receives a distribution pursuant to this section and the employee resumes covered employment under the plan, he or she shall have the right to restore his or her employer-provided accrued benefit (including all optional forms of benefits and subsidies relating to such benefits) to the extent forfeited upon the repayment to the plan of the full amount of the distribution plus interest, compounded annually from the date of distribution at the rate determined for purposes of Code §I RC 411(c)(2)(C). Such repayment must be made before the earlier of five years after the first date on which the participant is subsequently reemployed by the employer, or the date the participant incurs 5 consecutive 1-year breaks in service following the date of distribution.

270 | Defined Benefit Plan LRM Package 08/2020 06/2026

If an employee is deemed to receive a distribution pursuant to this section, and the employee resumes employment covered under this plan before the date the participant incurs 5 consecutive 1-year breaks in service, upon the reemployment of such employee, the employerprovided accrued benefit will be restored to the amount of such accrued benefit on the date of the deemed distribution.

Sample Adoption Agreement Language:

Treatment of Rollovers in Application of Involuntary Cashout Provisions:

(Note to reviewer: Section 4 of LRM #54 is an optional provision that provides that the plan will accept direct rollovers from a qualified defined contribution plan maintained by the employer in order to obtain an additional annuity. Section 4 of LRM #54 also provides that rollover contributions will not be excluded in determining the value of the participant’s nonforfeitable accrued benefit for purposes of the plan’s involuntary cash- out and consent rules. Therefore, if the provision in section 4 of LRM #54 is included as an option in the plan, the following sample adoption agreement language should be modified to provide that the election therein does not apply to an employer who elects the direct rollover option.)

The employer:

(1) ( ) elects to exclude rollover contributions in determining the value of the

participant’s nonforfeitable accrued benefit for purposes of the plan’s involuntary cash-out rules.

If the employer has elected to exclude rollover contributions, the election shall apply with respect to distributions made after:

____________ (Enter a date no earlier than December 31, 2001.)

with respect to participants who separated from service after:

____________ (Enter date. The date may be earlier than December 31, 2001.)