Section 2. Implicit Bifurcation Method

Effective for annuity starting dates on or after the date specified in the adoption agreement, if a participant so elects, the participant will receive a portion of his or her accrued benefit in the form of a lump sum distribution as described in the adoption agreement. The remainder of the participant’s accrued benefit not payable in the form of a lump sum distribution, expressed in the normal form of benefit commencing when the participant attains normal retirement age (or at the current date, if later) will be equal to the excess of:

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(3) The participant’s total accrued benefit expressed in that form; over

(4) The annuity payable in that form that is actuarially equivalent to the lump sum distribution, determined using the applicable interest rate under Treas. Reg. 1.417(e)1(d)(2) and the applicable mortality table under Treas. Reg. 1.417(e)1(d)(3).

If a participant elects to receive a portion of his or her accrued benefit in the form of a lump sum distribution, then the amount of the distribution payable with respect to the remainder of the benefit is determined in accordance with the method for calculating the amount of a distribution payable in the optional form elected for that remainder as if that remainder were the participant’s entire accrued benefit.

Sample Adoption Agreement Language:

1. Participants

( ) will

( ) will not

be permitted to divide their accrued benefit and choose different forms of payment for each portion of their accrued benefit, subject to the effective date and conditions set forth below.

2. If a participant elects to divide his or her benefit under this section, the portions of the accrued benefit will be determined using the following method:

( ) Explicit Bifurcation Method

( ) Implicit Bifurcation Method

Note: See Treas. Reg. 1.417(e)-1(d)(7) for restrictions on the use of the Implicit Bifurcation Method. For example, the Explicit Bifurcation Method must be used when the lump sum distribution option was discontinued under the plan and is available only to the extent protected under IRC 411(d)(6), or if the plan permits a lump sum distribution of the entire accrued benefit.

3. Explicit Bifurcation Method

Effective for annuity starting dates on or after ________________, a participant may elect to divide his or her accrued benefit to the following extent:

Note: If the plan previously permitted participants to choose different forms of payment and applied the applicable interest and mortality rates under IRC 417(e)(3) to the full distribution, the prior benefits must be protected under IRC 411(d)(6) unless the effective date above is on or before December 31, 2017.

( ) The participant may elect a lump sum distribution of any portion of the accrued

benefit, with the remaining portion of the accrued benefit payable in an annuity form described in section _____.

( ) The participant may elect a lump sum distribution only of the portion of the

accrued benefit earned:

( ) prior to _____________, or

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( ) on or after ______________,

( ) with the remaining portion of the accrued benefit payable in an annuity form

described in section _____.

( ) The participant may elect a lump sum distribution for ___% of the accrued

benefit payable with the remaining portion of the accrued benefit payable in an annuity form described in section ____.

( ) The participant may elect a lump sum distribution up to ___% of the accrued

benefit with the remaining portion of the accrued benefit payable in an annuity form described in section _____.

(Note to reviewer: If the plan applies different adjustment factors to different portions of the accrued benefit for early retirement, optional forms of payment, etc., then the plan provisions or the participant election must specify which portion of the accrued benefit is payable as a lump sum distribution in order to determine which factors apply to the remaining portion of the accrued benefit. See Treas. Reg. 1.417(e)-1(d)(7)(iii)(D).)

(Note to reviewer: The last blanks in each option above should correspond to LRM # 43.)

4. Implicit Bifurcation Method

Effective for annuity starting dates on or after _____________, a participant may elect to receive a portion of his or her accrued benefit in the form of a lump sum distribution as described below.

Note: If the plan previously permitted participants to choose different forms of payment and applied the applicable interest and mortality rates under IRC 417(e)(3) to the full distribution, the prior benefits must be protected under IRC 411(d)(6) unless the effective date above is on or before December 31, 2017.

( ) A participant may elect a lump sum distribution up to $_______, with the

remaining portion of the accrued benefit payable in an annuity form described in section ____

(Note to reviewer: The second blank above should correspond to LRM # 43.)

(Note to reviewer: Other options may be specified for the division of benefits under either the Explicit Bifurcation Method or Implicit Bifurcation Method, but they must meet the requirements of Treas. Reg. 1.417(e)-1(d)(7) and be described in a way that is definitely determinable.)