When an ESOP plan has the provision that no Company Stock may be distributed until the Exempt Loan is paid off in full and has the automatic cash out $1,000 limit, does the automatic cash out rule supercede the provision regarding no distributions until the loan is paid off. The only assets in the ESOP are Company shares, no cash.

jolie:

The 1,000 cash out limit as you call it, does not dictate when a distribution must or can occur. In simple terms, the provisions simply indicate that the distribution can occur in a lump sum benefit and without the consent of the participant if the participant fails to consent after being correctly notified, etc.

So the answer to your question is no.

You can't answer the question without seeing plan terms. The most you can say is it involves interpretation of the plan terms. In fact, it would not be surprising to find that a small balance cashout is an exception to the general rules that are more restrictive.