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Esop distribution: termination/disability?


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Hoping that someone can help...or point me in the right direction...

I worked for a company from 09/10 to 02/13. I won't get into details, but there was some shady and questionable things on their part and they found/fabricated a reason to terminate my employment...a lot of which had to do with my chronic illness...and the company requiring me to abide by my own set of rules, which didn't afford me the same flexibility as all other employees. If someone needs specifics, I can provide them. Anyway...

I haven't worked full-time since then and was determined disabled as of 07/14 by SSA. I received my ESOP distribution in 2014 (can't recall the month, offhand, but I believe it was November). I was only 20% vested, but it was brought to my attention that since I was still part of the plan, while waiting for my distribution, I should have been vested at 100% and also be able to forgo the 10% early distribution penalty. 

I managed to get the plan documents but they are not clear. Can anyone help?

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Normally, vesting % is determined at the separation of employment date (quit, fire, retire, disable, die, whatever).  Have you reviewed the precise definition in the plan document?  in the Summary Plan Description?

Observation: becoming disabled at a later date is (usually) not relevant, unless the disability determination is retroactive to on or before the separation of employment.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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You can talk to the plan administrator and see if they are willing to look into it.   This would be an informal process. 

If you don't have any satisfaction via that conversation the Summary Plan Description ought to give you the details you need to make a formal claim.  That will set in motion a process that will require them to give you a written response as to what their position is regarding your claim. 

What you describe is a difficult situation.  If the disability was ruled as being in effect as of the date of your termination you MIGHT have a point.  If the disability happened after the date of termination then it will be irrelevant. 

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On 1/6/2018 at 7:02 AM, dlarae said:

but it was brought to my attention that since I was still part of the plan, while waiting for my distribution, I should have been vested at 100% and also be able to forgo the 10% early distribution penalty.

disability does not automatically trigger full vesting - even if still employed at the time - depends on terms of the plan. so if above statement was made by someone in general and not specific to your plan, it may not apply to your situation regardless.

i agree that if you have a SSDI award effective prior to your distribution that you should be able to avoid the 10% premature distribution penalty tax.

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Assuming there is any significant amount of money involved for you, you need to get the fullest version of the facts you can, in writing and with documents attached, and try to connect with a lawyer in your area that knows something about ERISA litigation and let that firm evaluate your case. You might get a referral from the Pension Rights Center in DC.

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On ‎1‎/‎6‎/‎2018 at 10:55 AM, dlarae said:

....and the disability determination was due to the chronic illess that I have had since 1998.

Let's also point out: even if disability is "due to" an older illness/condition, that does not mean the disability itself will be deemed to date back that far.  While there may be some debate about the timing, the determination will be (should be) medically based, according to plan procedures.  As noted above by CuseFan, if the plan's provision about disability does not affect the plan definition of vesting, then any possible retroactive determination may have no effect on the resulting plan benefit, so you may wish to gather this information first.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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