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NRA and Distributions


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I have a participant who is still employed and at NRA in a Profit Sharing Plan. She would like to take a distribution but the plan document  does not allow for in-service distributions. I have looked in the Pension Answer Book and the 401(k) Answer Book to see if this is allowed because I am being told that the is an "unwritten rule" (LOL) that allows participants at NRA to take their money out of the plan. Can someone point me to the answer? Thank you.

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It supposed to be written.  In the plan document, that is.  Amend?

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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2 hours ago, SEM said:

I have a participant who is still employed and at NRA in a Profit Sharing Plan. She would like to take a distribution but the plan document  does not allow for in-service distributions. I have looked in the Pension Answer Book and the 401(k) Answer Book to see if this is allowed because I am being told that the is an "unwritten rule" (LOL) that allows participants at NRA to take their money out of the plan. Can someone point me to the answer? Thank you.

Being told by whom?  Make a note of their name and then make sure you never give credence to anything they ever say again!

It requires specific plan language, and the plan can be amended to add that provision (every one of our  plans allows for distributions at NRA even if still employed).

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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I agree with the others.  I would add that it's unusual, at least in my experience, to not allow an in-service withdrawal at NRA.  It's possible that it is in fact allowed but not where you are looking.

Ed Snyder

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I agree with nearly all of the foregoing. However, at the end of the day, whether such withdrawals are permitted is a plan design decision, over which the employer has the final say. If the employer chooses to change its mind, it simply needs to amend the plan.

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  • 1 month later...

The original question was for an active employee, however is the plan permitted to make a distribution under NRA for a terminated employee?

I have a plan that that uses age 59 1/2 as the Normal Retirement Age.

When a participant terminates:

   Distributions for termination of employment - paid after a participant incurs two year break in service

   Distributions for death, disability, retirement - paid as soon as administratively feasible

An employee, age 60, terminated employment.  Does he have to wait for two breaks in service to receive his distribution or because he terminated after NRA he is eligible for a distribution immediately?  The employer is calling it a termination, not a retirement.

Thanks.

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3 hours ago, jsample said:

The original question was for an active employee, however is the plan permitted to make a distribution under NRA for a terminated employee?

I have a plan that that uses age 59 1/2 as the Normal Retirement Age.

When a participant terminates:

   Distributions for termination of employment - paid after a participant incurs two year break in service

   Distributions for death, disability, retirement - paid as soon as administratively feasible

An employee, age 60, terminated employment.  Does he have to wait for two breaks in service to receive his distribution or because he terminated after NRA he is eligible for a distribution immediately?  The employer is calling it a termination, not a retirement.

Thanks.

Doesn't matter what the employer calls it.  He meets the plan requirements for retirement and is entitled to the benefits provided by the plan in such circumstance.  I'm sure it doesn't have any language requiring him to wait for two breaks  in service.  If the employer balks, participant calls DOL and that will solve the problem quick!

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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