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Handling Distributions Before Valuation is Completed

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How do other plans typically handle the requirement that distributions begin no later than the 60th day after the end of the plan year in which the participant attains 65, has 10 years in the plan or terminates service if the 12/31 valuation is not completed by the 60th day?

Do you pay a portion of the benefit and then true it up when the valuation is complete?


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For the most part, this is not an issue because there is an exception for a participant's election of a later date. Many plans deem the participant to have elected a later date which is not later than the required beginning date for RMD purposes unless the participant affirmatively elects to commence benefits sooner. See IRS Reg. Section 1.401(a)-14(a) and (b). Alternatively, subsection (d) allows for a retroactive payment to be made if the amount of the payment required to commence on the date cannot be ascertained by such date, if the payment to be made retroactively to the date it was required to be paid is made no later than 50 days after the earliest date on which the amount of such payment can be ascertained under the plan.

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Double check the document.  Some (well drafted documents) include language that says or within so many days of knowing the balance. 

I have never seen an ESOP get in trouble for holding paying such a person until the correct balance is known in all the decades I have been doing ESOP work.  I think the Reg quoted by Rocknrolls2 is the key. 

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