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OldAsERISA

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  1. Would it be permissible to draft the plan so that only employees who are age 55 are eligible to participate? It would eliminate the possibility of a 10% early withdrawal penalty applying to employees taking an immediate distribution.
  2. A municipality wants to set up a DC plan under which retiring employees can defer their accumulated PTO bank when they retire. The municipality has been told (not by me) that it can set up a 401(a) defined contribution plan for this purpose. The leave bank will be the only source of contributions to the plan (no amounts other than the PTO bank contributed by the municipality or the employees). Employees won't be required to contribute their leave bank, they will also have the option to receive a payout at retirement in a (taxable) lump sum. I can't fit this situation under any of the PLR's, and am concerned this this is really an impermissible "cash or deferred election." Any thoughts? Has anyone seen this type of set-up before? What if I drafted the plan so that employees were required to defer their leave bank at retirement (i.e., try to turn the leave bank into a "mandatory contribution") I am aware that these amounts can be deferred under a 457(b) plan - but some employees have leave banks that are much larger than the annual limit under 457(b).
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