GMK

First dig out your copy of the Summary Plan Description (or request one from the ESOP's Plan Administrator). The section on Distributions will describe the Plan's options and requirements for distributions, including information on when you can receive a distribution from the ESOP. It should also tell you how you go about requesting a distribution. The timing of when distributions MUST be made should be summarized in the Summary Plan Description. In some cases this vary depending on whether or not you are at the early or normal retirement age.

And contributions can be made to a Roth in retirement (there is no age limit on Roth contributions) IF you have earned income and your adjusted gross income is below the limit for your filing status. Contribution amounts are limited by earned income (up to the annual maximum contribution limit). For example, if your husband's earned income in 2009 is $1,300, then the most he can contribute for 2009 is $1,300.

Just asking: The amendments to Andy t.a.'s plan that terminates 12/31/2007 would list the effective dates required by PPA, and the changes that were effective before 2008 would apply and those effective after 2007 would be listed but have no effect. Yes, no, maybe?

An excellent reminder to plan administrators, Peter, regarding careful, prudent handling of this kind of case. And easy to administer, too, unless the participant dies with an AWOL spouse.

Thanks, John, for pulling me off the ledge (oops). Should jkharvey's doctors be concerned with any factors other than ADEA for age-based allocation groups?

Apart from everything else, age 45 may not be the best choice. Just be careful not to discriminate against employees who are age 40 and older with regard to the priviledges of employment.

Although it may not be relevant to nab420 ... Is it not true that you can use married filing separately status if you lived apart from your spouse for the entire year?

Thanks for all the comments. And am I happy that we decided not to have a Last Day Rule in our plans.

Am I correct that Q&A-4 of Notice 2008-30 (to which PGH.ERISA alerted us ... thank you) clarifies that plans must permit direct rollovers of eligible rollover distributions to a Roth IRA?

I think yesterday's Notice 2008-30 answers this. From Q&A-1: "Q-1. Can distributions from a qualified plan described in Section 401(a) be rolled over to a Roth IRA? A-1. Yes. The rollover can be made through a direct rollover from the plan to the Roth IRA or an amount can be distributed from the plan and contributed (rolled over) to the Roth IRA within 60 days. ..." Must be an eligible rollover distribution and still have to meet income and filing status rules.

With no reply to the contrary, I guess I better stick with ONLY in lieu of fractional shares.

The ESOP's assets are mainly in employer stock, plus a little cash. All assets are allocated to participants' accounts. The ESOP makes a distribution (paid to participant, not a rollover) in stock and cash, where the cash, for example, is for partial shares ($7) plus the cash account balance ($11). The stock basis is, say, $20,000, so mandatory withholding is $4,004, but withholding cannot exceed the cash portion. The total cash portion ($18) is less than $200, but it is not ALL in lieu of partial shares. All the references I've found, including IRC 3405(e)(8), say that no withholding is required for a distribution which consists only of employer securities and "cash (not in excess of $200) in lieu of fractional shares." Does this mean ONLY in lieu of fractional shares, or can other small cash amounts be included in the $200? In other words, does the ESOP need to withhold the $18 cash portion? Thanks in advance for any advise, references, and experience. If you need more information, let me know. (For reference, the ESOP used to keep larger cash reserves to pay all benefits in cash. This year it will make distributions in stock and cash, and situations like the example are likely.) Thanks, again.

Thanks for the question. I thought Alternate Payees have the same distribution options as the employee. But I'm not an expert in this, so I look forward to seeing the answer.

Thank you, Becky. That throws a different light on it. The 401(k) is a plain old deferral and match plan (all cash) with mutual funds for investments. There is no employer stock in or associated with the 401(k). The ESOP is all employer stock (and a little cash). The employer conrtributes shares of stock, and the ESOP can distribute them. (The employer, an S corporation, immediately and automatically buys any distributed shares). So, now I think my participant need only cash out the ESOP account for a lump sum distribution and has the option to leave the 401(k) account in place. Thanks again.

OK. I found it. Topic 412 at http://www.irs.gov/taxtopics/tc412.html says: "A lump–sum distribution is the distribution or payment, within a single tax year, of a plan participant's entire balance from all of the employer's qualified pension, profit-sharing, or stock bonus plans. All the participants accounts under the employer's qualified pension, profit-sharing, or stock bonus plans must be distributed in order to be a lump-sum distribution." Which means that my participant has to cash out BOTH the ESOP and 401(k) to use NUA or 10-year averaging. (Don't know why I couldn't find this before. No stupid questions, just stupid people, I guess.)

The Company has an ESOP and a 401(k). They are separate plans. If participant A wants to use NUA or ten-year averaging, would A have to cash out both plans for the distribution to qualify as a lump sum distribution? In other words, is the 401(k) the same "kind" of qualified plan as the ESOP (since they are both pension plans) for the purposes of determining a lump sum distribution? (It probably doesn't matter, but for completeness, the Company is an S Corp owned 100% by the ESOP.) And is there an IRS reference clarifying this?