Our ESOP plan document has the typical provision regarding distributions to terminated participants: last day of plan year following later of reaching age 65, fifth plan year following plan year in which termination occurs, or 10th year of participation. (There is no outstanding stock loan.) Distributions to participants with a balance greater than $5,000 take their distributions in equal installments over five years. We have a window of time following receipt and approval of the valuation for participants to request a distribution.
An issue I've never been able to figure out is what do you do with participants who are entitled to receive an installment distribution, but do not send in paperwork during the window? We have ex-employees who want to leave their account open because they think the value of the stock is going to go up, which it has in the past. However, we also have people who request a distribution one year, but then forget or neglect to do so for subsequent years. Our recordkeeper/TPA says that their forms are only good for a current distribution, and participants must send in additional paperwork each year to get the subsequent installments. As you can imagine, this plays havoc with our cash flow projections. Is this really how it's supposed to work?
Thanks for any guidance out there!
