Same Desk Rule

[Guest SHEILA GRANT]

I am desperately seeking any information available on the "Same Desk Rule". Thanks for your imput!

[k man]

The following is a summary of Rev. Rul. 2000-27, which essentially expands the same desk rule exception to the separation from service requirement

Separation of service.--Distributions of elective deferrals from a 401(k) profit-sharing plan, which included elective deferrals, that were made to terminated employees after the sale of less than substantially all of a company's business assets, were considered lump-sum distributions made incident to a "separation from service" within the meaning of Code Sec. 401(k)(2)(B) .

The IRS indicated that, for sales of less than substantially all of the assets of a trade or business that occur prior to September 1, 2000, the IRS will not treat a plan as failing to follow its provisions merely because the employer does not treat the termination of employment from the seller, and the hiring by the buyer, as a "separation from service" and does not permit distributions from the plan to the terminated employees hired by the buyer

[david rigby]

Text of Revenue Ruling 2000-27

http://www.benefitslink.com/IRS/revrul2000-27.shtml

You might also try a search for issue on the Message Boards, or on BenefitsLink.

[Guest Jim Kais]

Also take note that the new tax act (EGTRRA) modifies the same desk rule. This modification is effective for all distributions after 12/31/2001. The change will, supposedly, make it easier to get distributions when a business changes ownership. Be careful with this since there is no track record for determining the new meaning of "severance".

Benefitslink has some excellent links to the new tax act and specifically, the repeal/modification of the same desk rule.