Plan Changes with GUST Restatement

[DP]

I am getting ready to restate a client's PS 401k calendar year plan for GUST effective 1/1/03.

Early in 2003 one of the participants (aged 59 1/2) called the plan broker and asked for an in-service distribution. Without checking the broker mailed the participant a check without a Trustee authorization or without withholding taxes. The plan does not allow for in-service distributions so after many heated discussions, the broker agreed to put the money back in the participant's account, and the brokerage company would take the loss.

Now the client has decided to add In-Service distributions at the age of 59 1/2 for all accounts. I was adding this provision to the plan along with the Gust restatement effective 1/1/03. Since the In-Service distribution provisions will now be available, how does this affect the erroneous distribution made to the participant earlier in the year? Since the GUST restatement has not been signed, will the In-Service distributions not be available to participants until the date the restatement is signed?

Thanks for any advice.

[Lynn Campbell]

The in-service distributions will not be permitted until the GUST amendment has been signed. I guess I would treat the in-service distribution that was made earlier this year in error as not having occurred since the funds were returned to the Plan. Is this the approach you are taking?

[DP]

Lynn, Yes that is how I was planning to handle it. The client was questioning me to make sure the In-Service Distribution provisions would not be retroactive back to 1/1/03. Thanks.