Distributions "in kind" of nonmarket assets

[jkharvey]

Terminating plan has small amount invested in limited partnership and gold coins. Trustee wants to offer all participants a chance to take part of their distribution "in kind". In other words he wants all participants to have a chance to receive some of the lp and coins and not look like they were distributed to HCE only. Does anyone have a letter to participants that gives this option?

[Earl]

Better make sure the LP will allow for division of the interest.

But you probably did.

[KJohnson]

Here is some language that we put in a letter and then had a separate form.

Some limited partnerships remain in the Plan. In order to expedite the process of terminating the Plan, the Plan’s highly compensated employees have stated that they will, if necessary, take “in-kind” distributions of these partnership interests. However, the Internal Revenue Code requires that any distribution option that is offered to highly compensated employees (even if they have agreed to such a distribution option reluctantly) must be offered to non-highly compensated employees. Therefore, if you were invested in any “fund” within the Plan that still contains limited partnerships, you have the opportunity to elect an in-kind distribution of your share of that asset. In many instances, limited partnership interests are illiquid. Also, if you have elected to rollover your distribution into an IRA, some IRA custodians will not take possession of assets such as limited partnerships. Accordingly, we urge you to talk with a financial advisor if you feel inclined to take an “in-kind” distribution of a limited partnership interest. If you elect a lump sum and request an in-kind distribution you must complete Exhibit ___.

Earl's point is also well taken and you need to be sure you can "break down" the lp units.

[jkharvey]

Thank you very much for your help.