What is an interim distribution?

[Guest jcarlos]

I'm new to this. We have a nonqualified plan that allows "interim distributions". Will they still be OK under the new HR4520 (American Jobs Creation Act)?

[Guest Jimmy]

Under HR4520 distributions are only permitted under the limited circumstances. They don't include "interim distributions". Is an interim distribution like a series of distributions? If someone elects an interim distribution far enough in advance, why wouldn't it be ok?

[Guest jfsinger]

If by "interim distribution" you mean a distribution before retirement (a common provision), then......

As long as the distribution time and method are elected at the time of the deferral, then "interim distributions" (or "in-service distributions") are OK. There seems to be no minimum period before a distribution may take place (12 months?).

You can't tie a distribution to an event, such as a child going to college. You can, however, set a distribution to occur coincident with a child entering college. The "gotcha" occurs if the child does not go to college, and you receive the money anyway. Of course, you can always defer more that year to compensate. And, you can "re-defer" as long as you precede the distribution date by 12 months and the "re-deferral" is for at least 5 years.

We're going to discover a lot of flexibility within the new rules...don't you agree?