Does 1-year break-in-service requirement as condition for distribution apply to a participant at early retirement date?

[Guest Judy S]

A 401(k) plan requires participants to have a 1-year BIS before becoming eligible for a distribution. The plan has an early retirement provision of age 55/6 years of service with 6-year vesting. The plan is a Corbel prototype with this language:

"Distribution of the funds due to a Terminated Participant shall be made on the occurrence of an event which would result in the distribution had the Terminated Participant remained in the employ of the Employer (upon the Participant's death, Total and Permanent Disability, Early or Normal Retirement). However, at the election of the Participant, the Administrator shall direct that the entire Vested portion of the Terminated Participant's Combined Account be payable to such Terminated Participant provided the conditions, if any, set forth in the Adoption Agreement have been satisfied."

The condition in the Adoption Agreement is the 1-year BIS requirement.

Also, does this condition apply to a participant at NRD, age 65 in this plan? How about LRD? The requirement that a participant be paid no later than 60 days after the end of the plan year containing the latest of NRA, 10 years of participation, and termination of employment could delay payment to the 1-year BIS date for someone with short service at termination on/after NRD.

It seems that the first sentence in the above plan language may override the 1-year BIS provision for participants who die, are disabled or reach Early or Normal retirement, but I'm just not sure. Anyone?

[Guest Judy S]

One more try-does anyone know if the 1-year break in service requirement for termination payouts applies to employees at retirement date-early, normal or late?

[david rigby]

Most plans will define the time at which commencement begins, and one purpose of defining "retirement" is to permit a different commencement definition. Most likely, no BIS requirement, but check plan provisions again.

[Guest Judy S]

"Distribution of the funds due to a Terminated Participant shall be made on the occurrence of an event which would result in the distribution had the Terminated Participant remained in the employ of the Employer (upon the Participant's death, Total and Permanent Disability, Early or Normal Retirement). However, at the election of the Participant, the Administrator shall direct that the entire Vested portion of the Terminated Participant's Combined Account be payable to such Terminated Participant provided the conditions, if any, set forth in the Adoption Agreement have been satisfied."

(How do you get quotes like this in the box?)

When I read the above plan language, it says to me that the 1-yr BIS applies to all distributions except those due to death, disability or retirement. Would you agree?

[Just Me]

To answer your easy question, I higlight and copy the portion I want to quote, then when composing your message there is a quote button at the top you can click on, and paste the quote in.

To answer your trickier question - since it's a Corbel document, perhaps you could ask Corbel what it means?

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But that's *Just Me*

[Bird]

When I read the above plan language, it says to me that the 1-yr BIS applies to all distributions except those due to death, disability or retirement. Would you agree?

That's how I read it.

Clearly, at least IMHO, someone who terminates at age 37 has to wait for a 1 year BIS.

Likewise, I think someone who reaches NRA and then retires is entitled to a distribution at that point.

That is, the paragraph is NOT about death, disability or retirement. It's about "regular" Terminated Employees. THEY get paid at the earlier of death, disability or (attainment of) retirement (age), or a 1 year BIS.

[david rigby]

As implied by Bird, I would expect to see some other plan provisions for severance of employment due to death, disability, retirement.

[Guest Judy S]

Thanks to everyone who replied. I'm going to take Just Me's advice and ask Corbel.

[Guest Judy S]

I talked to Corbel a couple of times yesterday and found out that their document applies the termination conditions, such as 1-yr BIS, only to terminated participants with vested benefits greater than $5,000 (if involuntary distributions are elected). Participants who terminate due to retirement, early, normal or late, death, disability or simply terminate with vested benefits of $5,000 or less do not have to wait for the 1-yr BIS under their document.

It sure is hard to get that from their wording, but that's the story. Thanks to everyone who replied.