MORE LIBERAL DIVERSIFICATION

[Guest JBeck]

A KSOP PROVIDES FOR THE INVESTMENT OF MATCHING AND SALARY DEFERRAL CONTRIBUTIONS IN EMPLOYER STOCK, SUBJECT TO THE DIVERSIFICATION REQUIREMENT. CAN THE PLAN BE AMENDED TO REDUCE THE DIVERSIFICATION AGE TO AGE 45 WITH NO SERVICE AND/OR TO PERMIT PARTICIPANTS EVERY THREE OR FIVE YEARS TO HAVE AN OPEN WINDOW TO SELL EMPLOYER STOCK AND DIVERISFY? tHE ONLY CONCERN I CAN THINK OF IS THAT WE NEED TO MAKE SURE A "SUBSTANTIAL" AMOUNT ALWAYS REMAINS IN EMPLOYER STOCK.

ANY COMMENTS?

[stephen]

I think you can clearly offer additional times to diversify whether you use the age 45 or allow participants to diversify every 3-5 years depends on a number of factors including your employee base and the companies ability to fund the distributions among others. Whichever method is chosen I think you would want to take into account when running your repurchase obligation studies.

I do not think adoptiing either of the less restrictive methods would relieve you of the statutorily required diversificaiton elections (age 55 and 10 years of participation).

[MWeddell]

You can allow more shares to be subject to diversification than is required by law. See Q&A-11 of IRS Notice 88-56.

However, if your plan is more generous in this regard than required by law, then beware that you have a benefit, right, or feature that requires discrimination testing. See Treas. Reg. 1.401(a)(4)-4(d)(6), especially the word "solely." No, I'm not aware of when if ever the IRS has enforced this testing requirement.