Net Unrealized Appreciation and Terminating Plan

[Guest AEA]

In an acquistion situation, an existing 401(k) plan allowed for investment in employer stock. If the acquirer terminates the plan, can the participants who receive stock in their distributions use the net unrealized appreciation rule? It appears that Code section 402(e)(4) provides for distribution upon separtion from service but does not mention termination of a plan.

Also, am I correct that "separation from service" would still be interpreted under the old same desk rules since a) it is not part of section 401(k) and b) is separation from service and not severance of employment?

Thanks

[mbozek]

Check the rules in pub 575. NUA is available only if there is a LSD on account of death,disability age 59 1/2 or separation or if the employee withdraws stock which he purchased with after tax dollars. Temination of the plan is not a distribution event for NUA but is for rollovers.