Terminated Participant?

[Scuba 401]

A participant terminated but due to the moving of the plan fron one service provider to another, was not able to complete distribution paperwork. He is now employed again with the Employer (after a few months). The participant would like to get a distribution believing he is entitled because he had a separation of service. The plan does provide for distributions when there has been a separation. Should we let him have one?

[david rigby]

I'm not sure I understand the question, but I'll try.

Much depends on the plan wording, and on past practice. If the issue is "gray", I *always* recommend that no distribution be made to someone who has been rehired, since it seems to set a precedent that is not the purpose of the plan. Since the plan normally exists for to provide long-term capital accumulation (in the case of a DC plan) or for providing retirement income (in the case of a traditional DB plan), my opinion is that the administrative interpretations should adhere to that goal.

It is appropriate to inquire as to whether this issue has come up before and how it was handled.

[This message has been edited by pax (edited 02-23-2000).]