ESOP Failed to give notice regarding Diversification

[Guest esi-jht]

I found an older thread on this topic (3/28/2002) but I was wondering if there are any updates or is there some additional thought on the subject. The ESOP did not give diversification notice and now the 6 year period has completely passed.

If we give the participant opportunity today to diversify, how would we handle the distribution? Participant is not yet NRA and the plan does not provide for in service distributions. Any thoughts, suggestions or other references are appreciated.

[BeckyMiller]

I am not aware of any developments since that old thread. If you are certain that the plan has violated the diversification rules, I would suggest that the Plan Administrator request relief under the EPCRS procedure. As a system of relief, you need to focus on the participant's position. If the company stock declined in value - you will probably need to give them the value as of the date that they could have diversified, plus some earnings rate from that date. If the stock has increased in value at a rate in excess of the earnings rate that the IRS would apply under EPCRS, you might be able to simply grant them diversification now.

I would double check to make sure that you have missed the window and that noone else has missed an opportunity, before going into EPCRS.

And, as always - make sure the sponsor obtains competent and experienced ERISA counsel. I have seen a lot of EPCRS applications that were naively drafted, so emphasis on both competent and experienced.