Diversification distribution from ESOP

[lexi]

If an EE who is 55 yrs old and has had 10 yrs of service decides to diversify his/her ESOP account and takes a diversification distribution of

1) stock; and/or

2) shares

and does NOT roll it over into an IRA, i am assuming that the distribution would be treated as a non-qualified distribution and would be taxed accordingly.

Any thoughts?

[BeckyMiller]

Not sure what you mean by a "disqualified distribution." This is a taxable distribution with no exemption from the premature distribution penalty.