Delayed Distribution of Employer Money

[Guest LonePlanAdministrator]

We recently took over a company who I just discovered is not allowing their separated participants to take the employer money out of the plan until two years after the date of termination. As in a participant could be 100% vested in employer money, terminate, but is not permitted to remove it from the plan until two years after the date of termination.

To be quite honest, I have never seen something like this. Is this even allowed? I'm having a hard time finding anything that supports this.

Any thoughts, opinions, or insight about where to look would be greatly appreciated.

Thank you.

[rcline46]

If its in the document it is perfectly legal.

[Guest LonePlanAdministrator]

If its in the document it is perfectly legal.

i guess i've just never seen it where you can have all other sources of money immediately except employer money. and we haven't received their document yet - we're still in the transition process - i just received one of their enrollment books and like to have all my ducks in a row prior to setting them up.

[Lou S.]

It can be done if it is in the document. years ago we had a client in a balance forward plan that had a similar provision in the document because he was afriad his employees might leave and take their pension distribution to start up a business in competion with him.

[Guest Sieve]

In fact, you can withhold payment even longer, if you want--as long as the plan does not violate the "no later than" date of distribution in IRC Section 401(a)(14).

So, for example, if NRA is age 65, then a partacipant age 66 with more than 10 years of participation in a calendar year plan who terminates employment in December, 2009 must be paid no later than 60 days after December 31, 2009 if the participant so requests. Waiting 2 years to distribute in that instance would not be permissible.