distribution to rehired employee

[Belgarath]

I'm nearly certain I've seen discussion of this, perhaps at an ASPPA conference or something, but I'm darned if I can put my hands on anything.

Participant terminates employment on, say, Sept. 1, 2009. 12/31/09 valuation is processed, distribution paperwork sent to the former participant, who signs the distribution request paperwork on February 14th, 2010. Participant is subsequently rehired on February 20, 2010, BEFORE any distribution is processed.

Plan does not permit in-service withdrawals.

I believe distribution cannot be made. But I was just wondering if there is anything "official" from the IRS or in the regs that specifically states this. As I said, I'm certain I've seen discussion, and I think on these boards as well, but I've done several searches and can't seem to find it. Thanks!

[mbozek]

I'm nearly certain I've seen discussion of this, perhaps at an ASPPA conference or something, but I'm darned if I can put my hands on anything.

Participant terminates employment on, say, Sept. 1, 2009. 12/31/09 valuation is processed, distribution paperwork sent to the former participant, who signs the distribution request paperwork on February 14th, 2010. Participant is subsequently rehired on February 20, 2010, BEFORE any distribution is processed.

Plan does not permit in-service withdrawals.

I believe distribution cannot be made. But I was just wondering if there is anything "official" from the IRS or in the regs that specifically states this. As I said, I'm certain I've seen discussion, and I think on these boards as well, but I've done several searches and can't seem to find it. Thanks!

I think you need to have counsel review the question of whether approval by the plan to pay the benefits is a legally binding contractual obligation to make the payment since the actual distribution of the check is a ministerial act. For example, if the particpant requested that the plan not make the payment after the the distribution is approved by the plan administrator would the plan withhold the check? You need to check cases under claims provisions of ERISA 503 for the court precedents of withholding payments. Of course, there is the option having the participant roll the distribution back to the plan in order to be rehired.

[BG5150]

Was the request approved by the Plan Administrator by the 20th? I would think the paperwork is not in good order until the PA reviews and signs or otherwise approves it.

[Belgarath]

Thanks for the input. My dates were hypothetical, as I'm just trying to get a handle on the issue.