diversification distributions

[Guest dsprague]

I need some help to understand my ESOP's diversification policy. my job left me in June, 2006. I was born on May 13, 1952 so I should have turned 55 in 2007. the benefits clerk said I had 10 years in the plan. the plan year runs from Sept. 1 to Aug. 31. stock in my account was repurchased and placed in a money market.

I think I became a “qualified participant” and the “qualified election period” should have started in the plan year Sept. 1, 2006 to Aug. 31, 2007. The “adjusted account balance” for this plan year should be the sum of prior diversifications (zero) plus “stock in the person’s stock account as of the last day of the plan year preceding the applicable plan year”. I have an ESOP statement that says I had 100% vested stock worth over $380,000 as of August 31, 2006. as of Aug. 31, 2007 I should have been able to withdraw $95,000.

does that make sense? thanks for any help ...

following is from the plan document:

Section 7.10 - Diversification. Each Qualified Participant (as defined below) may elect within 90 days after the close of each Plan Year in the Qualified Election Period (as defined below) to withdraw all or any part of the excess of 25% of his Adjusted Account Balance (as defined below) comprised of stock acquired by or contributed to the Plan over the sum of the number of shares of Stock (adjusted for Stock splits, etc.) previously withdrawn pursuant to this Section 7.10. In the alternative, a Qualified Participant may directly transfer the portion of his Eligible Participant Account covered by the election to the Pacific Hide & Fur Depot d/b/a Pacific Steel and Recycling 401(k) Plan or another qualified plan of the Employer which accepts such transfers, but only if the transferee plan permits employee-directed investment and does not invest in Company Stock to a substantial degree. The Trustee will make the direct transfer no later than 90 days after the last day of the period during which the Qualified Participant can make the election. the resulting number of shares shall be rounded to the nearest whole integer and shall be withdrawn from the Plan. In the case of the sixth election year in which a Qualified Participant can make an election pursuant to this Section, “50%”’ shall be substituted for “25% in the preceding sentence. The distribution shall be made in cash or in Stock as provided in Section 7.1 and shall be made within 90 days after the election period with respect to which the election is made. Any allocation of Stock after the Qualified Election Period shall not be subject to diversification under this Section 7.10.

For purposes of this Section:

(a) “Qualified Participant” means any Participant (including former Employees) who has completed at least 10 years of participation under the Plan and has attained the age of 55.

(b) “Qualified Election Period” for an individual means the six Plan Year period beginning with the Plan Year in which the individual becomes a Qualified Participant.

© “Adjusted Account Balance” of a Qualified Participant for a Plan Year within the Qualified Election Period means the sum of all distributions of Stock made pursuant to this Section in prior Plan Years plus the Stock in the person’s Stock Account as of the last day of the Plan Year immediately preceding the applicable Plan Year.

Notwithstanding anything herein to the contrary, if the Fair Market Value of Stock allocated to a Participant’s Account on or before the last day of the Plan Year immediately before an election period during which the Participant is eligible to make a diversification election is $500 or less (and never exceeded this amount), then the above diversification of investment rules shall not apply. In determining whether the Fair Market Value of allocated Stock is $500 or less, Stock allocated or acquired for accounts of all employee stock ownership plans maintained by Affiliates shall be aggregated.

[QDROphile]

If your question relates to what your rights are now, it appears that your account has no stock in it and you may "withdraw all or any part of the excess of 25% of [your] Adjusted Account Balance (as defined below) comprised of stock ***." You may withdraw 25% of zero.

It is tough to get a good answer to a question like yours in this forum. You could apply for withdrawal. If withdrawl is denied, the plan's claims procedures probably require that you be given an explanation for the denial, with reference to the relevant plan terms. You will need to follow the formalities of the claims procedure, which probably means you have to submit your claim in writing. The procedures are explained in your summary plan description or a separate document that you can get from the plan administrator. The plan administrator should give you an informal explanation of what you can do if you ask, but is not legally required to do so, and the explanation might not be reliable.

[Guest dsprague]

I forgot to mention that in March of 2007 I had requested information on how to request the diversification. the individual I asked was the Director of HR and a Trustee of the ESOP Trust. he misquoted the SPD provisions and said nothing about a "formal" claim procedure. shortly after my email, I got the ESOP statement and a letter that said the Board repurchased my stock.