In-Service Distributions

[Guest djbh]

Can a plan be amended to allow 2 in-serivce distributions in a12 month period? Would only be for age 591/2 and 100% vested accounts. Thoughts?

[TPAMan]

Sure, although you probably mean maximum 2 in-service distributions per participant (not just 2 per year for the plan)!

Also, use a plan definition of 12 month period such as 'plan year', 'limitation year' or 'calendar year.' You probably don't want to deal with tracking rolling 12 month periods.

[Bird]

But if it already allows in-service I think limiting it to 2 would be a cutback. A different way to discourage multiple distributions is to charge the participant for each one, if possible; they won't be so likely to take small amounts if they're being charged $50-$100 per pop.

[Guest Sieve]

I disagree with Bird. I think you could amend the plan to limit hardship distributionss to once every 6 months (since that would be limiting in-service distributions to a time which is within 6 months of when it was available prior to the amendment). (See Treas. Reg. Section 1.411(d)-4, Q&A-2(b)(2)(ix).) For example, if you allow in-service hardships at any time, that means that a hardship could be taken on May 6, one day after a hardship taken on May 5--and requiring a 6-month wait would just mean that the May 6 hardship could be takien within 6 months of when it was available prior to the amendment. I think that result is consistent with the example in the reg.