ESOP Diversificaton

[ESOP Guy]

I found some older threads, and I don't think there is a reason to think anything has changed but...

1) I have never seen an election form for a plan that allows one to take a lump sum distribution out of the plan talking about rolling the amount over to another qualified plan vs just an IRS if the person is terminated. I know it is rare for a terminated person to even have a diversification, but in this case they have the 55 and 10 yop before the plan allows them to take their money out as a terminated person. But there is no reason it can't be rolled to another unrelated qualified plan if so desired is there?

2) Can you write the ESOP diversification provisions so only employeed people can transfer the money to the employer's 401(k) plan? Or put another way can you force the terminated employee to take a distribution as their diversification? Once again I suspect they will want their money, but if they have been paid from the 401(k) plan it would be a pain if you were obligated to set up a new account.

3) Related to #2, it would be the ESOP's provisions that are change to make that restriction correct? Is where you can send your money a protected benefit?

Thanks.

[GMK]

Some quick thoughts:

If the distribution is eligible for rollover, the distributing Plan cannot require or prohibit a participant's election of a rollover, and the plan cannot limit where a rollover goes if it's rolling over into an IRA or qualified employer plan.

A rollover can go to a qualified employer's plan if the receiving plan will accept the rollover. If the retired person has cashed out their 401(k) balance, then the 401(k) can say 'No, you closed your 401(k) account, and we have no way to open an account for a non-employee.'

The plan cannot require participants to take Diversification distributions.