Profit Sharing In-Service Withdrawals at Stated Age

[Lori Foresz]

Hi,

Can someone please confirm if a profit sharing plan can allow in-service withdrawals at a stated age of 40 and not place any other restrictions?

For example, NOT require the 2-year baked rule or 5 YOPS rule- only that the participant be age 40?

Help is greatly appreciated.

[Jim Chad]

I would think you would have to require the 2 year rule. FWIW

[BG5150]

From: 1.401-1(b)(1)(ii)

The plan must provide a definite predetermined formula for allocating the contributions made to the plan among the participants and for distributing the funds accumulated under the plan after a fixed number of years, the attainment of a stated age, OR upon the prior occurrence of some event such as layoff, illness, disability, retirement, death, or severance of employment.

I take the "or" as just needing a specific age. In the absence of a stated age, you'd need a seasoning clause, or restrict it to an event.

[QDROphile]

I got the IRS to approve age 40 for an ESOP (stock bonus plan, not PSP, but subject to same rules) in a determination letter filing. ESOPs have another layer of distribution rules that may have influenced the reviewer.