Diversification upon plan reentry after a normal retirement age distri

[KJohnson]

An employee reaches normal retirement age, retires, and takes a lump sum distribution. The employee had previously been offered diversification at the applicable time.

The employee is now rehired. Is he automatically entitled to diversification? Plan provides diversification upon attaiment of age 55 and 10 "Years of Service".

[KJohnson]

RLL is there any regulatory authority that would mandate such treatment?

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[This message has been edited by KJohnson (edited 06-27-2000).]

[This message has been edited by KJohnson (edited 06-30-2000).]

[RLL]

After further consideration, I think that the participant would NOT be entitled to a diversification election under the requirements of IRC Section 401(a)(28)(B). The 6-year "qualified election period" beginning after he/she first attained age 55 and completed 10 years of ESOP participation probably has expired. Was the participant given the election for those 6 years?

On the other hand, if the ESOP plan document was drafted to allow diversification in a manner other than as required under the IRC, the participant may still be entitled to elect diversification, as the plan document governs the participant's rights to benefits. What does the document say?

[This message has been edited by RLL (edited 06-28-2000).]

[Kirk Maldonado]

RLL:

Would your answer change depending on when the participant completed 10 years of service?

For example, what if the participant did not complete 10 years of service until reaching age 63? Assume further that the participant reached normal retirement age at 65 and retired (at that time). If the participant was rehired at 67, would the participant be entitled to diversification elections following rehire?

[This message has been edited by Kirk Maldonado (edited 06-28-2000).]

[RLL]

Kirk---

KJohnson stated that "the employee had previously been offered diversification at the applicable time."

I assumed that this meant that he/she had been offered the diversification election for the 6 years in the "qualified election period." If the election had not been offered to the participant six times, he/she might be eligible for additional elections with respect to any allocations attributable to post-reemployment service.

[This message has been edited by RLL (edited 06-29-2000).]