Delaying an ESOP distribution

[Foodbuilder]

I retired on 2/29/2020 after 41 years at 66 years old. The company became an ESOP 4 years before retirement.  The comptroller says I should receive a distribution this year ( 2020), after the audit is completed in September +/-.  I would prefer to defer the first distribution until January 2021 since I have already received a large deferred comp payment of $120,000, plus I have 2 month's of income and we are getting about $18,000 dollars this year from Social Security due to my wife getting her full SS and myself getting a spousal benefit while my primary grows. I am trying to stay below the IRMMA threshold for Medicare ( 174,000).   Is there a way to have the distribution deferred?   Should I ask for them to make an amendment saying that the first payout may be taken as late as April 15 of the year following retirement, similar to RMD rules? Thanks for your help.

[justanotheradmin]

Does the plan actually require you to take the money out of the plan? Can you roll it over?

Or does the plan just require periodic divesture of the ESOP stock into something else? Mutual funds, cash etc. 

[Degrand]

You need to read your plan document.  Many ESOP plan documents do not require the consent from a participant who has reached normal retirement age.  You may not be able to delay the distribution from the ESOP.  However, the distribution is considered an eligible distribution and can be rolled over into an IRA or other qualified retirement plan.  As long as you elect to rollover the ESOP distribution, you should be able to delay the taxes.   

[ESOP Guy]

Let's be clear here even if you can delay it to 2021 January might not be an option- it would most likely be much later in 2021.   If this is a calendar year plan that means any payment in 2021 has to be made based on the 12/31/2020 stock price.  I am assuming this is NOT a publicly traded stock.  They are saying a payment this year will be September suggest it isn't a public company.   So it sound like they are working on getting the stock appraised and account balances determined.  That is why they pay in the fall and not sooner after year end. If my assumption is true I would assume any payment in 2021 would happen in September of 2021. 

Most of the ESOPs I help do their work pay around the same time each year because that is how long their process take to get to that step.   ESOPs aren't like 401(k) plans were you get to just say give me my benefits when you want.   They work at their own pace and you have to understand what the pace is.  

I would get a copy of the SPD.  It might tell you if you can delay the payment.  If not, the comptroller might be able to get you the answer.  I would also clarify with that person when they would estimate a 2021 payment would actually happen.  I am willing to bet it would be around September of 2021.   Also understand you would have to take the change of the stock price good/or bad that happens as of 12/31/2020 if you delay the payment to 2021. 

I am not saying you can't delay or it is a bad thing to delay.  I am saying you need to make sure you understand what you can and can't do.  And you need to make sure you understand all the ramifications of such a decision.  I get the impression that isn't true at this point. 

[dmwe]

Based on your Plan balance, if it's large enough, the Plan may require you to take distributions in 5 annual installments. They should have a distribution policy in place that would spell that out. But if forced to take distribution, a rollover to an IRA is your best bet at spreading the taxability out over a number of years if you want.