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In Kind Distributions


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3 person plan, H/W owners and one NHCE.  Owners retiring and business and plan closing.  Client doesn't want to liquidate investments to transfer to IRA so are planning on doing in-kind rollover.  NHCE is taking a rollover of cash to IRA.

H/W owners only doing in-kind withdrawal.  Want to know does it have to be done as a percentage of each asset for each person.  So, do H/W both have to get their percentage of each investment or can they calculate the amount needed and move specific assets to one person.  I'm inclined to say it needs to be a proportion of each investment but then I thought what does it matter as long as the correct amount is distributed to each as it's not the plan's concern what they invest in their IRA.  

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Does the document specify? Make sure it even allows. I assume the NHCE was offered in-kind distribution and elected cash and they have documentation for such, otherwise you have BRF discrimination issue.

Assuming plan document allows but doesn't specify precise method and NHCE offered and declined, then I think they can divvy up assets how they want, equaling their correct individual distribution amounts.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services


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Is plan underfunded, overfunded, or underfunded with future contribution to make it whole?

In my experience, it is always a bad idea, especially if you need to distribute the exact amount at 415 limit. Value of funds leaving the plan almost never equal the value of funds received by IRA. 

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