In-kind distribution from DB plan

Small DB plan is terminating 6 participants, not PBGC, not being submitted to IRS.  Termination date is 12/31/18. The owner wants to take an in-kind distribution. The document does not currently allow for it, but it is an option on the prototype checklist.  

If the plan allowed for it,  does every participant have to be given the option to elect an in-kind distribution?  Could this amendment be done post-termination date? The owner (an attorney) wants to be the only participant allowed to elect an in-kind distribution. I have done a lot of plan terminations but never one that included in-kind distributions. What else do I need to look out for? 

2 hours ago, Cloudy said:

What else do I need to look out for? 

Discrimination!  BTW, this sounds like a BRF failure.  But maybe others have some relevant experience.

3 hours ago, Cloudy said:

The owner .... wants to be the only participant allowed to elect an in-kind distribution. 

The owner is a hog, as in pigs get fat and hogs get slaughtered.

Usually, (but not always) where I've seen this situation in the past is where there is an asset that the Hog expects to appreciate greatly in the future, so they want to take it at current value and make a killing when it is liquidated later. A piece of land, for example, where if the new interstate exit gets approved, it'll be worth a gazillion dollars. Thankfully, in my present life, we have no such plans!

On 12/8/2018 at 3:32 PM, Cloudy said:

If the plan allowed for it,  does every participant have to be given the option to elect an in-kind distribution?  Could this amendment be done post-termination date?

Yes, no and everything everyone else said. Unless you have a solo plan, or investments only in MFs or stocks that can easily be split up if needed, forget about in-kind distributions.

I couldn't agree more with what has been said above.   He might be able to get away with it since it is a small plan (audit roulette), but if he is caught, the consequences would be catastrophic in terms of the tax, penalties, etc.  Plus he will have to pay another lawyer to see the plan through the grinder.  Lawyers hate to pay other lawyers.  

Y'know, there is a possibility that this is harmless.  Maybe not likely but possible.  I mean, the guy's got two strikes on him already just for being a lawyer ? but he might not be the total jerk everyone seems to assume.  It could be that there are tradeable assets like securities that he simply wants to transfer in kind to avoid transaction fees and he thinks that it would be a hassle if other people wanted to do that too.  

So I would explain to him that yes it is possible to do in-kind transfers, but everyone has to have the option...but it is unlikely anyone else would want to exercise it.  If that doesn't work for him, well tough.  As an aside, if there is an undervalued asset then the valuation itself is a problem.   

Cloudy, what did the pension plan invest in that it matters whether an asset is redeemed or sold for money, or instead is delivered to a participant or to the employer (in a reversion of the plan's surplus)?

I don't think we know what the motivation is here, do we?  Maybe the asset can't be sold.  He should consider looking at the possibility of getting an EXPRO exemption for the sale of that asset to himself personally or perhaps to his IRA if he has enough money in an IRA.