Since the participants in the Company N plan will receive their account balances after the transfer of the CODA portion of plan assets, the distributions will be neither qualified total distributions for Sec.
3405(b)(2) requires the payor of any nonperiodic distribution to withhold from such distribution 10% for distributions that are not qualified total distributions, and an amount determined under IRS tables for qualified total distributions.
The IRS has issued Letter Ruling 9139031(70) revoking an earlier letter ruling that held that a distribution of a participant's remaining account balance, after a portion of the plan's assets was transferred to another plan, is a qualified total distribution and a lump-sum distribution if the participant was over age 59 1/2.
Company N requested rulings on whether the distribution of plan assets would be a qualified total distribution or a lump-sum distribution for participants age 59 1/2 at the date of distribution.
Since the participants in the N plan would receive their account balances after the transfer of the CODA portion of plan assets, the distributions would be neither qualified total distributions for Sec.
The Service ruled that a distribution of a participant's remaining account balance, after a portion of the plan's assets was transferred to another plan, was a qualified total distribution and a lump-sum distribution if the participant was over age 59 1/2.
N requested rulings on whether the distribution of plan assets would e a qualified total distribution or a lumpsum distribution for participants who were 59 1/2 at the date of distribution.
