The ESOP distribution timing rules for terminations due to Death, Disability, and Retirement and Other Separations of Service are in addition to the distribution rules that apply to all qualified plan distribution rules. The Internal Revenue Code provides that distributions must generally begin no later than the 60th day after 1) the later of age 65 (or the normal retirement age if earlier), 2) the 10th anniversary of participation in the plan, and 3) termination from service.
The Code also provides that if a participant met all of the early retirement plan provisions (if applicable) except for the age requirement, that they are entitled to the same benefits upon attaining the early retirement age.
Both of these provisions could impact the distribution commencement date. They also supersede the ESOP Loan Exception.
§ 401. Qualified pension, profit-sharing, and stock bonus plans
(a) Requirements for qualification
A trust created or organized in the United States and forming part of a stock bonus, pension, or profit-sharing plan of an employer for the exclusive benefit of his employees or their beneficiaries shall constitute a qualified trust under this section—
(14) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which—
(A) the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan,
(C) the participant terminates his service with the employer.
In the case of a plan which provides for the payment of an early retirement benefit, a trust forming a part of such plan shall not constitute a qualified trust under this section unless a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary.