I have a client who has a requirement that the participant must be employed on the last day of the plan year in order to share in the year's contribution allocation. The plan is also written that distributions cannot be made until following the end of the plan year. I have a participant who is trying to find a loophole and work on Dec. 31 and then quit that same day to be able to both receive a 2008 contribution as well as receive their money a week later in January. Is it possible to both be employed and terminated on the same day to get the benefits of both? My office keeps going back and forth on the subject and I cannot find any clear answers in my research.

I believe anyone who works on 12-31 meets the last day employment requirement, even if it is his or her last day on the job.

As for the distribution timing, the requirement you describe is often used with balance forward plans that may not know each person's account balance until several months into the next year.

If the plan's "last day" rule is stated the way it is usually stated, then if he resigns during the day on 12/31 he is eligible for an allocation.

Timing of distributions is a separate matter. Are you wondering whether he would be entitled to the distribution in 2009 or have to wait until 2010? What exactly does the plan say?