Am I missing anything in the following?

DC plan (ESOP) previously allowed employee after-tax contributions to individual accounts with tax-deferred earnings. These accounts are part of the ESOP assets, but they are not invested in any securities of the plan sponsor.

Participant contributed $8,000 (after-tax) in 1986. No after-tax contributions since then.

When participant receives distribution of the account (now worth say, $22,000), participant can take the original $8,000 in cash tax free and roll over the earnings ($14,000) to an IRA (or take the earnings in cash and pay tax on that amount).

Because the after-tax portion was contributed before 1987, it can be taken out separately, and the pro rata recovery rules (distributon = some contribution plus some earnings) for distributions of after-tax contributions made after 1986 do not apply to the $8,000.

And it doesn't hurt that there would be no RMD for 2009.

Participant would like to do this, and I would like to be sure we aren't missing something.

All comments are appreciated. Thanks.

I agree, although I don't understand the comment about it being good that RMDs aren't required...unless you just meant that that's one less thing to complicate it.

Thank you, Bird.

Yes the RMD comment was, as you surmised, only regarding one less thing in the process.