Guest barkley Posted September 8, 2003 Share Posted September 8, 2003 My husband swears that he had a "401(a) Plan" at his prior company. I tried to explain to him that this just covers the qualified status of the plan. He has been told repeatedly that "401(a)" is the plan type. The plan consisted of his after-tax contributions and the 6% company match on those. When he terminated, it was not permissable at the time to roll over his after-tax contributions (he was told that the rules have now changed). So, he rolled over the company match portion & earnings and withdrew his after-tax amount and now is being faced with the 10% penalty. Has anyone heard of such a plan? Link to comment Share on other sites More sharing options...
david rigby Posted September 8, 2003 Share Posted September 8, 2003 Yes. But don't be mislead; "401(k)" is merely a special feature that can apply to a 401(a) plan. The plan you describe - after-tax contribs + match - is what we used to call a "thrift plan" (actually, we still call it that). It precedes what is now known univerally as "401(k)", which is not a plan type but a plan provision that permits pre-tax contributions. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
mbozek Posted September 8, 2003 Share Posted September 8, 2003 A 401(a) plan refers to any qualified plan. From your description your husbands contributions were made to a form of qualified plan called a "thrift plan" in which employees made after tax contributions which were matched by employer contributions. The distribution can rolled over to an IRA or retirement plan. If he rolled over the employer contributions and the earnings there is no tax on the withdrawal of after tax contributions. However, he will be taxed on any earnings on the after tax amounts which are not rolled over to an IRA or retirement plan. mjb Link to comment Share on other sites More sharing options...
david rigby Posted September 8, 2003 Share Posted September 8, 2003 To clarify rollover Q, after-tax rollovers are now permitted, under 2001 tax law change. Prior to that, after-tax amounts were never eligible for a rollover. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Guest barkley Posted September 8, 2003 Share Posted September 8, 2003 He took out his after-tax money prior to the 2001 tax law change allowing for rollovers. Is he subject to the 10% early withdrawl penalty on this after-tax distribution? Link to comment Share on other sites More sharing options...
Fredman Posted September 8, 2003 Share Posted September 8, 2003 After tax contributions are not included in taxable income so they are not subject to the 10% early withdrawal penalty. Here is a link to a Q&A that addresses this question (this Q&A was written prior to the tax law changes, as far as I know this part did not change): http://benefitslink.com/modperl/qa.cgi?db=...ibutions&id=129 Link to comment Share on other sites More sharing options...
david rigby Posted September 8, 2003 Share Posted September 8, 2003 You can also see "Tax on Early Distributions" on page 27 of this IRS publication: http://www.irs.gov/pub/irs-pdf/p575.pdf I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now