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Distribution to 401(k) participant who will terminate employment and b


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An employer wishes to allow a 401(k) plan participant access to their money. The participant has reached the Normal Retirement Age of 55 under the plan, but is not yet 59 1/2. The adoption agreement and prototype do not seem to allow for choosing to grant in-service distributions from any source prior to 59 1/2.

Our thoughts have been:

1) Be sure the participant is terminated and then wait to rehire the participant until after the check is cut. Is it necessary to wait until the check is cut before the rehire?

2) Amend the plan to allow for in-service distributions prior to 59 1/2.

Are we correct that this could only be done for non-elective contribution sources?

Would the amendment make the plan an individually-designed plan?

Any suggestions as to the best course of action for the employer? Thanks.

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