Jump to content

401K-waiting period for final distribution


golfnut

Recommended Posts

I am looking to retire soon, I am 63.  However I ran into the following problem, the waiting period for final distribution of my 401K.

per the web site reads.

Your plan sponsor requires a waiting period of 999 days, after leaving employment, before you can request a transaction. This time may be used to provide important information to (deleted name of plan administrator that we have been with for 24 years) and to deposit the final contributions into your account. Your personal options may change based on information provided by your plan sponsor.

This seems excessive to me, that is 2-3/4 years!

I cannot prove this but I do not believe it was published in the past. I believe that it said something to the effect, that my plan sponser has certain requirement that must be met.

Going through all of my hard copy paperwork for my 401K there is nothing concerning a waiting period for final distribution.

 My plan sponsor (employer) tells me that he does not know about this and he will set up a meeting with the companies accountants for an explanation sometime in June or July

Who determines the 999 days. 

I really need to get this changed. Anything will be helpful.

 

Link to comment
Share on other sites

The plan document will specify when a terminated participant is allowed to take a distribution. There is another document called a Summary Plan Description (SPD) which MUST be provided tp plan participants at least once every 5 years. You may find this document on-line. If not, the Plan Administrator (likely your employer) must provide you with an SPD on request. This document should explain any distribution waiting period. 

Link to comment
Share on other sites

The plan can not require that your payment occur later that 60 days after the end of the year in which the latest of these happen:

  • You attain age 65 (or normal retirement age under the plan, if earlier);
  • The 10th anniversary of your becoming a participant in the plan; or
  • You terminate employment with the plan sponsor.

I agree with Mike that 999 days seems like a placeholder that should never have been included in the final documents. However if the plan's normal retirement age is 65, they could in theory hold on to your payment for a couple more years.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

Link to comment
Share on other sites

On 5/2/2021 at 12:16 PM, Mike Preston said:

Just because somebody "retires" doesn't mean they will start Social Security. Besides, the decision to retire at any age is subject to so many individual data points there is absolutely no way you can state that it doesn't make sense.  You just don't know.

The monthly increases to age 70 are based on when you start your benefit, not when you stop working. Prompt distribution of the 401(k) plan account could help the individual wait to start receiving soc sec benefits. As Mike said, there are a lot of variables. Certainly, if an individual has less than 35 years of earnings, they should think hard about whether they should continue to work. Basically, anyone in his/her 60's should establish their soc sec account online and look at their earnings history and think through some "what-ifs."

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

Link to comment
Share on other sites

On 5/2/2021 at 8:36 AM, Riley Britton said:

My so early? The longer you wait the more SS you get. Wait till 70, and you will get the max. Doesn't make sense to retire that early. 

Everyone has different goals and financial situations. I'm not sure a blanket statement about when to retire or electing when to receive SS works for everyone.

Link to comment
Share on other sites

As an update

Mr. Preston, The 999 days apparently was an error by the plan administrator, it has been changed to 60 days.

Mr. Hatlee upon my request I was given an SPD, it was the first I have seen this document, my co-workers have never seen it either. With that said the SPD and what is on the Internet are the same.

It seems my employer assumed since it was on the web sight  no further action was needed. He will be having a company wide meeting concerning this soon.

Mr. Zeller you hit the nail on the head. However within the plan I can take a "In Service Withdrawal" after 59-1/2 of any amount I choose, there is a fee for this. This can be the entire amount and roll it into a tax exempt IRA. Or I can I can leave the money in the plan and take another in service withdrawal as need until 65. At 65 the plan allows for the administrator to start monthly payments to me, as well as handle federal taxes and RMD's when it is time. And yes, there is also a fee from the administrator.

Mr. Britton. Maybe I should not have used the word retire. I have been working at this company since I was in high school. I simply plan on trying something different and see what the rest of the world is like. I have plenty of money without accessing my SS. 

 

Thanks for the comment everyone!!!

 

Link to comment
Share on other sites

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 account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...