EE terminates from one company in control group and begins to work for

[Guest LLandau]

An employee was employed by one company (Co. A) in a control group. Co. A sponsored a 401(k) plan into which the employee made contributions.

The employee terminated employment at Co. A, moved far away and began working for Co. B, another company in the control group. Co. B had its own employer-sponsored 401(k) plan, separate and apart from the plan sponsored by Co. A.

Employee wants to roll his 401(k) assets from the Co. A sponsored plan into the 401(k) plan sponsored by Co. B. Employee is doing the same type of work.

I believe that the employee may roll his 401(k) assets from the Co. A plan into the Co. B plan. Co. A's plan administrator says "no".

Therefore:

1) I would appreciate learning the truth. If I'm wrong, I can take it.

2)Does anyone have an appropriate cite?

Thank you

[actuarysmith]

To chant a familiar mantra on these message boards- "what does the document say?"

While many (if not most) 401(k) plans accept rollovers, they are not required to offer the option. Please consult the plan document for guidance.

Some documents will permit rollovers to any eligible employee, whether they participate or not. Some will permit rollovers only after employee meets the plan eligilibity requirements (i.e. 1 year of service, age 21, etc.).

Some plans do not permit rollover at all............

[MGB]

When the employee terminated, he was given options to rollover, take cash or leave the money. Obviously, he must have elected to leave the money in the plan. What happens under the plan when he does this? Is he now locked into the old plan until retirement?

It sounds like he is now requesting a distribution at a time that is not "on account of termination."

[KJohnson]

Employee does not have a termination from employment because he is still employed by the controlled group. Therefore I do not believe he has had a distributable event.

If he is over age 59 1/2 and the Plan provides for distributions then he might be able to "roll." However, I think you will have to have some kind of "in-service" featrue from the first plan to be able to roll.

[KJohnson]

I take back my last answer.

Was the "reemployment" with company B immediate or did you have a period of unemployment or employment with another company before starting with Company B.

Generally transferring between controlled group members is not a distributable event. However, if you had a legitimate termination of employment with Company A with no understanding that you would begin working with Company B, then I think it is a closer question.

[austin3515]

Many plans have been updated to allow "Plan to Plan transfers" for just this type of situation. If you do a google search for "same desk rule" (which was repealed) you should get a plethora of information on the subject.

I have at least one client who has a couple of Plans within the controlled group and they were amended during 2001 to allow employees who shift from one entity to a different entity within the group to rollover their money.

Of course in the absence of these amendments there is no distributable event, so I would question his ability to get any distributions whatever. Presumably the administrator would be aware if these options as it is a pretty new rule.

[KJohnson]

austin3515--Could you clarify, I don't think the repeal of the same desk rule would have any effect if you are still working for the same controlled group.

Also, I thought that EGTRRA's provisions with regard to plan-to-plan transfers had to do with "stripping out" various optional forms of benefits with regard to plan to plan transfers (as long as a lump sum was available).

Thus, even pre-EGTRRA you could have plan to plan transfers (not rollovers) within a controlled group as long as you preserved benefit options. Now, you can have plan to plan transfers within a controlled group and "strip" benefit options

I guess that leads you to a couple of questions:

1) Does the plan provide for plan to plan transfers (not rollovers). I agree with austin3515 that the plan administrator should be aware of any such provison.

2) If Plan to Plan transfers are not allowed, did you have an event which would allow you to receive an eligible rollover distribution from the first plan? If you legitimately terminated employment and then just "happened" to find employment subsequently with the new employer in the controlled group you might have an argument (assuming that the new employer's plan accepts rollovers). However, if you were transferred from one employer to another within the controlled group with no break of employment in between, I think you would have a tough argument.

[austin3515]

Scratch what I said about the same desk rule. That was incorrect.