401K early withdrawal...

[Guest Carl C]

Our company started a 401K plan a few years back, but everyone stopped contributing because the performance of the plan was very poor, and the plan administrator was difficult to work with. We are just starting a new 401K with a new investment company and plan administrator. I am 45 years old, and still employed with the company.

I was just told by the plan administrator that I cannot withdraw or transfer the funds (to an IRA ot Roth IRA) of the old plan, even if I agree on the 20% withholding and 10% penalty. Eventually, the funds will be able to be transferred to the new 401K, but I would rather cash the old fund out.

Is it true that I can't touch the money? I don't want to borrow against the 401K, I want the funds free and clear or rolled over to my IRA's.

Do I have to declare a "hardship" to get the funds? What are Can the old 401K be rolled into my Roth or traditional IRA?

Carl C

[KJohnson]

The plan administrator is correct. You have not terminated employment which would (presumably) allow you to receive a distribution. Also, under the "successor plan" rule the "old" 401(k) plan cannot be terminated and its assets distributed. The employers options are to either leave the old plan as a frozen plan or merge the old plan into the new plan. However, allowing distributions to participants under age 59 1/2 of amounts deferred into the plan is not an option.