Can an owner, who no longer works for the company but is receiving W-2

[Guest hpaine]

Can an owner, who no longer works for the company but is receiving W-2 wages, take a distribution from his 401(k) account? I was under the assumption that if an employee received W-2 wages from a company, regardless if they actually work or not, that they are still considered "employed" thus cannot satisfy the requirements for a distribution.

Thanks!

[Guest RBeck]

W-2 wages and no longer working for the company? I'd like that kind of job!

no distribution, IMHO.

[Guest hpaine]

Thanks for the information!

[mbozek]

What kind of w-2 wages is he receiving? Did the owner agree to withdraw / terminate from the company which would entitle him to severance/termination payments? Employees can be paid wages under a severance agreement after they terminate employment which are subject to income tax withholding. I recently negotiated such an agreement for a terminated employee who will receive 18 months of severance pay, cobra benefits and can take an immediate lump sum distribution from the 401(K) plan because he is terminated from the employer. I think you need to review the terms of the owner's payment with the company's accountant.

[Guest RBeck]

good point. I'd forgotten that severance pay can be W-2 comp.

[Scuba 401]

does the plan allow in-service distributions?

[E as in ERISA]

Deferred compensation is generally W-2 wages.