Are there ANY circumstances when a participant may cash out or rollover their 401k monies if they are not terminated, disabled or have passed away?

[Guest Michael Anderson]

We have a Plan on a prototype document. A participant insists that he is allowed to rollover his monies to an IRA. He said that his accountant told him that he could. Is there ever any circumstance in which a participant who is not disabled, terminated, age 59 1/2 or passed away, that this would be correct??? Thanks for the info!

[Guest Mbrockway]

The only thing I can think of is if the plan allows for inservice distributions on a "rollover" source.

Check the provisions in the basic plan document.

[Guest Michael Anderson]

I know that our document does not specifically allow for distribution unless they are disabled, terminated, hardship, passed away or age 59 1/2 inservice - but he is claiming that the IRS and an accountant have informed him that he should be allowed to take his monies out, pay the 10% penalty even the he does not fit into any of the categories I have listed above. I am just looking for something concrete that I can either tell him or give to him - that states there is no situation other then the above mentioned in which a person can take early distribution (either to roll to an IRA or cash out) simply because they want to! Thanks

[Guest Mbrockway]

I would refer him to the SPD and ask if they could provide YOU with supporting documentation of their findings.

[chris]

Check the plan document. It will govern when distributions can and cannot be made. If a distribution is made which is not authorized by the plan document, then the plan is not being operated in accordance with the document and qualification issues could result. Ask the participant or participant's CPA to point to the language in the plan document that allows for the distribution.

[Guest Michael Anderson]

Thank you for your replies, we will do that. But I am also wondering if anyone has heard of a situation (in a 401(k) Plan) or document that WOULD allow for such a distribution??? It doesn't seem to me that there are any circumstances in which this would be allowed???

[KJohnson]

As far as (k) money goes, I don't think you could have a distribution for any other reason. (There are of course hardships, but you can't roll a hardship). As far as the match, profit sharing, or any rollover account, the rules are more liberal. (stated age, seasoned money, five yearrs of participation) The IRS has approved documents that I have worked with that have in-service distributions at age 40 from these "buckets." You can also draft your plan to receive a distribution of a rollover account at any time. However, as people have stressed, you have to follow your document.

[david rigby]

The plan could define "normal retirment age" in a manner that might permit such distributions, but that would already be described in the SPD.

[Guest Michael Anderson]

Thanks again for the responses. What I am getting is that it is not a usual practice to allow for such distributions and our document is not off base by not allowing for this. To me the answer was so simple, but sometimes when people push and push the issue, it makes you start to wonder if you missed something somewhere! Thanks again - Mike

[Brian Gallagher]

Our prototype allows for the sponsor to pick any age for in-service withdrawals, with the exception of deferrals, which has to be at least 59 1/2.