I need help on 403(b)

[Guest treewv]

I have a 403(b)annuity account with ING. I am having financial difficulty, and am falling behind in my bills and payments. I am a single mother, and it is very hard at times to get caught up to date. I have tried twice to cancel my account and each time I was told I would have to take a loan out. Which I did. I did not want to do this, and now I am falling behind in payments and still have not been able to cancel my account. I would like to pay off the loans out of my annuity account and be sent the remaining balance. I know I will be penalized by the IRS. I do not think this is fair business. As of this date, they will not give me MY money. How can I get them to release my money? There hasn't been any money added to the account since June 2004.

[QDROphile]

You cannot get money from your account unless you meet the conditions for distribution. Generally, you cannot get a distribution unless you have terminated employment, attained age 59 1/2 or become disabled. You may be able to get a distribution on account of hardship, but hardship is usually narrowly defined. Most annuities are designed around legal requirements that prevent distributions except in those specified circumstances, so the annuity provider may have no choice. If the annuity is more strict than the law requires, you may be able to transfer your account to another provider, but I suspect that another provider would not be able to distribute to you, either. Look before you make that leap. You should be able to get written information from the provider about what is necessary before you can get a distribution. You could also look at IRS Publication 571, which should be available at the IRS website.

[joel]

I assume you fund your account via a salary reduction agreement. You have a shark for a ING rep. The law permits you to cancel your salary reduction agreement at anytime without restriction. ING is in violation of the law if they in fact told you, you have to take a loan in lieu of stopping contributions. THIS IS AN OUTRAGE!! He or she should have first advised you to stop making contributions. This would give you some more take home pay. If this did not do the trick for you you should have been advised to look into taking a hardship withdrawal which is a taxable distribution with the 10 percent penalty tax. Under the rules a hardship withdrawal would trigger a cessation of contributions automatically.

YOU NEVER SHOULD HAVE BEEN ADVISED TO TAKE A LOAN BECAUSE THAT FORCES YOU TO MAKE TIMELY LOAN PAYMENTS----SOMETHING THAT YOU OBVIOUSLY CANNOT AFFORD TO DO. I would write a letter to the branch manager and tell him/her that you want to stop your contributions forthwith.

PS: Your rep handled it this way because s(he) still wants those commission trails coming in every month and the hell with you and your financial welfare.

Let us know how you made out.

Peace and hope,

Joel L. Frank

[GBurns]

Your salary reduction agreement is with your employer not ING. What was the response from your employer (payroll dept) when you sent in your salary reduction cancellation?

Do you have the advice that you should take out this loan, in writing?

Do you have the ING advice regarding stooping your salary reduction in writing?

I hope you do and do want to take some action against ING etc.

[Lori Friedman]

Joel, I believe that wvtree was asking about withdrawing her account balance, not about stopping her election for salary reduction contributions.

wvtree, QDROphile provided a good summary of the terminating events that can trigger a plan distribution. It's probably best not to think of your previous contributions as "your" money. When you began participating in your employer's plan, you made a voluntary election to forego a portion of your compensation in return for 403(b) contributions. In other words, you gave up some of your rights and control over the money to save for your retirement in a tax-favored manner. You also shouldn't criticize yourself for trying to be financially responsible, build up retirement assets, and take advantage of some tax benefits. Nobody has a crystal ball, and you couldn't have foreseen your current situation.

I know that my words are no help to you, at all, right now. Your best bet would be to ask your employer if your 403(b) arrangement can provide a hardship distribution. Such distributions are taxable income and, in general, subject to an early withdrawal penalty, but at least you'd have use of the funds.

I commend you for all the things that you do to support your children and take care of your family. Single parents face such straggering challenges, every day of their lives, and our society never gives enough recognition or appreciation.

[joel]

Tree,

Hardship withdrawals are permitted but are limited to the amount needed to alleviate the hardship and may not include earnings. Ex: You contributed $5000 and the account is worth $6000. You document that you need $6000 to alleviate the hardship. The hardship withdrawal is limited to $5,000, the amount you contributed.

You may want to default on the loan. If you do then the loan balance becomes a taxable distribution. So in essence you get some money out without documenting financial hardship.

Lori,

I stand corrected. Tree simply wants the account balance. I cannot detect if her contributions were stopped. I find it outrageous for her rep to advise her to take out a loan to pay off debt. This rep should be fired!

Was tree informed of the restrictions on in-service withdrawals prior to signing on? This should be disclosed at the point of sale. It is not enough just to hand the client a prospectus.

Peace and Hope,

Joel L. Frank