Volutary After-Tax Contributions

[Guest dhall5]

I have a participant who would like to roll her voluntary after-tax money, including the interest, out of her employer's Profit Sharing Plan. She is not 59 1/2.

I was told it is acceptable if the distribution consists of pre-1987 $$, which it does not. It's all post-1987 $$.

The plan document states that in-service distributions may be made at or after normal retirement age.

Can this be done?

[rcline46]

CHeck the document under Voluntary Contributions, there may be special distribution options in that section.

[Bird]

It seems to me there are two issues-

1. Can she make a withdrawal? The plan says no, so no (unless there is special language, as suggested).

2. Taxation. If she could make a withdrawal, my understanding/recollection is that it is distributed tax-free in proportion to basis. I get the feeling that whoever told you "...it is acceptable if..." meant that the participant could withdraw the voluntarys on a FIFO basis.

[Guest dhall5]

The document says that there are no withdrawals until NRD, death, disability, and termination with the exception of rollover contributions, which can be withdrawn at any time.

I wasn't sure if the rules of voluntary after-tax contributions were different.

Thanks for the replies.

[rcline46]

If it is a Corbel document, the language in the section permitting voluntary contributions also permits withdrawal of same at any time. I cannot speak to other document providers, but I would be surprised if it did NOT permit such withdrawals. Again, do not look in the distribution section for the answer. I apologize in advance for being so pedantic but documents have strange items scattered throughout and not always where you expect them.

[Guest Harry O]

Post-1986 after-tax contributions and earnings are treated as a "separate contract" under section 72. Code 72(d)(2). In theory, these funds could be withdrawn separately from the remaining portion of the plan. However, you need to check the plan document to make sure it permits such a targeted withdrawal. A poorly drafted plan may require the participant to withdraw other available taxable monies first (e.g., profit sharing contributions "aged" for more than 2 years) before getting to nontaxable after-tax money. See IRS Notice 87-13.