401K Distribution on terminated plan due to company ownership change.

[Guest JamesRRogers]

Background:

I am fully vested in a 401K plan valued at $5500. I am 58 Years of age. I am faced with putting two sons in college this year, one of which is getting married next month and I am faced with our share of expenses of the wedding and need funds to meet these expenses.

The 401K is through a company that went through bankruptcy procedings and has been bought by another Telecomunications

company. All employees were terminated by the former company on June 30,1999. I was one of the rehires on July 1,199 of the new company and was offered the same posistion that I previously held (Same Job, Same Desk?).

The plan with the former company terminated with the buyout, and because of this reason the loan option is not available. As an employee, the ability to roll this plan into the 401K Plan of the new company is awaiting approval by the IRS.

Being that I am fully vested, the current 401K plan has closed, and have 60 days after a distribution from that plan to reinvest in the new 401K, or into a self directed IRA, why can't I take a distribution under these facts? Also, can I take a hardship distribution

based on putting two sons in college and the wedding expenses if I want to?

Jim

I need funds ASAP.

[Guest JF]

Not sure of all your facts and circumstances, however, here's some general stuff. If your plans allows for hardships, (big if), then educational expenses for you or a dependent would be a safe harbor hardship reason to take money. However, you will still be taxed and since you are not 59 1/2, a 10% penalty. If you have the ability to do a rollover out of your 401k plan into an IRA, you could then take a withdrawal from your IRA to pay for the educational expenses. Although you will staill pay taxes, you can avoid the 10% penalty from the IRA. You would have to roll the 401k into an IRA, at least long enough to establish the account to take advantage of that. Finally, a new rule went into effect for 1999 which does not allow a hardship withdrawal to be rolled into an IRA. Each plan sponsor had the chocie of either adopting this rule for 1999 or waiting until year 2000. If your plan sponsor did not adopt this rule for 1999, you may be able to take a hardship with, roll int oteh IRA, then take a withdwaral without the 10% penalty to pay for college. Generally, the hardship with will also carry a 1 year restriction on participation in your plan, so if you have the right to roll out of the plan and not go int othe new 401(k), you may consider not rolling the money you need back into the 401(k) plan rather than taking the hardship with. Hope this helps.