Rollover Funds Disbursed

[Guest WCHB]

A 401(k) plan allows Rollovers in before meeting eligibility (limited participant) as well as after someone is a Participant. My question is: In a 401(K) Plan, once someone has met eligibility (therefore, they have "moved" from being an Employee to being a participant) is it permissible to allow Rollover Contributions to be withdrawan at any time (without a distributible event)?

Tagdata has said no but I saw it in a document on a tranferring in client.

[Guest Sieve]

If amount is a rollover, either direct or indirect, it can be distributed at any time--but only if the plan so provides. Otherwise, it cannot be distributed absent a distributable event.

[Guest WCHB]

If amount is a rollover, either direct or indirect, it can be distributed at any time--but only if the plan so provides. Otherwise, it cannot be distributed absent a distributable event.

So you are saying it is okay - can you give me a reg stating such?

[BG5150]

If amount is a rollover, either direct or indirect, it can be distributed at any time--but only if the plan so provides. Otherwise, it cannot be distributed absent a distributable event.

So you are saying it is okay - can you give me a reg stating such?

Did you read your plan document? You said you saw it in someone else's.

As for TAG's response, I have seen the ability to distribute rollover accounts at any time in prototypes, volume submitters and IDP's, all with determination letters. So I know it's allowable. Maybe the question was ambiguously worded.

[TPAMan]

I have a feeling there are no regulations restricting the timing of rollover contributions.

[PensionPro]

The code does not place restrictions on the distributions of rollover contributions, such as it places on 401(k) deferrals and profit sharing contributions. However, a plan is not required to allow the distribution of rollover contributions 'prematurely.'

The plan document dictates. A plan may allow the distribution of rollover amounts at any time.

[Guest WCHB]

It was in a doc we received on a transfer plan.

In our documents, it usually has that any employee can roll funds into the plan and if they want to get it out before meeting eligiblity, they can do so; however, a participant must wait for a distributable event. I think the difference is the understanding of the difference in an employee and a participant.

We are in the middle of re-statements and if this is allowable for participants, we want to make it available to our clients.

Thanks.

[MWeddell]

Here is a citation: IRS Revenue Ruling 2004-12. It holds the following:

If an eligible retirement plan separately accounts for amounts attributable to rollover contributions to the plan, distributions of those amounts are not subject to the restrictions on permissible timing that apply, under the applicable requirements of the Internal Revenue Code, to distributions of other amounts from the plan. Accordingly, the plan may permit the distribution of amounts attributable to rollover contributions at any time pursuant to an individual's request.

So it depends on whether the plan document imposes any restrictions in in-service withdrawals or other distributions of rollover contribution accounts.

[Guest WCHB]

Thank You all so much. That gives me something to take to our legal department so we can better service our clients.

[Guest Sieve]

Thnaks for the on-point cite, MWeddell . . .