Transfer/Rollover II

[Guest Redchip]

Thanks for the responses to my first questions.

I understand that a trustee to trustee transfer is not a distributable event, but can an employee in a 401(k) plan transfer his/her assets to another plan for any reason?

[david rigby]

No.

Distributions from a qualified plan are based on the ocurrence of an event: retirement, termination of employment, death, disability.

There is no authorization to make a payment "'because the participant wants to".

Nor does the participant have the right to choose who (or what) acts as trustee.

[M R Bernardin]

Since a trustee to trustee transfer is not a distributable event, it may be permitted when the terms of the plan and trust allow for it. Usually, it is not permitted except in circumstances where there has been some sort of merger, corporate change, etc., and then it is done on a group basis rather than on an employee-by-employee basis. But, there is nothing to prevent a plan from permitting this on an individual basis. For example, it may be allowed when an employee transfers from one member of a controlled group to another, both of whom maintain separate plans (particularly if the plan defines separation from service as termination from all controlled group members, so that the employee would not otherwise be entitled to the distribution).

[jlf]

David Rigby; Under the statutory definition of an "eliglible rollover distribution" there is no mention that a distributable event must be satisfied; i.e.; 59.5, separation from service, death, disability. See 402©4. Why was such a MATERIAL part of the definition omitted?

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[This message has been edited by jlf (edited 08-26-1999).]

[This message has been edited by jlf (edited 08-27-1999).]

[LCARUSI]

jlf -

You don't need a distributable event to qualify for an eligible rollover distribution. For example, a nonhardship inservice withdrawal qualifies as an eligible rollover distribution

[jlf]

LCarusi,

I agree with you. The Court of Appeals, however, in FRANK V AARONSON, CA 2ND 96-9456, ruled that post 1988 elective deferrals from TSAs are only "eligible rollover distributions" AFTER an early distribution triggering event under 403(b)11 is met. Why don't the same restrictions apply to 401(k)s?

[This message has been edited by jlf (edited 08-24-1999).]

[jlf]

LCarusi,

I trust you did not forget my post of 8-24-99

I look forward to your reply.

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[This message has been edited by jlf (edited 08-26-1999).]

[LCARUSI]

jlf -

I am not familiar with the distribution rules for 403(B) plans and I don't have time to research it. If the definition of an eligible rollover distribution is different for a 403(B) plan than for a plan qualified under 401(a), so be it. If you want to know why they are different, I don't know.

I can only repeat what I previously said, you can have an eligible rollover distribution in a qualified plan without a triggering event. If you read the definition of an eligible rollover distribution, it is basically any distribution except for specific exceptions, and I can easily give examples of distributions which have no triggering events and do not fall into any of the exception categories. Therefore, they would be eligible rollover distributions.

[jlf]

LCarusi,

Thanks for your reply. The statutory definition of an "eligible rollover distribution" from a 403(B) arrangement is IDENTICAL to an "eligible rollover distribution" from a qualified plan. See sections 403(8) and 402©4.

Is it possible the Court of Appeals misapprehended and misapplied 403(b)11 to govern "eligible rollover distributions" of post-1988 salary reduction amounts from 403(B) arrangements? When you have a moment check out my message of 8-27-99 on this message board; topic: transfer/rollovers.

[This message has been edited by jlf (edited 08-30-1999).]

[This message has been edited by jlf (edited 08-30-1999).]