Restrictions on 59 1/2 withdrawals?

[Locust]

A client wants to allow participants who have attained age 59 1/2 to withdraw elective contribution and matching accounts on request. Didn't there used to be an IRS restriction on that - to prevent participants from withdrawing their contributions as soon as they were credited to their accounts? Was all this replaced by 401(k) and 401(m) (I'm showing my age)? In your experience, what is a normal restriction for age 59 1/2 withdrawals - once a year?

[Tom Poje]

assuming this is a non pension plan, see 1.401-1(b)(i)(ii)

....distributions...after a fixed number of years, the attainment of a stated age, OR a prior occurance of some stated event...layoff, illness, disability....

the fixed number of years was set at a minimum of 2 in some type of bulletin

as I recall, most document checklist give you the option of select an age or svc(min 2) or participation(min 5)

usually 59 1/2 is selected because no early withdrawal penalty

[MWeddell]

Another reason that age 59½ is selected for the stated age upon which vested employer contributions may be withdrawn is because by law the employee pre-tax deferrals cannot be withdrawn until that age. Picking age 59½ allows one to coordinate the withdrawal options more smoothly for all types of contributions.

[RTK]

Locust, that type of restriction is old and harks back to Rev. Rul. 72-275 as modified by Rev. Rul. 74-55. Have not seen its application in a while.