Distribution while still employed

[Guest CGBS]

I have a top-heavy plan. Participant is now working one day a week only. Can she paid out now?

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[david rigby]

What does the plan say? Many plans prohibit any payment until the employment relationship has severed for some reason (quit, retire, death, disability, etc.) Exception of course for the 70-1/2 rules. Other plans may permit distributions at normal retirement age even if EE has not severed employment.

Top-heavy status is not relevant to this issue.

[Spencer]

Going part-time is not a distributable event. As pax said, check your plan document to see if in-service withdrawals are allowed.

I'm guessing the reason you mention Top Heavy status is that you don't want to include this participant's account balance in determining T/H for the plan subsequent to her distribution. Even if you could pay her out now, you would still have to add back her distribution (and any others) for a period of five years.

[Guest]

document still decides. if it is a profit sharing plan that permits in-service withdrawals, the person could get the money out. If it is a 401(k) plan, and you are talking about deferral money, then it might depend on how far you wish to stretch 'hardship' withdrawal.

what would appear to be even stranger is if ee is having break-in-service.

generally after 5 breaks the person would forfeit their unvested portion- and I don't think termination comes into play - at least not in the documents I have seen! They simply say 5 1-year breaks in svc.