In-Service Distribution

[ERISA13]

With a Safe Harbor 401K plan it is my understanding that the elective deferral and safe harbor money sources cannot be accessed in an in-service distribution until the participant has reached age 59 1/2. The Adoption Agreement of the Prototype plan document we use allows you to select the money sources from a list that will be available for distribution but there is a note that states the following:

Distributions from a Participant's Elective Deferral Account, Qualified Matching Contribution Account and Qualified

Nonelective Contribution Account (including 401(k) safe harbor contributions) are subject to restrictions and

generally may not be distributed prior to age 59 1/2.

Are these sources unavailable to the participant until age 59 1/2? The "note" above states "generally" cannot be distributed. Is there any circumstances they can be distributed?

Also, what would happen if a participant / trustee decided to take an in-service distribution from all sources including the Elective Deferral and Safe Harbor money source before they were 59 1/2?

I really appreciate any clarification on this!!

[Lou S.]

If you are using a prototype the restrictions are probably listed in the relavant secetion of the master text as opposed to the adoption agreement. Also the language is often in the distribution section of the SPD.

As for "generally" some of the money (like deferrals without earnings) is sometimes available for hardship if the plan allows before age 59 1/2.

If you have someone who takes an impremissable distribution you have a qualification issue, see EPCRS for correction methods.