Pre-mature 401(k) withdrawal

[rcline46]

NRA is 55, working participant is age 57, plan provides for in-service withdrawal at NRA.

Participant wants to have his 401(k)/QNEC/QMAC/Safe harbor accounts distributed, and I say NO because he is under 59 1/2 and still employed. Does the participant win or do I win?

Of course this is the owner and he is being forceful.

[John Feldt ERPA CPC QPA]

The plan's written document allows in-service at NRA for ALL accounts, and NRA is 55? If so, does that plan have an IRS D letter, an advisory letter, or an opinion letter?

I would think the plan, assuming it's a tax-qualified plan, would also have language stating something like, "regardless of anything you might have seen written in this here plan elsewhere, there ain't no way any participant is gettin' an in-service distribution before age 59.5 from them elective deferrals, safe harbor, QNECS, or QMACs, unless the distribution is for hardship or disability, or if its a qualified reservist distribution of elective deferrals." Probably not worded exactly like that, but you get the idea.

[Bill Presson]

The plan's written document allows in-service at NRA for ALL accounts, and NRA is 55? If so, does that plan have an IRS D letter, an advisory letter, or an opinion letter?

I would think the plan, assuming it's a tax-qualified plan, would also have language stating something like, "regardless of anything you might have seen written in this here plan elsewhere, there ain't no way any participant is gettin' an in-service distribution before age 59.5 from them elective deferrals, safe harbor, QNECS, or QMACs, unless the distribution is for hardship or disability, or if its a qualified reservist distribution of elective deferrals." Probably not worded exactly like that, but you get the idea.

More plans should be worded like this.

[Doghouse]

Just as an example, for one of our plans, although the adoption agreement would allow you to select the NRA criterion for in-service withdrawals, the basic plan document has the following language:

Provisions Applicable to 401(k) Plans

If the Plan is a 401(k) plan, the minimum attained age requirement which can be elected by the Sponsoring Employer in the Adoption Agreement with respect to the distribution of amounts attributable to a Participant's Elective Deferrals, QNECs, QMACs, ADP Safe Harbor Non-Elective Contributions and/or ADP Safe Harbor Matching Contributions is 59 1/2.

[rcline46]

The document does have such a provision. Of course this is a takeover in 2013 and the client would have to justify the age 55 NRA, but that's another issue.

He is of course unhappy because he SAYS that he wants his funds safer - but he is the once who chooses the investments in the plan!

[K2retire]

Perhaps he should revise the plan's investment line up!