In-service distribution of rollover account only

[t.haley]

401k plan currently allows for in-service distribution of rollover accounts only (i.e., plan states that distribution of "Rollover Account" maybe made at any time but no other in-service distributions are allowed other than hardship distributions).  Plan sponsor did not intend to allow in-service distributions of any amounts, including rollovers, and wants to eliminate this going forward.  Any anti-cut back issues?

[BG5150]

I believe you can eliminate it prospectively.  That is, r/o money in the plan now (and the future earnings thereon) is protected.  But any r/o money coming in after amendment date can be restricted.

[Bill Presson]

I want to caution you on doing that, however. If a participant has rollover money in an IRA, there's likely 0% chance they will roll money into the plan if they are then restricted from all access to that money until termination, death or disability.

[t.haley]

Thank you for your replies.  Client is aksing whether these distributions are handled just like any other distribution - i.e., if prior to 59 1/2 subject to early withdrawal penalty, special tax notice, etc.?

[BG5150]

Yes they are.