Funds accumulated for at least two years: meaning?

[BG5150]

Plan allows for 59 1/2 withdrawal but only:

 • the portion of your account being withdrawn has accumulated in the Plan for at least two (2) years

 What does that mean?  Up to the account balance two years ago?  Or everything now minus any contributions in the past 24 months?

For example, my account is worth $10,000 now but I added $1,500 in contribs in the past 2 years.  Two years ago, the account was worth $7,900.  how much can I take?  $8,500 or $7,900?

[QDROphile]

I have an educated guess, but interpretation of plan provisions is up to the plan administrator or other fiduciary charged with the authority and responsibility. Check with them.

[Bri]

I'd guess they'd interpret that you get the 7900 plus the specific gain/loss on that 7900 in the last two years.  Some intricate trust accounting, perhaps.  And probably equivalent to saying it's the 10000 minus the (1500 plus its separate gains)

[ESOP Guy]

Make the person who wrote that provision tell you what it means?   

 

Sorry, but more attorneys need to made to be called out for writing vague provisions in plans.  I know there are some wonderful attorneys who read these threads but a pet peeve of mine for years has been how disconnected some ERISA attorneys are to the practical issues of the provisions they write.  Throw it back at them to tell you how to implement it.  We are Third Party Administrators.  We aren't paid to fix these people's messes. 

 

Off soap box now. 

[Paul I]

The feature to take an in-service withdrawal from match or profit sharing accounts if the amounts have been in the plan for at least 2 years has been around since before ERISA.  Revenue Ruling 71-295 clarified Revenue Ruling 54-231 that the time period had to be at least 2 years, and Revenue Ruling 73-553 clarified that the count starts from the date a contribution is deposited into the employee's account (i.e., not the date the contribution was accrued).

There does not seem to be any clarification regarding how earnings are considered.  Using the actual account balance from 2 years ago is a safe option.

It is clear that contributions deposited within the last 2 years are not available.

Adjusting the amount for earnings is acceptable if the accounting detail is available to calculate the actual associated with the 2 year old balance.

[david rigby]

Links to Revenue Rulings available here:  

https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev-rul-73-553/d93b?highlight=73-553