Can I rollover my 401 K to a self directed IRA as a result of my posit

[Guest oppenhg]

My position has been outsourced as of a wek ago. I am doing the same job as I was before the outsourcing, but now receive a pay check from another company. Only 200 of about 40,000 employees have been affected by this change. I want to rollover my 401K into a self directed IRA. My former employer says I cannot take a distribution because there has not been a separation in sevice. Can anyone advise me as to whether I am entitled to rollover by 401 K into an IRA?

[MWeddell]

I know it doesn't make a lot of practical sense, but your former employer is correct. Based on IRS guidance, you probably have not experienced a "separation from service" that constitutes a distribution event from a 401(k) plan. The IRS modified its position about a year ago so that most asset sales now are distribution events but a change of employers due to outsourcing is not a distribution event.

If you are age 59½ or older, your plan may allow a distribution for that reason. Ask for a SPD if you don't already have one to check if that's an option.

[Guest oppenhg]

Doesn't revenue ruling 2000-27 come in to play here? Only a part of the business assets are being affected (less than 85%)and my new employer did not take sponsership of the old employer's 401K. Doesn't this make this situation exempt from the same desk rule?

[MWeddell]

In Rev. Ruling 2000-27, the seller was no longer recipient of the transferred employees services. That's what makes it different from your situation.

Also, if you've got access to private letter rulings, 200027059 issued on 7/10/2000 seems to describe a situation similar to yours where distributions were not allowed.