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Bill
Bill , Financial Advisor
Category: Finance
Satisfied Customers: 3151
Experience:  EA, CEBS - 35 years experience providing financial advice
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I am over 59 and 1/2 and wish to withdraw 50% of my 401k ...

Resolved Question:

I am over 59 and 1/2 and wish to withdraw 50% of my 401k this year as my CPA says I have "0" Tax Liability this year. Since this 401k is losing money my retirement advisor also recommends I take it out and put in another plan or Roth IRA. But my company says it will not allow this. I have to retire or withdraw on a hardship. I cannot understand this. The company does not contribute and therefore this is my money(and whatever Uncle Sam can steal from it). I need the Government 401k withdrawal rules, written in stone, so I know if I have to get a lawyer and sue or just quit the company. Is there an easy way to force this company to allow me to withdraw my own money? Can I just close my entire 401k?
Submitted: 8 years ago.
Category: Finance
Expert:  Bill replied 8 years ago.

A 401(k) is not required to permit in-service withdrawals prior to age 65 or the attainment of normal retirement age if earlier. A 401(k) plan may permit in-service withdrawals of elective deferrals at age 59 1/2 but is not required to do so. Whether you can take a distribution prior to retirement age will be explained in the Summary Plan Description (SPD). The company should have already provided you with a copy of this document. You also have the right to obtain a copy of the entire plan document. The company must provide you with a copy of this document within 30 days of your written request or they can be fined.

So if the plan does not permit in-service withdrawals at age 59 1/2, you will not be able to withdraw the entire amount and roll it over to another plan unless you terminate employment.

Treasury Reg 1.401(a)-14(a) - http://edocket.access.gpo.gov/cfr_2005/aprqtr/pdf/26cfr1.401(a)-14.pdf

 

Customer: replied 8 years ago.
Reply to Bill's Post: Your reply tells me I cannot withdraw my own money from my 401K and the company is not required to do so. Who allows them to enforce this regulation? Federal government?? I would like to know.

Is this legal?

I have viewed the current 401K plan document on file with the company and the SPD and both say you can withdraw at age 59-1/2. The Adoption Agreement and Basic Plan with ING, our 401K provider, do not allow such a withdrawal.

There is no company matching of any kind; all contributions were made by me. All I want to withdraw is 50% of my current account.

I don't think it is fair to not allow a participant who is nearing retirement the ability to get his/her own money to do with it what they please if the 401K is not providing enough retirement security.

As you can tell, I am determined to fight this.

Therefore, do I have any recourse to fight for getting my money since the documents are contradicting?

Can the company amend the Adoption Agreement to allow withdrawals at age 59-1/2 ?

I appreciate your time and advice.
Expert:  Bill replied 8 years ago.

There shouldn't be conflicting documents pertaining to 1 plan. You may want to ask your employer as to the reason that there are 2 separate plan documents and the reason that the provisions are different. Perhaps the company is not operating the plan in compliance with regulations. Perhaps the company originally permitted in-service distributions at age 59 1/2 and then eliminated this feature which could be another violation. You could file a complaint with the Employee Benefits Security Administration which is a division of the Department of Labor regarding the company's failure to operate the plan in accordance with the provisions of the documents that contain the age 59 1/2 in-service distribution feature.