401K Issues
1)Is there any legal restriction or limitation on 401K In Service Non Hardship Withdrawals, except those in the specific company plan?
2) Clarification please, page 46 Orlando Course,!st para.401K Non spouse rollover must be Direct Rollover( Trustee -T-Trustee),but other info says (T-T-T) can only be used between institutions and not between institution and IRA, that must be accomplished via Direct Rollover
Permalink Submitted by Al Fry on Thu, 2008-10-02 03:41
2) Non spouse Direct Rollover is considered trustee-to-trustee, when in reality it is from plan administrator to IRA custodian. Al
Permalink Submitted by Alan Spross on Thu, 2008-10-02 04:04
Another way to put this is that a direct rollover is a term used to describe a REPORTABLE trustee to trustee transfer. A basic T to T transfer is done between the same type of plan and is NOT reportable.
The direct rollover for reporting purposes is a two part transaction, a distribution followed by a rollover.
With respect to Q 1 – while a plan does define what non hardship in service distributions are allowable, usually at a certain age such as 59.5, a qualified plan by definition has a prime purpose of providing accumulation of assets for the retirement of the employee. Therefore a plan may not meet QRP requirements if it allows employees to use the funds simply as a temporary savings account. The age at which distributions are allowed may vary somewhat by occupation, ie occupations that cannot effectively be carried out by older people may have earlier retirement ages at which in service distributions are allowed.