Taxation of Rollover from company plan
Scenario: an employee rolls over their company plan to an IRA and puts down on the rollover form they are no longer employed when in fact they are. If this account is rolled over to an IRA would it be deemed a taxable event?
A follow up question then, isn’t it possible to take an in-service withdrawal from a company plan and roll it over to an IRA while still working and it not be a taxable distribution? Assuming the plan documents permit an in-service withdrawal.
Permalink Submitted by Alan - IRA critic on Mon, 2015-12-07 23:31
Many plans allow in service distributions of a portion of the balance, and if a certain age is attained, even the entire balance. This is not a taxable event, it is just like a rollover after separation from service. However, if the plan makes an error and distributes an amount that is not eligible under the plan provisions, it could create real problems because it would not be eligible for rollover. Hopefully, that is not the case here. Employees that move to part time positions may or may not be considered still employed depending on the plan provisions, number of hours still worked etc.