No In service rollover of 401K allowed but Can take a in service Distribution

Submitted by Keith James on Sun, 2016-01-31 04:43

My company will not allow an in service rollover to an IRA However they will allow a distribution payable to me which is taxable…BUT WHAT IF I DO A 60 ROLLOVER TO MAKE IT NON TAXABLE…CAN I DO THAT?

Many thanks to all replies.

Keith



Submitted by Alan - IRA critic on Sun, 2016-01-31 16:36

  • This raises questions. Usually, if you are eligible for a distribution, it would not be limited to payment to you. Are you sure this is not a hardship distribution? A hardship distribution is not eligible for rollover.
  • If this is a non hardship distribution and not an RMD, you could roll it over within 60 days of receipt, but would have to replace the mandatory 20% federal withholding on the distribution to eliminate all taxes.

Submitted by David Mertz on Wed, 2016-02-03 02:51

If the distribution is eligible for rollover, section 401(a)(31) requires the plan to offer the option of performing a direct rollover.  Since they are not offering the option of a direct rollover, the in-service distribution they are allowing to be made payable to you implies that it is a hardship distribution, ineligible for rollover.

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