401k In Service Distributions Any Suggestions???
Hope someone can help- I live in a small town and have been to the 4 CPA’s and financial advisors who have a business here and no clear answers.
We all have a 401k. Employees age from 23 to 61. 27 employees in all. Do to the mutual fund choices and market conditions provided, a few of us would like to get out of the plan if we can use the in service distribution option and transfer to a new IRA. We just don’t want to get hit with a tax bill or penalty.
Questions from what we have read on the net.
1- From what we have read we are allowed to transfer Employee after tax contributions, all Money rolled over form a previous 401k plan, employer pretax contributions, and all account earnings?
2- We must use a trustee to trustee transfer?
3- We can roll to a traditional IRA?
4- Can the funds be rolled to a roth IRA?
5- Any age participating in the 401k plan can transfer funds?
6- Anyone over age 59 1/2 can transfer his whole account?
7- Can all continue to make contributions and receive matching contributions from the employer after the transfer?
Hope someone has the answers to help us out.
This is the exact email I received from a potential new client. If additional information is needed I will contact them. I know some of the answers but I am especially unsure with the following. 1) account earnings 4) Roll to Roth IRA 5) any age
Thanks
Permalink Submitted by Denise Appleby on Sat, 2008-10-11 01:49
The distribution options vary among plans. For instance, some plans permit withdrawals of amounts that were rolled over from other plans at anytime. Whereas, others may require the employee to experience a triggering event in order to withdraw those amounts. In order to determine when distributions can be made from your plan, you would need to consult your [url=http://www.retirementdictionary.com/summaryplandescription.htm%5Dsummary plan description (SPD).[/url]Your employer is required to provide you with a copy.
1- Depends on plan provisions
2- Technically, it’s Direct Rollover…this allows you to avoid the employer withholding 20-% for federal taxes. If you have the amount paid to you, 20% would be withheld from taxable amounts that are eligible to be rolled over.
3- Yes…for amounts that are eligible to be rolled over
4- Yes…Converted [i]techincally [/i]and would be taxable… for amounts that are eligible to be rolled over
5- Depends on plan provisions
6- Depends on plan provisions
7- Yes…depending on plan provisions