401(k) Forced Distribution
If an employer terminates a 401(k) plan and the employees (including the 50% business owner) are forced to take their assets out of the plan, is the plan administrator still required to withhold the mandatory 20% on any non trustee to trustee transfers?
Or, is there a special rule that says since it is a forced distribution the mandatory 20% is not required??
Thanks
Permalink Submitted by Alan Spross on Thu, 2008-11-06 16:55
Sec 3405 of the tax code does not contain any exception to the mandatory withholding with respect to portions of the distribution which are considered to be eligible for rollover. In most cases, the entire amount would be eligible for rollover. Of course, amounts that represent after tax contributions would not be subject to withholding.