Dept. of Labor investigating claim against 401k plan
My husband died March of this year and was an employee of a very large and well-known company for 23 years. He was 51 at the time of death. I was given 52% of his 401k and his 3 children from his first marriage were each given 16%. The 401k was distributed into four separate accounts 4 or 5 mos. ago. I did not sign a spousal consent to waive the 100% of his 401k and I now have the Dept. of Labor doing a fully fledge investigation into the company’s “Plan.” The Dept. of Labor in TX where I reside reviewed all the pertinent information and was given approval to transfer the case to the Dept. of Labor in CA where the company is. I was advised by them that it could take 6 mos. to a year or longer to get this resolved and that they would update me every 90 days on their progress. I have not touched my 52% in my account sine it was set up for fear that if I did I would be acknowledging that this is the amount I agree on. Now that it is in the hands of the Dept. of Labor I would like to go ahead and roll the 52% over to an IRA with my own agent here in my hometown. Before doing so, I am going to take out a certain amount to pay off my home equity loan and refi my house as I am now a single mom with my three children to raise. My question is, by my rollover, would that in any way affect the Dept. of Labor and their investigation into my claim that I should have received the full 100% of my husband’s 401k? The Dept. of Labor says that they can’t see how it could but that they can’t give legal or financial advise on such matters and to refer those questions to my financial advisor or attorney. Neither which have the answer. Can you give me advise on this issue? I will struggle financially if am forced to wait 6 mos. to a year or longer for the Dept. of Labor to finish their investigation with the company. Thank you!
Paige Schuchard
Permalink Submitted by Alan Spross on Tue, 2011-11-08 18:24
Unfortuneately, I do not believe that this is the place for you to receive specific legal advice on this question. We can discuss general issues that would apply to anyone.
Did you request and receive a complete copy of the plan document? In some cases, whether you were married at least one year at the time of your husband’s death could have a bearing on your claim of right to the entire account.
Another thing to consider is that distributions you would take from an inherited account are penalty free. If you roll over the funds to your own IRA, you would face a 10% penalty on all distributions until you are 59.5. While the penalty could be avoided by setting up a 72t plan, it is generally not advisable to set up these rigid plans unless you have to. If you break the rigid terms of these plans you will owe the penalties and interest on the penalties back to the first distribution you took under the plan.
An inherited IRA is an option you might want to consider as an alternative to an inherited 401k plan.
Again, these are issues to consider after you get legal advice on whether you can tap the plan without affecting the DOL case.