Rolling out of 401k before 59.5
Taxpayer, 52 years old, has 401k at firm where he can no longer contribute due to HCE rules and poor plan design. No match, no nothing, assets just sitting there. 401k is with Northwestern Mutual and costs and expense ratios are high. IF could roll to IRA, would save about 1% annually. However, not 59.5, so doesn’t qualify for in-service distribution.
Can this guy roll 401k to IRA because he cant contribute anymore or is he stuck till he hits 59.5?
Permalink Submitted by Alan - IRA critic on Thu, 2016-10-06 20:14
The plan may allow certain components of the 401k balance to be rolled out, but never elective deferrals prior to 59.5. High fee 401k plans have recently been the target of considerable class action suits, so the employer may need to take some action soon. Meanwhile, the plan document will specific if any portion of the plan can be rolled out, but bad plans are less likely to allow such activity. Not being able to contribute to the plan does not create any exemption to the above restrictions.