Hi,
I have a client that is 68 years old. He retired from his full time position with his company in December 2022. He now has a board position with his company that pays him a small amount each year. Earlier this year, someone in his HR department told him he was no longer eligible to fund the 401(k) given his transition from full time employee to his role as a board member. He also lost other benefits through his employer given this transition. He contacted Empower (financial provider for his 401(k)) and initiated a 401(k) to IRA rollover last week. Someone at his HR department called him today and said that “because he is still classified as an employee (as a board member), he can’t transfer the funds to another company” (Wells Fargo Advisors-where his IRA is). However, that HR person said that because he is over 59.5 he can request an in-service withdrawal and not be subject to taxes/penalties. Does this sound correct?

I am wondering if the HR person meant in-service rollover. I don’t want him to take an in-service withdrawal and have the check be made payable to him (instead of his IRA) and/or have taxes mandatorily withheld. I know that if he has taxes withheld, he could still roll the full gross amount into an IRA within 60 days (to avoid the full amount being taxable) but then he would probably have to come up with $100,000-$200,000 in additional funds from the bank to replace the mandatory taxes that were withheld on the 401(k) withdrawal.

Please advise. Do you think the “in-service withdrawal’ provision also applies to an “in-service rollover” and they could just make the check payable to his IRA?