Roll Over Current Employer 401k Funds

[Bryan O.]

As ever, the definitive answer is, it depends. In some cases, the stars align. In others, not. Regardless, you need to know The Good, The Bad, and The Ugly:

The Good:
Review your employer's Summary Plan Document (SPD) or talk with your plan administrator. You want to know if your plan allows for:

• non-hardship (many plans allow for hardship distributions. this would not be one of those),
• in-service distributions (this meanst that the distribution can be made while you still work for the company)
• without minimum age restrictions (some plans require that you are 59 1/2 for their in-service distributions)

The Bad:

• If all of the above is true, you still need to know if your plan has a length-of-service requirement. This is often 2-5 years
• Your plan may not allow transfer of any funds that are not fully vested
• Your plan may only allow certain types of funds to transfer such as:
  • After-tax contributions, plus earnings.
  • Rollover amounts, plus earnings.
  • Company match contributions, plus earnings.
  • Before-tax contributions, plus earnings (if you are disabled or have reached age 59½)

The Ugly:

• Make sure your company does not have penalties if you withdraw. They may suspend or defer company contributions if you perform the in-service non-hardship withdrawal
• You need to use a Direct rollover, also known as a trustee to trustee transfer. If not, your company will withold the mandatory 20% taxes. Fixing this can be done, but you have to have that 20% amount sitting around available to you to offset the missing amount that your employer pulled. Then you have to wait for taxes to get that amount returned to you.

So basically, you want to know if you have met any time-at-company requirement and can do a non-hardship, in-service, direct (trustee to trustee) transfer to another eligible plan with no penalties from your company. Piece of cake, right?

I am not a CPA, attorney, adviser, or even really all that smart, so all I am doing is presenting information that I believe is accurate. I am hoping that some of the CPAs and 401k experts can chime in and validate or dispute. I used a number of different resources, but I'm nowhere near as good as others. Resources:
https://secure.marketwatch.com/story/the-right-way-to-roll-over-your-retirement-accounts-2015-03-19
http://www.raymondjames.com/newyork/docs/In-Service%20Non-Hardship%20Withdr.pdf
https://401kbasics.wordpress.com/2009/08/19/in-service-non-hardship-employee-withdrawals/
http://www.forbes.com/forbes/2008/0225/046.html

Happy investing!!