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  1. #1
    Join Date
    Jul 2020
    Posts
    1

    Default 401(A) Withdrawal

    My question involves labor and employment law for the state of: Missouri/Illinois

    Ill try to make this clear and quick.
    I work out of a local labor referral hall in Missouri. I traveled to Illinois and worked in their jurisdiction for long enough to be vested in their 401a.
    Our pension plans are separate.
    I have not worked in the out of town jurisdiction for over 2 years. Every government agency site I read says that you can withdraw money after you no longer work for an employer. Whos my employer in this case. Even the union halls pamphlet says this money can be withdrawn after not contributing for 1 year or when you turn 59 1/2. Its been 2 years since I worked there. When I inquired about this, they said that is for money added by their members above and beyond What the employer put in.
    Do I have a right to this money now? Im a couple years away from their age requirement. What kind of lawyer would I need to speak to?

    Thanks

  2. #2
    Join Date
    Jun 2006
    Location
    Massachusetts
    Posts
    24,488

    Default Re: 401(A) Withdrawal

    Retirement plans are subject not just to Federal regulations but to their own plan document. The plan can have stricter regulations than the government has. The plan document RULES. You don't need a lawyer at this point. You need to be talking to the plan administrator, who will tell you when and under what circumstances distributions can be taken.

  3. #3
    Join Date
    Oct 2014
    Posts
    8,120

    Default Re: 401(A) Withdrawal

    Quote Quoting Doggoneit
    View Post
    Do I have a right to this money now? Im a couple years away from their age requirement. What kind of lawyer would I need to speak to?
    First of all, plans under IRC 401(a) tend to be offered primarily for employees of governments and certain tax exempt organizations. In any event, many of the rules for the various types of pension plans are the same. In general, for the plan to qualify for certain tax benefits (i.e. to be qualified plans) the plans must provide that the plans will provide for distributions to the employee starting no later than the required beginning date (RMD). The RMD currently is the later of (1) the date the employee retires or (2) the date the employee reaches age 72 (it used to be age 70 but the law was fairly recently amended to change it to 72). This means that while a plan may provide for distributions before that, it doesn't have to do so. The RMD is simply the latest date that the plan can choose to allow distributions.

    There are also rules for retirement plans on the earliest date they may allow the employee to take distributions. For most plans the general rule is that the earliest the plan may allow you to take distributions is age 59, although the plans may allow it earlier in certain specific situations (like hardship withdrawals, for example). But plans under 401(a) are different in this regard. Instead, the rule in the code for the earliest in which the plan participant (employee) may be allowed to take distributions is this:

    (14) A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that, unless the participant otherwise elects, the payment of benefits under the plan to the participant will begin not later than the 60th day after the latest of the close of the plan year in which
    (A) the date on which the participant attains the earlier of age 65 or the normal retirement age specified under the plan,
    (B) occurs the 10th anniversary of the year in which the participant commenced participation in the plan, or
    (C) the participant terminates his service with the employer.

    In the case of a plan which provides for the payment of an early retirement benefit, a trust forming a part of such plan shall not constitute a qualified trust under this section unless a participant who satisfied the service requirements for such early retirement benefit, but separated from the service (with any nonforfeitable right to an accrued benefit) before satisfying the age requirement for such early retirement benefit, is entitled upon satisfaction of such age requirement to receive a benefit not less than the benefit to which he would be entitled at the normal retirement age, actuarially, reduced under regulations prescribed by the Secretary.

    Note that it is the LATEST of either (A), (B), or (C). So plan benefits do not start until you terminate your service with the employer, and even then you still have to wait 10 years from when you started with the plan and you have to have reached either age 65 or the age that the plan determines is the normal retirement age. The plan cannot allow for distribution prior to that unless it allows for the election for an early retirement benefit, something not all plans will do because it can end up costing the plan more. These rules are one reason why private employers opt instead for other plans like 401(k) plans rather than plans under 401(a).

    The plan may allow for distributions anytime between the starting date discussed above and the RMD.

    The bottom line here is that whether you are entitled to distribution now depends on exactly what kind of plan it is and what the plan document says. You may find that you have not yet reached normal retirement age for a 401(a) plan, for example, and that might prevent you from being able to get distributions. As long as the plan provides for distributions no later than the RMD and does not allow distributions earlier than the earliest date the law allows the plan can provide for anything in between. This is why, as cbg says, you need to contact the plan administrator to find out what the plan says. I suggest you get a copy of the actual plan rules from the plan administrator. If you don't understand something in that plan document, your first step is to contact the administrator to discuss it. Until you've done that, you don't need a lawyer. It may turn out that under the plan you simply don't have a right to distributions yet, in which case there is nothing a lawyer can do for you.

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