The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/the-regulations-governing-mandatory-distributions-14933511.aspx

Subject:  Re: Rolling over a 401k Date:  5/9/2001  8:39 AM
Author:  mwyattea Number:  29569 of 75833

The regulations governing mandatory distributions were changed back in 1997 by increasing the threshold from $3,500 to $5,000. In addition, it now appears that there is no "grandfathering" of crossing the threshold (i.e., if your account was above $5,000 but has dipped below the line, the employer still has the right to pay you out without your consent). Note that most plans right now have not yet made amendments adding this language (will be added this year when these plans are restated for several recent pension acts), so if you ask to see the document or refer to your SPD, you won't find this yet. Your former employer is NOT trying to pull a fast one on you, just the vagaries of operating plans in a constantly changing legislative environment.

However, you are no longer working for this employer. Why don't you set up a rollover IRA to receive the distribution. This will give you added choices in investments and more control of your money. You also have the option to have the money rolled into your new employer's plan. Some plans may require that you be a participant before having the ability to roll funds in (depends on the document). In this case, set up a rollover IRA account to hold the funds (referred to as a conduit IRA) until such time as you can roll the funds to the new plan. Important point if you follow this course: the conduit IRA can only hold monies eligible for rollover. If you have a present IRA (not a Roth) which you have contributed to personally in the past, DON'T put the money in the existing account (no adverse tax consequences, but you lose the ability to move the money back to a qualified plan). Instead, establish a new account.

Hope this is of help.
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us