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I guess there must be some reason the laws allow this (denying rollovers), but it seems odd.

Not saying this is your situation, but one typical reason is the retirement obligation is not funded.

Our laws about pensions are odd and they interact with the tax code. If a company's retirement fund investments make lots of money some portion was considered a profit years ago. In the first part of this century I remember reading with great amazement how the retirement investments of operations like GM and say the State of CA were going to obtain returns of over 7.5% a year - were the projected returns more in line with reality large payments into the retirement fund would be required.

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