I had a 401(k) plan at my previous place of employment. It’s not a lot, but it’s not pocket change either. I need to get some of the money, but I can’t get a loan since loans are paid back through a payroll deduction. Since I’m not there anymore, that’s out of the question. I won’t be eligible for the 401(k) at my new job until I’m here 90 days (two months from now). I don’t have an IRA. So, I opted to take take a lump sum (yeah, yeah, I know I’ll get clobbered by the taxman, but I don’t have a choice). I have signed the paperwork to do this acknowledging the tax burden. I was told (by the person who handles these things) that it would take 7-10 business days after the company where the money is held receives the paperwork for me to receive my check. As you can see by my location, I’m in Georgia (if that matters any). I called the company who holds the money and there’s nothing they can do.
Well, it’s been four weeks and no check, I called the person and she tells me that the plan only pays out once a year. In this case, it’s the end of the calendar year! Can they do this? I mean, it’s my money. I was fully vested. Should I be forced to wait eight months?
DISCLAIMER: I am looking for opinions only! Not real legal advice.
After I left my last job (I was employed and lived in Georgia, but moved to TN after I left), I called the company that handled the 401k - in my case, Fidelity, and told them I wanted to take the distribution. I had a check within 2 weeks. They wanted me to either take the payout or roll it over within 90 days - 8 months seems a too long to me.
The company that handles the 401k should be who you deal with, not with your previous employer. I’d dig a little deeper, because a once a year disbursement seems unusual to me.
I’m going to have a talk with her supervisor tomorrow. She’s was rather snotty with me today. I knew nothing of this “once a year” distribution thing until today. I did receive a document earlier in the year from my previous employer, but it just described the various ways of dealing with the plan after termination of employment. Here’s a quote about taking a lump sum and the 30-day rollover period:
When you get your money can also be related to how often the company’s 401(k) funds are valued. This is not just a simple matter of looking at the value of the underlying funds as there can be optional employer contributions and leavers’ non-vested forfeitures to calculate. My company’s fund used to be valued only once a year, so you could only get your money out once a year.
I’ve never heard of once-a-year disbursements for taking a lump sum, and I manage several 401K plans. Although I suppose it’s possible but I’ve never heard of it. You should request a copy of the Plan Document and Summary Plan Description, which they are required by law to send to you in a timely fashion, and see what they have to say about disbursements.
Lsura, I think you are incorrect - it is not the company that handles the 401K that a person wishing a disbursement should deal with; it’s the plan administrator of the former employer. With my 401K plans, it is impossible for people to contact the 401K company directly and request disbursement and if they tried, they would be told to contact the plan administrator at their former employer. I have to send former employees a termination form and they have to return it to me; I then have to provide various information to the 401K company about the employee and authorize the disbursement. Nobody can take money out without my signature, neither lump-sums nor rollovers.
I got a copy of the distribution rules in the mail today.
I talked with the idiot’s supervisor today. He turned out to be the very definition of “tool”. He told me that I couldn’t even roll the money into another 401(k) or IRA until the end of the year!
I asked him why, he kept quoting the plan rules. I said what good was having this money if I couldn’t use it. I can’t cash it out, roll in over, or get a loan against it. You know what he said to this?
Are you ready?
He said, “Well, you could manage it.”
If I’d had the ability, I would have climbed through the phone line and ripped his intestines out through his eyes.
I hung up on him at that point. I’m going to try and contact the trustee and see what he can do. Unfortunately, he is also a tool and I don’t think he’ll be of any use.
Was this a small company? Like missbunny, I (used to) work in 401(k) administration, and I find this arrangement very odd. It’s becoming less and less common for plans to be valued less than daily, although I am familiar with plans valued monthly and quarterly. Annually is pretty much unheard of.
However, it could be that the plan is valued more frequently, however they have elected to only “write the checks” once a year.
One of the daily plans I administered would cut loan and distribution checks once a week instead of daily, to reduce costs.
However ridiculous it is to only run disbursements annually, if it’s in the plan document, I’m afraid your stuck (unless they change the plan). That’s what you agreed to when you enrolled in the plan.
You could complain to the Plan Administrator - the name of that person should be in the plan document. However, even if she wanted to, she can’t make an exception to the rules for you. The plan itself would have to be changed to allow more frequent payments.
Just out of curiosity, if you were an active employee and took a loan from the plan, would you have to wait until the end of the year for a check?
Yes. There were only about 35 employees with, maybe, half participating.
According to plan, if I had an outstanding loan, they would take the balance out of the proceeds and, yes, I would have to wait until the end of the year.
Oh, and I left this out (due to the blinding rage): the rule about the once-a-year thing was added about six months ago. It wasn’t this way when I started the plan about six years ago.
Well, I still find the whole thing extremely odd, especially the part about being able to take a loan out once a year. As Skammer said, it’s extremely unusual for a plan to be valued only once a year. These days, most of them are valued daily. And size of the company has nothing to do with it - my parent company has 12 people, for example, and no plan that we have now nor any that I have ever examined as a potential plan had any such requirements. (Obviously companies can write plans, to some extent, with the rules they want, but being small doesn’t at all mean that the plan is going to be more restrictive. In fact, since a small company is much more likely to have a prototype plan [kind of like a “boilerplate” plan], it’s much more likely that they would have the average & standard rules and requirements, rather than designing a custom plan, which is much more expensive and time-consuming to administer).
Really, get a copy of the Plan Document and review it. Make sure they include the amendment that (supposedly) shows the new loan & disbursement rules. They would have been required to write an amendment, approved by the 401K company and the companies directors, in order to make such a change to the plan.