I was employed by a privately held company. We had a 401K plan. We just got acquired by a publicly held company as a wholly owned subsidiary. The parent company has its own 401K plan. I know that we can roll our 401K assets to the parent company's 401K. However my question has to do with considering this a change of employers. Can I say that the new parent company is a new employer, take my 401K assets from my current 401K plan, and roll them into an IRA?
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401(k) rolloever
To be eligible to roll your 401(k) assets into an IRA, you have to separate from service (leave your job), either because of death, retirement, resignation or discharge. If an employee continues on the same job for a different employer as a result of a liquidation, merger, consolidation or other similar corporate transaction, the employee is not considered to have separated from service.
Other rules were changed in the 2001 tax act. From the conference committee report on H.R. 107-84, the Economic Growth and Tax Relief Reconciliation Act of 2001:
“The conferees intend that, as under current law, if there is a transfer of plan assets and liabilities relating to any portion of an employee's benefit under a plan of the employee's former employer to a plan being maintained or created by the employee's new employer (other than a rollover or elective transfer), then that employee has not experienced a severance from employment with the employer maintaining the plan that covers the employee.”
Bottom line is the new employer does not mean a change of jobs for you that would allow you to say you left your job, allowing you to take your 401(k) plan assets out. Plus the fact that you still work for the same employer. Even though you are a wholly owned subsidiary, the parent company really isn’t your new employer. The parent is simply a new stockholder in the same corporation you have been working for. -
Is this true of all 401k's?
Can someone still employed just rollover their 401k to an IRA for the purpose of then converting to a ROTH?Originally posted by Bees KneesJGComment
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I would suggest talking to your plann administrator. They will know the in's and out's of your specific plan . Not all 401k's are the same.Comment
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Plan specific
So, its according to the plan but OK for tax purposes. In reading pub on retirement, it just talked about rollovers being done, but I wondered if this meant only after quitting etc.Originally posted by sea-taxJGComment
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Most if not all plans will not allow you to roll money over with out seperation of service. I say most because I always leave a possibilty to be wrong but I have never seen one that allows it prior to seperationComment
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Thanks Sea
Thank you. It'll be much easier now to discuss what this client wants to do.
JGJGComment
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It isn't just 401(k) plans. Any employer plan that is set up with some kind of vesting schedule is set up so that the plan administrator controls the funds. For example, the plan has to be fully vested at all times for employee contributions, but not the employer matching amounts. It may take up to five years for the employee to be fully vested in the employer contributions. With that kind of restriction, it is also necessary to not allow the employee to roll over any funds before the vesting scheduled has been met. Otherwise, how are you going to get the employee to give the employer's money back if the employee were to quit before meeting the years of service requirement? It also follows that if the funds are going to be controlled by a plan administrator, then you don't want your employees rolling money out at any time to take control themselves. Plan administrators charge fees, and if nobody leaves their money in the plan (because they keep rolling all of their funds over into their IRAs), the administrator is either going to charge allot more for the service, or not provide the service in the first place.Comment
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