Distributions From An IRA

[taxtime]

One with a different twist

Had someone who is 66 still working and participating in a 401k at work. Wanted to take funds out to put in his wife’s IRA. Even though he is of retirement age, he is still working for the company that sponsors his plan. I told him that is probably not allowable and he should consult the plan administrator. Even though he is of retirement age he still works for the company that would preclude from rolling those funds in an IRA. Correct? Just wanting to know if I am thinking along the right lines.

[sea-tax]

[QUOTE=taxtime;64197]Had someone who is 66 still working and participating in a 401k at work. Wanted to take funds out to put in his wife’s IRA. QUOTE]

He can't take his 401k assets and roll them into his wifes IRA ever, never. His IRA is his, hers is hers. Thats why it is Indvidual Retirement Account -IRA. Same goes for a 401k

[taxtime]

I guess my

point really was that he can not withdrawal the funds and put them another tax deferred account while still employed with the plan sponsor. We had already had the discussion about what IRA meant. I guess I should have been more specific.

[Bees Knees]

point really was that he can not withdrawal the funds and put them another tax deferred account while still employed with the plan sponsor. We had already had the discussion about what IRA meant. I guess I should have been more specific.

Code Section 401(k)(2)(B)(i) says:

may not be distributable to participants or other beneficiaries earlier than….(III) in the case of a profit-sharing or stock bonus plan, the attainment of age 59½…

So in other words, a 401(k) plan can be amended to say once an employee reaches age 59½, he or she can take a distribution out of a 401(k) even though he or she is still employed by the employer sponsoring the 401(k) plan. The plan does not have to have this provision, but it can if the employer wants it.

And as long as the distribution is not being used to meet the required minimum distribution rules (RMD for people 70½ or older), the distribution can be rolled over into an IRA tax free.

[taxtime]

Good info bees. Thanks.