Advanced Underwriting Consultants

Question of the Day – July 26

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client has a substantial 401K account with his current employer.  Can he take an in-service distribution and roll over the money to an IRA?

Answer: If the taxpayer is entitled to an in-service distribution, the distribution that is NOT part of a required minimum distribution can generally be rolled over to an IRA tax-free.

Under Section 401K rules, in-service distributions may be permitted

  • If the taxpayer has financial hardship,
  • Of money rolled into the 401K plan,
  • Of after-tax employee contributions,
  • Of employer contributions,
  • If the 401K plan is terminated or
  • When the taxpayer has reached age 59 ½.

However, the plan administrator is not generally required to allow in-service distributions in those cases.  Check with the taxpayer’s plan administrator to find out which of the options might be available.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.