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.
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