Employer holding 401K funds for one year Michigan

[honey764895]

Hi,

I recently accepted a new job that I will begin on January 19. Yesterday I spoke with the HR dept. at my current job about the process of rolling over my 401K funds into either an IRA or my new 401K, and I was told that I cannot do anything with that money until probably January of 2016. This is because our plan administrator does not do the paperwork for former employees' 401K monies until the end of the year in December, and apparently no more than once a year. This includes those who are retiring and wish to cash out, also.

It says on the paperwork I was given when I put my notice in: "You are eligible to cash out/rollover your account beginning in January - the year after your year of termination. Contact Fidelity at 401K.com or (800) 835-5095 at that time."

I am disappointed because I can invest that money and make more throughout the next 12 months than if I leave it sitting in an old 401K. Are there any laws governing how long an employer has before they are to "release" the funds to the former employee, whether it is for rollover purposes or retirement? Or are they free to wait as long as they wish, such as in this case? It is my money, after all. I don't understand what right they have to do this.

[Marketeer]

Is the issue that the employer doesn't fund its 401(k) match till the end of the year?

[cbg]

The law does not *require* that they allow you to roll over funds at all.

At the time a 401(k) is established initially, the employer and the fund administrator determine how, if and when certain actions would transpire. One of those decisions is whether they would accept roll overs and if so, at what point.

Once these decisions are, they are entered into the plan document. They MUST follow the plan document. They MAY NOT deviate from it. The law doesn't really care when, or whether, you are allowed to roll over funds from your old 401(k) but it cares A LOT that both the old and the new funds follow their plan documents.

If the decision was made and put into the plan documents that you must wait a year before you can do a roll over, then you have to wait a year before you can do a roll over.

[Betty3]

Agree with cbg -sorry but the 401(k) plan document/agreement rules. (whatever it notes/says)

[Betty3]

PS - You can ask your employer for a copy of the summary plan description if you do not already have one.

[honey764895]

Is the issue that the employer doesn't fund its 401(k) match till the end of the year?

I don't believe so.

[honey764895]

The law does not *require* that they allow you to roll over funds at all.

At the time a 401(k) is established initially, the employer and the fund administrator determine how, if and when certain actions would transpire. One of those decisions is whether they would accept roll overs and if so, at what point.

Once these decisions are, they are entered into the plan document. They MUST follow the plan document. They MAY NOT deviate from it. The law doesn't really care when, or whether, you are allowed to roll over funds from your old 401(k) but it cares A LOT that both the old and the new funds follow their plan documents.

If the decision was made and put into the plan documents that you must wait a year before you can do a roll over, then you have to wait a year before you can do a roll over.

Thank you for your response, but I wasn't referring to my new employer accepting rollover funds; I was wondering if my current employer, the one I am leaving, is allowed to refrain from releasing my money for as long as they wish, which prevents me from putting that money to a place of my choosing (new 401K or IRA).

[honey764895]

PS - You can ask your employer for a copy of the summary plan description if you do not already have one.

I will do that, thank you.

[hr for me]

I suspect that the recordkeeping may not be a "daily" one that is very common now. Prior to daily recordkeeping, many 401k's had distribution wait periods of at least end of the quarter if not end of the year. Mostly due to match/company reallocating forfeitures. They only want to make one distribution to those that leave rather than multiple. It may also depend on when/how they allocate any trust income and if they are not daily/unit based, it isn't as easy as it sounds. Especially if any of the money is in employer stock and if that stock is only valued at certain times (rather than being on an exchange).

You can ask for an SPD or even choose to pay for a copy of the full plan document. But this, while more uncommon now, used to be very very common.

[honey764895]

I suspect that the recordkeeping may not be a "daily" one that is very common now. Prior to daily recordkeeping, many 401k's had distribution wait periods of at least end of the quarter if not end of the year. Mostly due to match/company reallocating forfeitures. They only want to make one distribution to those that leave rather than multiple. It may also depend on when/how they allocate any trust income and if they are not daily/unit based, it isn't as easy as it sounds. Especially if any of the money is in employer stock and if that stock is only valued at certain times (rather than being on an exchange).

You can ask for an SPD or even choose to pay for a copy of the full plan document. But this, while more uncommon now, used to be very very common.

That is interesting. Thank you for the explanation!

[DAW]

Agreed. Also, there is a separate trustee involved with a 401(k). You can try contacting them directly.

[Marketeer]

Yes, if it's in your plan documents that you must wait, then you must wait.

If you are unhappy about your current allocation and think you'll lose money while you wait, I'd suggest calling Fidelity and speaking with a customer service rep about the best allocation for you based on your current age, projected retiremetn age, and risk tolerance.

[Raster]

Are you talking about your funds deferred or an employer match or both?

I agree with others , the basic starting point is the SPD ..quote what it says or doesn't say as to withdrawal options/rules upon separation from employment .

[hr for me]

Are you talking about your funds deferred or an employer match or both?

I agree with others , the basic starting point is the SPD ..quote what it says or doesn't say as to withdrawal options/rules upon separation from employment .

Actually in most cases of termination payouts, it doesn't matter what type the funds are (employee deferrals or employee match), the distribution rules are the same. It's the vesting rules that might be different based on type of money.

Now it is possible that the distribution rules might be different if the plan allows of hardship withdrawals. Sometimes, those can come from only employee deferrals, but the employer will most likely require some proof of the hardship (foreclosure, medical expenses, college expenses, etc). They might also have different distribution rules for any money that was previously rolled into the plan from another 401k.

But again, while 401k's can be similar, often they have some differences so no "one size fits all" here.

[cbg]

I was wondering if my current employer, the one I am leaving, is allowed to refrain from releasing my money for as long as they wish, which prevents me from putting that money to a place of my choosing (new 401K or IRA).

No, but they ARE allowed to refrain from releasing the money for the duration of the time it says in the plan document. Which could be for up to a year.