Status: 401k

Many people have been asking that status of their 401k plans (besides the fact that the investments themselves have likely tanked due to the problems on Wall Street) and specifically if they need to roll it over to a new firm or if they need to move it from Vanguard to another plan.  Below is what was received via email late yesterday.

Not being an attorney or an expert in 401k administration, here is how I read the second document:

– participants will soon receive a payment from the 401k plan that may be eligible, in whole or in part, to be rolled over to another qualified employer plan (meaning to your new firm’s 401k or similar plan) or to a traditional IRA.  This means you cannot leave your money with Vanguard in the current plan.

– you cannot roll this over to a Roth IRA or various other types of retirement plans that are not eligible to receive such a rollover.

– your new plan is not legally bound to accept rollovers; you need to check first whether your firm’s plan will accept rollovers

– it is best to check with you new plan or traditional IRA as to what documents are required and how rollovers are handled if they are accepted

– there is a summary of tax rules.  I know personally that I don’t want to accept a check made out in my name.  If that happens, I am immediately taxed 20% plus then have to pay a 10% penalty for early withdrawal since I am below the age to qualify for a distribution

– try to have the payment roll directly to the new plan or IRA and never let it touch your hands unless you like the Tax Man

– a rollover cannot be made until after 30 days notice – this email is the notice dated 10/2/2008

– if you have an oustanding loan balance, the balance of your account may be reduced by the amount of the loan still not repaid.  That amount is treated as a distribution and will be taxed (20% federal, state + 10% penalty above) ” . . .unless you roll over an amount equal to the amount of your loan offset to another qualified employer plan or a traditional IRA within 60 days of the date of the offset. “

What I intend to do: talk to my personal financial professional and see if he or she can give me some advice and assist with the rollover of my Heller 401k to a traditional IRA since I may not have a new job within the time required to perform the rollover (60 days).

* * *

As you obtain new employment and roll over your Heller Ehrman 401(k) money into your new employer’s plan, you may be requested to provide proof that the Heller Ehrman 401(k) Plan is a qualified plan. You will want the Plan’s IRS Determination Letter. Here it is:

[attached pdf]

In addition, if you have a loan, you may wish to understand the tax implications of defaulting on your loan when you take a distribution:

[attached pdf]

Both of these documents are posted on the Plan’s 401(k) website here:

Save this link. Send it to your home email and save it on your favorites on your home browser.


1 Response to “Status: 401k”

  1. 1 Heller Enron 3 October 2008 at 12:07 pm

    Thanks so much for this info. I wonder if any ex-Brobeckians can weigh in, what with their post-implosion 401(k) issues. We could sure use the foresight of their hindsight!

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