On Apr 21, 4:24 pm, Heather <HeatherR...@[EMAIL PROTECTED]
> wrote:
> Can a 401k Plan/Plan Administrator restrict rollovers to certain types
> of IRA accounts? Specifically, when an employee is terminated and
> wants to take a full distribution/rollover to an IRA and close their
> existing 401k account, can the Plan/Plan Administrator say they will
> only allow direct rollovers to Traditional IRAs and not to Roth IRAs,
> even though rollovers to Roth IRAs became allowable by law on January
> 1, 2008? Does the Plan/Plan Administrator have that authority? ...
Unfortunately, you are probably screwed. But, to be clear, the 401k
plan administrator is not to blame. The 401k plan document is. The
administrator is obligated to perform within its confines. I haven't
read the new law since it was proposed, but I'm pretty certain the new
law does not REQUIRE that you be allowed to rollover directly to a
Roth, only that it is now an option 401k plans can provide. Whether
your employer takes advantage of this new availability is up to them.
If they decide to allow for the "Roth Roll" they must amend the plan
document, which is neither a free nor a speedy process.
> It gets worse. Not only that, they want to top it all off with a $40
> account closing/servicing fee. I almost died. They want $40 out of
> *MY* retirement when they can't even do what I asked?!? Is that
> legal? Is there anything I can do to fight *THAT*??
Nope. It's common. They also usually charge $50 to process loans
against your own account. I've seen people go bonkers over that one!
You agreed to the fees when you enrolled. They also did not make these
fees up last night. They've been in disclosed and available since the
plan was established, it's just that no one thinks to ask until it's
too late.
> I told her my copy of the Plan Summary does not address these types of
> rollovers because it was written prior to 2008 and asked her to please
> send me an updated copy if there is one that addresses this new law.
> I followed up my phone call with an email to her recapping our
> conversation and thanking her for her time/help. It will be
> interesting to see if I ever hear from her again. And if I do, it
> will be interesting to see what she says.
There is likely not an "updated plan document". Again, the key to
understanding is to know that the law is not mandatory. They don't
have to allow it, and apparently they don't at this time.
P.S. - If the 401k was pre-tax money you will have to pay taxes to
convert to the roth. This may or may not affect your actions, I just
wanted to make sure you were aware of it.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
