1) Can I stop my 401k deferrals?

Most plans allow you to stop your deferrals at anytime by completing a 401k change form. 

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2) Can I withdraw money from my account while I am still working? ?

Most plans offer loans allowing you to borrow money from your 401(k) account, but you have to pay yourself back with interest. If you fail to pay back the loan, it is treated as a withdrawal and the outstanding loan balance will be subject to current income taxes as well as a 10% early withdrawal penalty. If your plan doesn't offer loans, you may be able to qualify for a severe financial hardship withdrawal if no other resources are available to you. According to the IRS a hardship withdrawal includes the following:

• Down payment of primary residence
• College tuition for you or your dependents
• Unreimbursed medical expenses
• Prevent eviction or foreclosure from your home

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3) What are the general rules regarding loans from a 401(k)?

The rules governing 401(k) plans allow plans to provide loans. You must pay the loan back within five years, although this can be extended for the first-time home purchase.
Usually you are allowed to borrow up to 50% of your vested account balance to a maximum of $50,000 (set by law). Loan payments will generally be deducted from your payroll checks and, if married, you may need your spouse to consent to the loan. Funds obtained from a loan are not subject to income tax or the 10% early withdrawal penalty. If you should terminate your employment, often any unpaid loan will be considered a distribution, subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty.

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4) What are the rules regarding hardship withdrawals from my 401(k)?

The IRS code that governs 401(k) plans provides for hardship withdrawals only if:

1. the withdrawal is due to an immediate and heavy financial need
2. the withdrawal must be necessary to satisfy that need (i.e. you have no other funds or way to meet the need)
3. the withdrawal must not exceed the amount needed by you
4. you must have first obtained all distribution or nontaxable loans available under the 401(k) plan
5. you can't contribute to the 401(k) plan for 6 months following the withdrawal

The following four items are considered by the IRS as acceptable reasons for a hardship withdrawal:

• Un-reimbursed medical expenses for you, your spouse, or dependents
• Purchase of an employee's principal residence
• Payment of college tuition and related educational costs such as room and board for the next 12 months for you, your spouse, dependents, or children who are no longer dependents
• Payments necessary to prevent eviction of you from your home, or foreclosure on the mortgage of your principal residence

Hardship withdrawals are subject to income tax and, if you are not at least 59½ years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back.

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5) Can I transfer my 401(k) balance into an IRA if I'm fully vested?

Under IRS regulations, you cannot take a distribution or roll to an IRA while you are still employed.

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6) Why can't I take my money out of the plan if I am no longer participating?

IRS regulations prevent taking a distribution if you are still employed at the PEO or the work-site employer. Once you terminate employment from both, you may withdraw your vested balance, subject to taxes and penalties.

 

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7) What happens to my 401(k) account balances if I choose to leave or am terminated from the company?

Your distribution options are the same whether you voluntarily leave or are terminated. If your account balance is more than $5,000, you can leave your money in the plan. If you want to take your money with you, your vested account balance can be rolled into another 401(k) plan with your employer or put into an IRA to avoid early withdrawal penalties.

 

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