Hello,

I am French, 29 years old, and an H-1B holder. In January 2010, I started contributing to a 401(k) plan. My company is matching 25% of my contributions (6% of each $1,312.5 bi-weekly paycheck). Right now I believe I have around $1,000 but I am quitting my job at the end of January 2011 and am trying to figure out what the process is to withdraw the money?

Should I talk to my HR department or the company dealing with my 401 (k) directly or the IRS?

Does it make a difference if I withdraw the funds before December 31st 2010 and file the appropriate schedule on my 2010 Personal Tax Return or if I wait until 2011?

All in all, would it be best to cash out that very small amount right away and pay the related penalties or roll it into an IRA account? I understand there is a 10% IRS penalty and 15% tax bracket (based on my annual income $31,500) but I'm not really sure how much of that $1,000 I would be left with...

Thanks a lot for your help and insight!

Sarah

1. Direct your questions first to the 401(k) plan administartor - they know the details of your company's particular plan and are familiar with the rules.

2. You probably can not make a withdrawal until after you quit the job . In general active employees are not allowed to withdraw money from a 401(k) unless they meet one of the "hardship" consitions, which you don't.

3. So after you leave the job you have a choice of either (a) leaving the money in the 401(k) account where it is, (b), rolling it to an IRA account, or (c) taking the money and paying taxes plus early withdrawal pewnalty. If the account has less than $5K the plan probably won'y allow you to leave it alone - typically $5K is the miniumum amount a former employee can keep in a 401(k). So that leaves choices (b) or (c). I personally think (b) is better, as it avoids any taxes right now, and avoids the 10% penalty. Be sure to do a direct rollover - whichever company you decide to go with for your IRA can handle all the paperwork.