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Heather30 · Nov 15, 2011, 07:58 AM

My husband was laid off 8 months ago(company closed). He told HR and the corporate company that he wanted to close his 401k immediately after being laid off. The woman from HR told him she would talk to the bank and send him the appropriate paperwork but it would take some time. Well we kept calling her overtime and she kept saying the same thing. Now 8 mon ths has gone by and we called again. The company informed us that the woman who we spoke with is "no longer with the company" and they gave us the number to the bank holding his 401k. The man we spoke with there said we can't close it out until April. I don't understand this we desperately need the money now and I've been doing some research on here. Since his company closed we should be entitled to the money. HELP!

ebaines · Nov 15, 2011, 08:30 AM

Did the person at the bank give you a specific reason as to why it will take until April? I assume that the bank you are referring to is the administrator for the company's 401(k) plan. There is no reason for such delay, unless perhaps the company has not forwarded either his personal contributions or company matching funds to the plan administrator (the bank).

Heather30 · Nov 15, 2011, 09:06 AM

He said they have to add to it and have until April to do so... but he has $9,100 in there now, when they add to it it will $12,100 but why can't we have the $9,000 and be done with it?

ebaines · Nov 15, 2011, 09:21 AM

Originally Posted by Heather30

He said they have to add to it and have until April to do so...but he has $9,100 in there now, when they add to it it will $12,100 but why can't we have the $9,000 and be done with it?

Good question - and what does the bank say?

Heather30 · Nov 15, 2011, 09:35 AM

The administrator said that that is how the corporate company has it set up... I'm not fooled. I really feel like they're giving us the run around and I'm am thinking of contacting a lawyer, I just want a professional opinion before I do so. I want to make sure that I am right in thinking that this is a load of BS

ebaines · Nov 15, 2011, 09:50 AM

In fact each company plan has its own rules around things like vesting and distributions. I suggest that you request a copy of the company's 401(k) plan documents from the administrator and see what they say about making withdrawals.

Heather30 · Nov 15, 2011, 09:52 AM

Will do appreciate all your help

ScottGem · Nov 15, 2011, 10:24 AM

I suspect your husband worked for a small company. Many small companies only value the plans periodically, maybe quarterly, semi annually or even annually. So distributions can only be processed after the valuation. This may be the case with your husband's plan. You do realize that if you take a distribution now, depending on your husband's age, you will incur a 10% penalty to be paid when you file your 2011 tax return. In addition, the distribution will be subject to taxation, which may not be a big deal if he was unemployed for the last 8 months.

Heather30 · Nov 15, 2011, 10:54 AM

I did know it would be roughly 30% they would take. I figured I would take the 10% and set it aside so I don't end up in a dilemma at tax time. We really need the money and don't have much of a choice. If we can't get this money out we're looking toward filing bankruptcy which is last resort for us. I'm also looking into taking out a 10k personal loan granted that someone will lend us one and paying that off in April when we are able to pull the 401k.

ScottGem · Nov 15, 2011, 11:14 AM

The 10% penalty will be paid when you file your taxes. They may withhold 20% for withholding against your actual tax liability.