• down payment of primary residence
• college tuition for you or your dependents
• un-reimbursed medical expenses
• prevent eviction or foreclosure from your home

Some companies are more lenient than others. Because of the complexity surrounding this issue and varying plan designs, you need to reference your plan document or ask your Human Resources representative for further information regarding plan withdrawals.


Q: How is my company match determined?
A: There are several different methods used to determine the amount your company may contribute to the plan. Some of the more common employee matches include:

• fixed percentage - company contributes 25% up to 6% of participant deferrals
• guaranteed percentage - company contributes a pre-determined percentage of participants' pay
• discretionary percentage - company contributes a percentage of participants' pay generally based on company profits and subject to change year to year

Q: Can I stop contributing if I feel I can't afford to?
A: Most plans allow you to stop contributing at any time though employers are not required by law to do so. Some plans may require specific percentage contribution for a full plan year so be sure to check your plan rules.


Q: What happens to my 401(k) account balances if I choose to leave or am fired from the company?
A: Your distribution options are the same whether you voluntarily leave or are terminated. If your account balance is more than $5,000.00, 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.


Q: How long can my former company hold my account balance from my date of termination?
A: There is no quick, general answer. There are four factors that affect the timing of your distribution:

1. The plan itself may provide a time frame which should be documented in your plan documentation or summary plan description. In some rare cases, distributions are not made until the participant has reached retirement age, usually defined as age 65, even if the participant terminated employment much earlier.
   
2. Your distribution cannot be processed until after the next valuation date when the plan determines the account balances of participants. Companies can determine account balances daily, monthly, quarterly, semiannually or even annually.
   
3. How your money is invested can affect how long it will take for you to get your distribution. While most investments can be liquidated quickly, a few, such as some real estate investments, may take longer.
   
4. Processing your paperwork after the valuation date can take a few days or a few weeks depending on how your plan is managed.

It is important for you to know that your company wants you to have your money just as soon as you do. The company is responsible for and must pay fees on your account balance for as long as your money remains in the plan.


Q: What information and reports is my employer required to provide me with on my 401(k) plan?
A: Your employer must provide you with a Summary Plan Description and an annual statement of your account information. You have a legal right to ask the plan administrator for a copy of the plan's latest Form 5500 or Form 5500-C/R, the summary plan description, the plan document, the trust agreement setting up the plan, if separate from the plan, and any collective bargaining contract, if appropriate, and any other instrument under which the plan was established or is operated. In addition, you will often be provided a prospectus for every fund offered in the plan, but this is not legally required. If your company's stock is offered in the plan you are required to receive a prospectus on the company stock fund.


Q: How soon does my employer have to deposit my contributions deducted from my pay into my 401(k) account?
A: Government regulations require that participant contributions to a 401(k) be deposited to the plan on the earliest date that they can be reasonably segregated from the employers general assets, but in no event may they be deposited later than the 15th business day of the month following the month in which the participant contributions are deducted from their pay. Please note that your employer cannot wait until the 15th business day of the month following the month in which your contribution was deducted just for the convenience of doing so. If they can deposit the funds sooner, they must do so.


Q: I still have a 401(k) account with my former employer. I would like to transfer this account into my IRA. Can this be done? If so, are there any penalties?
A: Yes, this can be done and is referred to as a trustee-to-trustee transfer. You need to request the distribution forms from your former employer. Make sure you open your new IRA before the transfer so that you can provide the account information on the required forms. There are no penalties with a trustee to trustee transfer, but if you allow your former employer to send the funds directly to you and not to your new IRA, they will be required to deduct and remit 20% of the total to the IRS.


Q: What are the rules regarding hardship withdrawals from my 401(k)?
A: Law allows hardship withdrawals but your employer is not required to provide this option in your plan. The cost of administering such a program can be prohibitive for many small companies. Your summary plan description (SPD) will state whether or not your employer allows withdrawals in your plan. 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 401k plan; and (5) you can't contribute to the 401(k) plan for 6 months following the withdrawal. The IRS considers the following four items as acceptable reasons for a hardship withdrawal:

1. Un-reimbursed medical expenses for you, your spouse, or dependents.
2. Purchase of an employees principal residence.
3. 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.
4. 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 59 years of age, the 10% withdrawal penalty. You do not have to pay the withdrawal amount back.


Q: What are the general rules regarding loans from a 401(k)?
A: The rules governing 401(k) plans allow plans to provide loans, but do not mandate that an employer make it a plan feature. Your summary plan description (SPD) will state whether or not your employer allows loans in your plan. Most of the time loans are only allowed for the following reasons: (1) to pay education expenses for yourself, spouse, or child; (2) to prevent eviction from your home; (3) to pay un-reimbursed medical expenses; or (4) to buy a first-time residence. 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). Because of the cost, many plans will also set a minimum amount and restrict the number of loans you can have outstanding at any one time. 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 distributed to you. This distribution will be subject to income tax and, if you are not at least 591⁄2 years of age, the 10% withdrawal penalty.