Early 401k distribution

[figurefive]

What is the name of your state (only U.S. law)? I live in TN, employer and 401k is in CA

I want to take an early distribution from my 401k, but the plan administrator says that the plan does not allow for early distributions - just loans and hardship withdrawals.

It seems to me that as long as I am willing to pay the penalties and taxes I should be allowed to make a withdrawal. Are they allowed to restrict distributions this way?

[ecmst12]

It's not your employer making the restriction, it's the law. You can't take a distribution from your 401k unless you leave the job or reach the allowed age. Thank the IRS, that's who regulates 401k plans.

[cbg]

They are not only allowed to restrict distributions this way, they are required by law to do so. They would be violating the law and putting the entire plan in jeopardy for everyone if they DID allow it.

The pre-tax feature of 401k's means that they are HEAVILY regulated.

[figurefive]

Originally Posted by ecmst12

It's not your employer making the restriction, it's the law. You can't take a distribution from your 401k unless you leave the job or reach the allowed age. Thank the IRS, that's who regulates 401k plans.

I don't believe that's entirely accurate. The gov't does allow early distribution from a 401k subject to a 10% penalty in addition to any tax that would normally be due.

I'm just questioning whether the plan is allowed to forbid early distributions and only allow for loans and hardship withdrawals.

[cbg]

The government allows early distributions IN SOME SITUATIONS. This is NOT one of them.

I assure you, your employer is following the law to the letter.

Feel free to contact the US DOL and the IRS if you don't believe us.

[ShyCat]

I'm just questioning whether the plan is allowed to forbid early distributions and only allow for loans and hardship withdrawals.

Yes. The administrator must follow the rules of the plan. If the plan says only loans and hardship withdrawals are allowed, as allowed by law, then only loans and hardship withdrawals are allowed. To do otherwise would invalidate your employer's 401(k) plan and cause it to be terminated. You can lobby your employer to modify the 401(k) plan to meet current law (which is less restrictive than when originally written), but that will take time and won't help you at this moment.