401k

[lcs1951]

What is the name of your state? washington

I was saving money in my 401k to put a downpayment on a house and/or pay for my son's college tuition. The company has changed the "rules" midstream and now I can ONLY withdraw money for medical reasons. Is this legal? The IRS says I can withdraw for college tuition or to buy a house. It seems that I should at least have an option to put the money I have already contributed somewhere else.

 

[cbg]

It depends on what the plan document says.

The IRS has approved four limited reasons why money from a 401k can be withdrawn. However, employers are not required to allow withdrawals from a 401k plan at all. IF they choose to, they cannot allow it for reasons that the IRS has not approved; however, they are not obligated to allow it for all of the reasons the IRS accepts.

So if the plan document says that withdrawals are only allowed for medical reasons, then you cannot withdraw it for a downpayment on a house, EVEN THOUGH the IRS has said they will approve that if the employer wants to allow it.