Refusal to allow transfer from 401(k) to IRA
Former employer and American Funds refuse to permit vested 401(k) balance to be transferred (via trustee to trustee transfer) to a Fidelity rollover IRA. The requirement stated is signing a release from all claims, present and future, against the former employer. The account owner cannot sign such a release because there is pending litigation between the parties on a totally unrelated matter. Is there any regulation or ruling that deals with this issue?
Permalink Submitted by Al Fry on Wed, 2008-04-02 21:12
Sounds as if it is frozen because of the pending litigation.
Permalink Submitted by Martin Helmer on Thu, 2008-04-03 21:57
Sounds like a potential exclusive benefit violation (Internal Rev. code sec. 401(a)(2)) and/or violation of the anti-alienation clause (IRC sec. 401(a)(13)). They may be able to delay/put you off for a while for’administrative convenience’—-I think a year beyond the distribution parameters stated in the written plan. Any time 401(a)’s been violated, the plan is disqualified, even if the IRS hasn’t officially said so.
In addition, ERISA law has the exclusive benefit rule too and probably also the nonalienation rule. The Dept. of Labor, EBSA branch is your best bet for immediate help. Google ‘EBSA toll free number’ and call them.
Permalink Submitted by Bob Lloyd on Fri, 2008-04-04 15:52
Many thanks, “martinhelmer” for this very helpful information and references.