Age 55 and separated from service
I have a client who left her company (owned by her husband) in February after age 55. She then took money out of her 401(k) as income. Should she be reemployed by this company next year and roll a large IRA into the 401(k), then leave again, would she be eligible for the Age 55 and separated from service rule exception again?
Permalink Submitted by Alan - IRA critic on Wed, 2019-04-10 19:56
Yes, the only requirement is that the distribution occurs after separation at the required age.
Permalink Submitted by Arnie Cabiles on Mon, 2019-12-09 14:10
My client turned 55 in 2019 and plans to leave her employer in 2020 while still 55. She has an IRA Rollover with pre-tax funds from previous employers 401(k)s. She wishes to do a direct transfer of these IRA funds to her current 401(k) to avail herself of the Age 55 and Separated from Service penalty exceptions. If she plans to leave her currently employer within a month or two after transferring these IRA funds, will she run afoul of the Age 55 provisions? Does the Summary Plan Description need to specifically reference the Age 55 exception ( we didn’t see it in the SPD).
Permalink Submitted by Alan - IRA critic on Mon, 2019-12-09 16:01
Her entire balance with the current employer qualifies for the age 55 separation exception. Any distribution from that plan after separation should be coded 2 on the 1099R. With all of her retirement assets remaining with the now current employer, hopefully the investment options and plan expenses are competitive.