What Distributions Can You Take From an Employer Retirement Plan?

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

What distributions can you take from an employer-based retirement plan? We get this question all the time and the answer is always the same. You can take whatever the plan document says you can take.

Some of the distribution rules are set by federal law. Others are set by the plan document. In order to have a “qualified” plan, one that retains its tax deferred character, the plan must be operated in accordance with the rules set out in the plan. There can be no exceptions made – unless they are allowed by the plan. Hardship distributions and plan loans would be examples of those exceptions.

These rules apply whether or not the company is still in business if the plan has not been terminated. They apply in the cases of mergers, acquisitions, buy-outs, take-overs, spin-offs, whatever the change in ownership may be called. As long as the plan remains in effect, all employees, former employees, and company management are bound by the rules of that plan.

Bottom line, just because ABC Widget Company is now called XYZ Super Widget Company does not mean that you, a former ABC employee now working for XYZ, can take a distribution from the ABC plan. Even if the ABC plan is no longer accepting contributions, you are still bound by the distribution rules of the ABC plan.

If you are separated from service – retired, fired, laid off, etc. – from both ABC and XYZ, then you generally do have access to the plan funds. Try to get a copy of the Summary Plan Description for the plan to get an idea of your options.