A:
You are most plausible to experience a 401(k) freeze following a merger where the new company have to determine what to do with the 401(k) plan it has acquired. During this change, the employer temporarily halts all your new plan contributions and withdrawals, thus the term “frozen.”
What a Frozen 401(k) Means for You
If your 401(k) has been fixed by your company’s new management, you will still retain all of the rights you had till to the freeze. Your existing investments still grow or shrink hinged on their market performance, and your retirement savings maintain their tax-advantaged prominence. The only difference is that you cannot add new funds or make withdrawals from your account.
In most took places, you can change the composition of your existing retirement portfolio and shift assets from one investment to another. You also maintain to receive statements in accordance with ERISA guidelines.
What May Go on to Your Frozen 401(k)
There is no legal restriction on the length of a retirement layout freeze. Your 401(k) plan may be frozen indefinitely until the new head following a merger decides what to do with it.
Your new management has three basic options with recently acquired 401(k) plans:
1. Your 401(k) blueprint may be merged with the other company’s existing 401(k) plan.
In this screenplay, your retirement assets are rolled into the new plan, after which the 401(k) is unfrozen. Since 401(k) arranges are often very different and highly complex, this can take a extended time to execute properly. You can also opt to move your funds into a rollover IRA in lieu of of having them rolled into the new plan.
2. Your 401(k) programme may be terminated (“discontinued”).
This cannot be completed until the company inherits a letter from the IRS indicating that everything has been properly managed. After termination, your contributions, vested matches and profits are all returned. Believing the other 401(k) plan allows for rollovers, you can opt to have your retirement finances rolled into that plan. Whether or not rollovers are allowed, though, you can move your funds into a rollover IRA.
3. The 401(k) plan may be radical alone (“continued”), at which point your account drive be unfrozen.
In this case, it is likely that any new employees at your friends will be directed into the new company’s 401(k) plan, and existing wage-earners from the acquired company may continue to access the legacy plan.
If you elect to use your old 401(k) money to establish a rollover IRA, you keep the tax-advantage significance for those funds and are not charged an early withdrawal penalty.
How Required Littlest Distributions Are Handled
If you have reached the age for required minimum distributions (RMD) from your 401(k) account and your intend is frozen, your plan sponsor still pays out RMD. If this does not develop, request your RMD and document your efforts to avoid IRS penalties.