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When making an in-service withdrawal from a 401k with your current employer at under age 59.5, which earnings are you allowed to include in the withdrawal?

Are you allowed to withdraw earnings on employee (your) pre-tax contributions, or only on company matching funds?

Example:

  1. Employee pre-tax contributions: $5000
  2. Earnings on employee pre-tax contributions: $1000
  3. Employer matching contributions: $5000
  4. Earnings on employer matching contributions: $1000

Is the total allowed for an in-service withdrawal $6000 (from 3 and 4) or $7000 (from 2, 3, and 4)?

Chris W. Rea
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Redwood
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3 Answers3

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This upvoted Money.SE answer claims that it is illegal for 401(k) plans to make non-hardship in-service distributions to participants under the age of 59 1/2. In my opinion, the answer gives pretty good, but not overwhelming evidence, that this is the case.

Jess Riedel
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For Qualified or Safe Harbor Matching/Profit Sharing they have legal requirements over 59.5. For everything else it's based on the plan document what is allowed. The plan document can be (and usually is) more restrictive than the law.

jbtule
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Unfortunately, with 401(k) in-service withdrawals, they are plan based as to the parameters of what can be distributed and at what time. You'll want to check with your plan administrator or HR for clarification as the plans vary and for the most part are custom to the employer.

Lindsey
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