Can I contibute to my profit sharing after tax???

Question

My employment only allows me to contribute before tax, It merge with another company and I lost almost 5 grand. Can I still withdrawl from them and move my dough to better opportunities???

Answer 1

You could start a Roth if you wanted to.

First, from the IRS:  Although 401(k) plans must be established with the intention of being continued indefinitely, you (as an employer) may terminate your plan when it no longer suits your business needs. For example, you may want to establish another type of retirement plan in lieu of the 401(k) plan.

Typically, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, and filing a final Form 5500. Although you are not required to, you may file a Form 5310, Application for Determination for Terminating Plan, to ask the IRS to make a determination on the plan's qualification status at the time of plan termination. You must also notify your employees that the 401(k) plan will be discontinued. Check with your plan’s financial institution or a retirement plan professional to see what further action is necessary to terminate your 401(k).

I think you should have been notified by your {ex?} employer that the merger would goof up your profit sharing {401(k)}.    From the IRS:  Many 401(k) plans allow employees to make a hardship withdrawal because of immediate and heavy financial needs. Generally, hardship distributions from a 401(k) plan are limited to the amount of the employees' elective deferrals only, and do not include any income earned on the deferred amounts. Hardship distributions are not treated as eligible rollover distributions.

You should call the IRS and tell the representative what happened.  Ask the rep to investigate as to whether the IRS received a 1099-R from the company.  If the 5K just vanished, you didn't receive one because there has been no accounting as to what happened.

This could get you in to the bank, credit union, brokerage that you want.  From the IRS:   You may defer tax on all or part of a lump–sum distribution by requesting that your employer directly roll over the taxable portion into an Individual Retirement Arrangement (IRA) or to an eligible retirement plan. You can also defer tax on a distribution paid to you by rolling over the taxable amount to an IRA within 60 days after receipt of the distribution. A rollover, however, eliminates the possibility of any future special tax treatment of the distribution. Refer to Topic 413 for more information on rollovers. Mandatory income tax withholding of 20% applies to most taxable distributions paid directly to you in a lump-sum from employer retirement plans regardless of whether you plan to roll over the taxable amount within 60 days.

Why those guys didn't inform you that you could roll over, I do not know.  Perhaps they only posted a notice and did not bring it to the attention of the employees.  I smell a lot rotting.   While on the phone with the IRS, you may want to ask if you should contact the Attorney General.  There could be a class action suit in the wings.

This is effective as of 2007 and applies also.   From the IRS:   For tax years beginning in 2007, the nontaxable part of an eligible rollover distribution (such as after-tax contributions) from a qualified

retirement plan can be rolled over to another qualified retirement plan that is either a qualified employee plan or an annuity contract described in section 403(b). Previously, this part of the distribution could be rolled over only to another qualified retirement plan that was a defined

contribution plan.  

Did your employer put your money in a questionable investment and lose a {huge?} portion of the funds?  Good luck.