Can a former employer withhold my 401K distribution at 59 1/2 because I work for a competitor ??

Question

I was told I must reach 65 yrs or stay out of the "industry" that I have worked in for 36 years, for 2 full years before I can get my money. This is a punishment for going to work for a competitor. Does this sound legal ??

Answer 1

Your 401K and the funds that you contributed are controlled by a trustee company not your X-employer.  Contact any company that has IRA's such as your Bank, any brokerage house (Fidelity, Merrill Lynch, etc.) and ask them for their 401K rollover form. Fill out the form and they will take care of the transfer and opening the IRA for you. Your former employer has nothing to say about it. You can roll the money directly into a Traditional IRA, then you will have full control of your money. If you really want to get nasty - file a complaint with the IRS against your x-employer for deceptive practices. I think what DIGDOWN is referring to only applies if you are younger than 59 1/2. Apply for the IRA rollover and see what happens, you have nothing to lose and everything to gain.

Answer 2

Depends...are you union?  Did you go to work for another union shop?  Does that union shop co-sponsor the same 401k?    

Many union plans will have distribution rules that don't allow for distributions for a certain period (never heard 2 years but I have heard of 18 months) in order to prevent people jumping ship to another company with same plan just to get the $$.   Reason is that they consider it all same employer and you didn't really "quit" just changed locations.

Answer 3

If you no longer work for that company, you should just rollover that 401K to an IRA.  Then you can do what you please and they have absolutely no say so.  You should have been given info on how to do this when you left that company.  Just call the company that handles the 401K and they will take care of it for you.

Remember that when you start to take money out of that 401K, you will have to pay income tax.  So only take out what you really need and let the rest ride.

Answer 4

no - your investment account belongs to you.  you may roll it over into another account or even cash it out with no penalty since you are 59.5 yrs.

Contact a senior law attorney if necessary for a consultation.