Is it a federal law that you can withdraw 401k at 59 1/2 without penalty Just pay taxes What federal agency?

Question

handles 401k

Answer 1

Yes, there is a federal agency that 'handles' 401k plans.  It's called the Internal Revenue Service.  Most of the laws and regulations that govern how qualified retirement plans operate can be found in Section 26 of the United States Code, more commonly known as the Internal Revenue Code.  

Furthermore, most of the laws in the IRC can be found in section 401 of said code (as well as other sections).  The laws surrounding the 10% early withdrawal penalty on distributions from qualified retirement plans can be found in Section 72(t) of the IRC.  

The IRS has a unit in its agency called the Tax Exempt/Government Entity Department.  They are responsible for, among other things, enforcing the laws and regulations of Section 26 of the US Code and its sister Title 26 of Code of Federal Regulations.  

There are also some laws that fall under the umbrella of the Department of Labor but these will mainly concern the plan sponsor and how the plan is established and operated.

Answer 2

You only pay the 10% penalty if you are under age 59 1/2.  No Federal agency "handles" 401(k)s but the IRS does collect the taxes on the distributions.

Answer 3

If you are currently employed, your plan may not allow withdrawals.  However, any withdrawal you make after age 59.5 will not be subject to a 10% penalty.

The rules for this are part of the Internal Revenue Code (Section 401k).

Laws regarding the IRC are passed by Congress.