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Rolling over 401K (from current employer account)

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  • Rolling over 401K (from current employer account)

    I have been with my current employer (a medium-sized academic hospital) for almost 10 years.  I like most aspects of the job, but retirement saving setup is not great.  401k only (with 18K/year max), no profit sharing, no after-tax, no 457b plan.  Moreover, the administrative expenses are not sky high but not cheap either (ER 0.18), plus poor investment choices with only one decent low-expense mutual fund (total market index with ER = 0.3, everything else is ER=0.7 or over).  I have tried agitating with the finance committee, but there is too much momentum/entrenchment.  I contribute max to my ROTH and SEP 401k, but still I have uncomfortably too much tied in with whole market US index; yeah, it's decently diversified but US market is kinda riding high at this point, not to mention this index mutual fund is too expensive for an index to boot.

    Is there a way to do an IRA rollover while you are still employed?  At 10 years is about the point where length of service benefits max out (no added time for sabbatical, pay increases, vacation, etc)... can I 'strategically' quit for a day (alas, I think that is too difficult from a practical standpoint, but humor me please & treat this as a serious question).

  • #2
    You are asking about an "in-service" rollover. Some plans allow them, most don't. You'll have to check with your HR department or read your SPD (Summary Plan Description).

    You'll have to check with your employer to see if you can "strategically" quit for a day. I can see a lot of complications involved (loss of accrued benefits, for example) not to mention that other employees will want to do the same.

    Did you mean "SOLO" 401k, rather than SEP 401k? There is no such thing as a SEP 401k.

    Best alternative I can think of at this point is to build up your taxable account. I can think of 11 reasons to do so.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Even if the plan allows in-service rollovers in general, IRS regulations prohibit in-service rollovers of employee salary deferrals and earnings before 59.5. Since that is all the OP has, there is no ability to do any rollover.

      Be very careful with any "sham termination". The IRS view is that for it to be a bona fide (their term) termination, neither the employer nor the employee can intend to restore the employment relationship. I can't believe any company would agree to a 1-day sham termination based on IRS information letters that it could result in plan disqualification.

      If the OP is referring to their employer plan, employers sometimes refer to their SARSEP plans as a SEP/401k. It is easier to explain the SARSEP as a SEP plan with a 401k employee salary deferral feature, to people who are familiar with 401k plans.

       

       

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