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Asked 1/14/2011
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Do we have a choice what to do with our money in our 401K if a Company is bought out and changes names & Investment Companies? The company that my husband is working for was bought out this past year and they have slowly been changing the name over on everything. They have now decided as to go with a different Investment Company for our 401K. They are freezing our old 401K accounts (as of 12/31/10) until July of 2011 and letting them sit and then in July they are rolling them into the new Investment Company. We have decided we do not, for many reasons, want to invest in the new investment company and instead go with our own investment company outside. Do they have to provide us with the option to roll our money to a company of our choice with our future contributions being our responsibility after tax of course, or our we forced to go with their Investment Company. They are not giving us a choice, as of July they said we will have an account with the new Investment company whether we want one or not. Not to mention that we have been vested for 10 years and now they are transferring our money to this new Investment Company and using the date the buy-out happened as the hire date and starting from square one, with not being vested. This seems wrong to me. I really need advice! |
Answer 1/3 - Submitted 1/14/2011
If your current employer is switching the investment company, often referred to as the retirement plan administrator, you cannot take out the money without incurring a penalty. If you take out the money prior to age 59 and a half, it's considered an early withdrawl and is taxable. The additional tax on an early distribution is 10% of the taxable amount. The taxable amount is also included in your taxable income. This 10% tax is in addition to regular income taxes.
Because the 401k is considered an employer plan option, they have the ability to direct where the contributions would go.
Answer 2/3 - Submitted 1/14/2011
Answer 3/3 - Submitted 1/14/2011
You can roll over your 401K at any time if you're fully vested. If not, the company may be able to take out their contributions. There is no penalty incurred when rolling a 410K to an IRA. The trick is to get an IRA that does not have obligated contributions from you without a service fee. You need to speak with a competent banker, investment advisor, etc before making the switch to make sure you can get the biggest bang for the buck.
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