Rule of 55 - Ask employer to modify plan?

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Doc7
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Rule of 55 - Ask employer to modify plan?

Post by Doc7 »

My megacorp 401k plan documents contain no verbiage about withdrawals after separation at or after age 55. My old employer’s does, but this won’t help me (left them when I was 28).

I am 37 now so am not in a hurry. Is it possible and is it probable that by asking HR to consider adding this provision to our plan I may experience success?
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beyou
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Re: Rule of 55 - Ask employer to modify plan?

Post by beyou »

Alot can happen in 18 years. I wouldn’t worry about it anytime soon.
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Doc7
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Re: Rule of 55 - Ask employer to modify plan?

Post by Doc7 »

beyou wrote: Mon Jan 17, 2022 12:32 am Alot can happen in 18 years. I wouldn’t worry about it anytime soon.

I was thinking that (if I continue to work there) 18 years I can ask several regime changes of HR and plan administrators. Probably gives me at least 9’chances of denial without getting fired for harassment! (Once per two years)
Lionel Hutz
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Re: Rule of 55 - Ask employer to modify plan?

Post by Lionel Hutz »

You are over-estimating the number of regime changes, and even if you aren’t it wouldn’t be 100% turnover and records still remain, so emailing them once every 2-3 years would not go unnoticed. In general, employers are not keen to change retirement plan rules as it’s a very complex regulatory process. Without a lot of public support it’s unlikely they’d take one person’s request especially when there’s years since the person would benefit from said change.

However, your plan does not need to offer a specific “Age of 55 Rule Distribution”, as this is inherently a feature of every 401k. Any distribution that meets the requirements is exempt from the 10% penalty.

What you may find, is that your employer does not offer individual partial distributions, only lump sum distributions. If so, and assuming they never change the plan document, you would still have “one shot” to leverage the Age 55 Rule: take a total distribution of your account, and split that distribution between what you wanted as a taxable distribution and have the remainder be a rollover to an IRA. That too is a risk to ensure you don’t need funds before 59.5 again, but all that can be done to still leverage the benefit of the Age 55 Rule.
Dude2
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Re: Rule of 55 - Ask employer to modify plan?

Post by Dude2 »

In my experience, what really drives this is competition, i.e. loss of personnel due to competitors having better retirement benefits. We have two giant defense contractors in town. Each of their 401k's are handled by Fidelity with nearly identical fund offerings. One company offered in service conversions, one didn't. Took about 3 years for the 2nd company to wake up to the fact that this was an incentive for people to go work for company A.

Where in service rollovers affect many, Rule of 55 not so much. Plus those are folks that probably want to hang on to their jobs. I think that's where this lies. You as a younger person actually considering Rule of 55 benefits is powerful leverage. Write email to HR/benefits expressing your concerns.
Then ’tis like the breath of an unfee’d lawyer.
OhBoyUhoh
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Re: Rule of 55 - Ask employer to modify plan?

Post by OhBoyUhoh »

Lionel Hutz wrote: Mon Jan 17, 2022 7:31 am However, your plan does not need to offer a specific “Age of 55 Rule ...
What you may find, is that your employer does not offer individual partial distributions, only lump sum distributions. If so, and assuming they never change the plan document, you would still have “one shot” to leverage the Age 55 Rule: take a total distribution of your account, and split that distribution between what you wanted as a taxable distribution and have the remainder be a rollover to an IRA. That too is a risk to ensure you don’t need funds before 59.5 again, but all that can be done to still leverage the benefit of the Age 55 Rule.
I need things spelled out and wondered about this. Great explanation, thank you!
I had money, I had none. I had money, I had none. But I never been so broke that I couldn't leave town. (Jim, Ray, Robby, John)
Escapevelocity
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Re: Rule of 55 - Ask employer to modify plan?

Post by Escapevelocity »

OP - I wouldn't assume that the lack of verbiage about Rule of 55 with your current employer would impair your ability to take advantage of the rule. As previous poster stated, they key provision is the ability to take partial distributions. Check with your plan administrator specifically about that.
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