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I Want it Now! Receiving Pre-Termination of Employment 401(k) Plan Distributions

May 14, 2024 (4 min read)

ERISA and tax-favored retirement plans are primarily intended to provide retirement income to plan participants and their beneficiaries. Unrestricted access to retirement savings before retirement generally is not permitted, but plans, particularly 401(k) plans, can and often do allow some in-service distributions. Take a look at the types of permissible in-service distributions by referencing this comprehensive chart. Consider adding PLESA emergency account provisions as a way to allow active participants under age 59 ½ some access to their savings without incurring the 10% penalty tax.

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Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.      

  • Employee Benefits & Executive Compensation Key Legal Developments Tracker (Current)
    Stay informed on new developments.
    • Health and Welfare Plans. DOL's EBSA division issues a final rule that rescinds ''association health plans'' noting the expanded definition of ''employer'' under the prior final rule marked a substantial departure from the DOL's longstanding pre-rule guidance on ERISA's definition of "employer." 89 Fed. Reg. 34106 (Apr. 30, 2024)EBSA Fact Sheet.
    • Health and Welfare Plans. HHS issues a final rule seeking to protect the privacy of a person legally seeking abortion-related services by prohibiting the use or disclosure of protected health information where the use or disclosure is sought for purposes of (1) conducting an investigation (be it criminal, civil, or administrative) into any person for seeking, obtaining, providing, or facilitating reproductive health care; (2) imposing liability (be it criminal, civil, or administrative) on any person seeking, obtaining, providing, or facilitating reproductive health care; or (3) identifying any person for the purpose of conducting such an investigation or imposing such liability. 89 Fed. Reg. 32976 (April 26, 2024)HHS Fact Sheet.
    • Employment, Independent Contractor, and Severance Arrangements. The FTC issues a final rule prohibiting new non-compete agreements with all workers. The rule provides that existing non-compete agreements with “senior executives” remain in force and existing non-competes with all other workers are not enforceable, as of the effective date, September 4, 2024. 89 Fed. Reg. 38342 (May 7, 2024).
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