Wednesday, April 22, 2009

BEWARE - Hostage Situation

When I began employment with the County, I had the option of contributing into a separate tax-deferred compensation plan to help save for retirement. I chose the 401(a) plan. I could only afford to pledge the minimum contribution, but figured that it would be SOMETHING to augment my retirement whenever that time rolled around.

In the past fiscal quarter, my 401(a) account has dived 50% because of the stock market tank. And all of MSU's medical bills have gone into collections because there has been no insurance settlement yet. The lawyer indicated that settlement is still at least 4 months away, if not longer. I decided that I wanted to rescue my money from the 401(a) before any more of it was lost and then rescue MSU's credit score by paying those medical bills.

First, let me begin by stating that the money in the 401(a) account is MINE. There is no employer contribution. It’s MY money that is invested in the way that I dictate.

I called the Plan Coordinator today and learned:

I can not request distribution of MY MONEY unless I am terminated from County employment. I can not request distribution of MY MONEY for rollover into another retirement account unless I have been terminated from County employment. I can request a loan of MY MONEY from MY ACCOUNT, but must set up a payment plan ON TOP of my regular contribution to pay MYSELF back MY MONEY and must pay MYSELF interest on MY MONEY to the tune of prime +2%..

The good news is that if I default on paying MYSELF back MY MONEY, the default is treated like a lump sum distribution and is taxed as such, WHICH IS WHAT I WANTED IN THE FIRST PLACE.

However, I can only take half of what is in my account as a loan. AND, I can’t even apply until the 27th, because the County is inconveniently converting the plan management to something called “Nationwide," which no doubt is a private management firm that will inevitably have more fees and penalties to hit me with as I attempt to access MY MONEY.


W.........................T...............................F..............................?????????????

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2 comments:

David said...

First let me say THOSE BASTARDS!

It really comes down to the paperwork you signed when you opened up the account. I would ask them to show you what part of the contract they're citing. It's possible that it doesn't exist or they are interpreting it wrong. It sure doesn't sound right. Why would they care if you took the money out and still worked for them or not?

I see her point about a loan. Since it's tax deferred there will be a hell of a penalty if you took the money as income but not if you plan on putting back. But, that should be your choice because like you said, it is your money.

I wonder if there is something like a hardship clause or something that would allow you to take the money for medical or other? Even if you go the loan route without planning on paying it back you can only get half. When would you be eligible to borrow the rest?

I would ask to speak to someone else. This doesn't sound right. You shouldn't have to go into the poor house with money in the bank. :(

6:15 PM
David said...

*hug*

6:16 PM

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