A:

Although the participant may be eligible to withdraw the funds if a plan is terminated as a result of an acquisition or other similar transaction, this does not mean that the 10% penalty will be waived. However, the participant would qualify for an exception if he/she meets any of the requirements as listed under the Tax Code. Please see Page 29 of IRS Publication 575 for a list of exceptions.

For more insight, read Tough Times ... Should You Disturb Your Qualified Plan's Assets?

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS
  1. I withdrew funds from my Roth IRA to contribute elsewhere. How will I be taxed?

    If you close the Roth IRA now and withdraw the balance, you will be taxed on the earnings unless the distribution is qualified. ... Read Answer >>
  2. What is the penalty for taking money out of my 401(k) before I'm 59 years old?

    Learn why withdrawing from a 401(k) plan before age 59 carries an extra 10 percent tax penalty. Only a few circumstances ... Read Answer >>
  3. I failed to distribute an inherited 401(k) that was found in an audit. What happens ...

    The party responsible for paying the penalty in such cases will be the beneficiary of the 401(k) plan. You may want to start ... Read Answer >>
  4. How do you withdraw money from your 401(k)?

    Deciding to take a withdraw from your 401k is not a decision that should be made lightly. However, for those who needs funds, ... Read Answer >>
Related Articles
  1. Retirement

    Your 401(k): Not the Best Emergency Fund

    If you have an emergency and need to access your retirement funds, you may have to pay a penalty if you dip into your 401(k). But there is a better option.
  2. Retirement

    When a 401(k) Hardship Withdrawal Makes Sense

    If you've exhausted all other avenues, there are ways to withdraw funds before age 59½ – sometimes without the 10% penalty that's usually due.
  3. Financial Advisor

    Tough Times: Should You Dip Into Your Qualified Plan?

    401(k)s, pensions and profit-sharing plans can be a source of cash, but there are consequences to this option.
  4. Retirement

    When Paying Off Debt With Your 401(K) Makes Sense

    The experts warn against touching your retirement savings early, but there are situations where it is the best financial decision.
  5. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  6. Financial Advisor

    The 401(k) and Qualified Plans Tutorial

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  7. Retirement

    How Yearly Taxes on 401(k) Accounts Work

    Learn how your contributions to traditional or Roth 401(k) accounts are taxed, either in the year of contributions or at withdrawal, depending on the type.
RELATED TERMS
  1. Withdrawal

    Removing funds from an account, plan, pension or trust. In some ...
  2. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  3. Withdrawal Benefits

    The rights of an employee who has a qualified pension plan to ...
  4. Qualified Reservist

    A member of the military reserve who is not actively serving ...
  5. Active Participant Status

    Active-participant status is a reference to an individual's participation ...
  6. Eligible Rollover Distribution

    A distribution from an IRA, qualified plan, 403(b) plan or 457 ...
Hot Definitions
  1. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
  2. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  3. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  4. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  6. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
Trading Center