Expert: Allen - 1/10/2008

Question
My company's 401k plan permits an in service distribution to employees who have reached age 59 1/2.  I am 63 and do not plan to retire for at least another 5 years.  I am extremely dissatisfied with my plan's investment options and would like to take a substantial in service distribution and roll it over to another qualified plan with better investment choices.  I also have a 401k loan that will be paid off from payroll deductions in another 2 years.  If I take an in service distribution now, will I have to pay the balance of the loan immediately?

Answer
If you are eligible for a distribution, you certainly can take one. However, you should probably continue to make new contributions.

As far as the loan, it will depend on the wording in your plan. Check with the Plan Administrator. The plan may require you to keep a small amount in your account. If you can continue to make loan repayments, they will be deposited in your plan account and not your IRA. So if you are dissatisfied with the investment choices, you'll have to make additional distributions in the future.

Finally, as far as the investment choices, I would voice your dissatisfaction to the Plan Administrator and the Trustees. They have a fiduciary responsibility to provide good choices and can be sued if they don't.