Expert: Allen - 9/1/2004

Question
Hello and thank you in advance for your time and expertise.
I have what is most likely a simple question. My husbands company was bought out last year and they are switching the 401K option with a pension plan. How will this affect the money he has in his 401K account? Will we be allowed to withdraw it or will it just roll over into the pension fund? Also, can you explain the difference, as far as the rules go, between 401K's and a pension plan?
Thank you again,
Lisa Shaner

Answer
Whether you have a choice on withdrawing the money or rolling it into the pension plan will depend on how the termination of the old 401k plan is handled. If its structured as a plan termination, you will have the choice. If its structured as a merger of plans and/or a restatement of the old plan, you won't have a choice - the money will be automatically rolled into the pension plan.
As far as the difference between a 401k plan and a pension plan, this would require a very lengthy answer with many ifs in the answer because there are numerous types of pension plans and numerous parts to a 401k plan. So I can't provide an answer without a lot more details about the plans.