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I have left a company where I did not meet the 5 year vested date (no problem and understand). However, what I don't understand is how can an employer limit my lump sum on the full distribution (yes, yes I understand the tax implications).

Is that legal? I am really confused. In the distribution documentation it did not mention anything about not giving me the full distribution or stating anything about "Highly Compensated Employee". We are talking about $20,000 and I was only distributed $10,000 for a multi-billion dollar company.

Has anybody had this problem? If so, can you provide any advice because I am confused?

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It's legal. In fact, they are required to do this, assuming you are in fact a HCE (highly compensated employee) to avoid getting in trouble with the IRS. I'm guessing they don't provide documentation for the same reason they don't explain to you explicitly what the income thresholds are for social security taxes, etc - that's a job for your personal accountant.

Here's the definition of a HCE:

An individual who:

Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015, 2016 or 2017), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

There are rules the restrict distributions from plans like 401ks. For example, treasury reg 1.401a(4)-5(b)(3) says that a plan cannot make a distribution to a HCE if that payment reduces the asset value of the plan to below 110% of the value of the plan's current liabilities. So, after taking account all distributions to be made to HCEs and the asset value of the plan, everyone likely gets proportionally reduced so that they don't run afoul of this rule.

There are workarounds for this. But, these are options that the plan administrators may take, not you. I suppose if you were still employed there and at a high enough level, a company accountant would have discussed these options with you.

Note, there's a chance there's some other limitation on HCEs that I'm missing which applies to your specific situation. Your best bet, to understand, is simply ask. Your money is still there, you just can't get it all this year.

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    Thank you for the response. When you say that the "PLAN" are you referring to the entire 401k Plan for the entire company because this company has been in business for 40+ years with employees who have been working here for 30+ years, an again is a billion dollar company. So, my little $20,000 I would doubt would put a dent in the companies plan with 1000's of employees. This company does not provide any information in fact they do not let you see the employee hand book unless you as management. And after that you have a target on your back. – Moojjoo Oct 26 '17 at 0:51
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    If the plan is qualified for deduction from the employers taxes as an employee benefit, then they are guided by ERISA and must provide a Summary Plan Description. irs.gov/retirement-plans/plan-participant-employee/… One of the rights you have is to receive a copy of the plan document. I recommend that you get and read it. – chili555 Oct 26 '17 at 1:14
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    @Moojjoo If the company is as big as you say, it may have many different 401k plans. Or, the subsidiaries they own may all have their own, and if you were an employee of one of those, even though their business name reflects the giant parent. – iheanyi Oct 26 '17 at 1:25
  • Thank you for the response. When you say that the "PLAN", are you referring to the entire 401k Plan for the entire company? Because this company has been in business for 40+ years with employees who have been working there for 30+ years, and againthis a billion dollar company. So, my little $20,000 balance I doubt would put a dent in the companies plan with 1000's of employees. The company does not provide any information in fact they do not let you see the employee hand book unless you ask management. And after that you have a target on your back. (Corrected Grammar). – Moojjoo Oct 26 '17 at 23:13
  • I learned today that an additional sheet of paper was added to the fax sent from the company to the 401k Plan Company that I did not sign or was given for review (aka NO Initial or Signature). SHADY. Also, I learned I am not listed as an HCE on the plan. Time for getting my i's dotted and t's crossed and have a three way call with the Company and the 401k Company to get this straighten out. Are they trying to stay under $10,000 line to not raise any flags with the IRS? Hmmmmm????? – Moojjoo Oct 26 '17 at 23:18

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