Can my employer hold my 401k funds and not allow me to continue to contribute?
<p>My employer stopped taking my my 401k contributions after 12 years of my participation. They said since I am a union member I was never really eligible. However they won't release my funds so that I can start my own IRA.It seems to me if I can't contribute to the 401 my participation has been terminated and they should have to make the appropriate distributions. I appreciate any information anyone has on this subject. </p>

<p>There is no federal rule barring union members from participating in employer-sponsored 401K plans. And as described at <a href="http://www.401khelpcenter.com/mpower/feature_042401.html#.XCp8uK_ru9Y" rel="nofollow noreferrer">this site</a> 401K plans are often offered by a union directly to its members. However, it is possible that your employer's plan is not (or is no longer) open to union members. You could ask for a copy of the written rules under which they say you are not eligible to make further contributions.</p>

<p>If you cease to be an employee, the plan must allow you to withdraw your account. It must also allow withdrawals once you reach age 59 1/2. It is usual for a 401K to allow you to withdraw at any time, withholding the proper IRS penalty, or accepting a statement that you will roll the money over to a qualified IRA account within 30 days. Many plans allow direct rollovers, in which the plan sends the account balance (or part of it) directly to such a qualified account. This is often the best method, because it avoids any error that might trigger a 10% penalty. You might want to ask if direct rollovers are supported by your plan. Get the answer in writing, especially if it is "no".</p>

<p>However, a plan is not required to support direct rollovers. In fact I cannot find any rule that requires a plan to permit withdrawals for current employees prior to age 59 1/2, although I have never encountered a plan that forbids all such withdrawals. You could ask for a copy of the plan's written rules on withdrawals. </p>

<p>Once you have a copy of the rules, you can consult a lawyer with knowledge of 401K law as to whether the plan can deny your request, and what steps you might be able to take.</p>

<p>See also the article <a href="https://www.plansponsor.com/challenges-of-retirement-plans-for-union-members/" rel="nofollow noreferrer"><em>Challenges of Retirement Plans for Union Members: The collective bargaining agreement rules</em></a> from Plansponsor for some relevant information.</p>

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