Before a change in law about 20 years ago, many businesses simultaneously maintained a money purchase pension plan (“money purchase plan”) and a 401k profit sharing plan (“401k plan”). After the law changed, many businesses merged the money purchase plan into the 401k plan. However, a 401k plan that permitted an employee, while employed, to take an “in-service” distribution at age 59-1/2, was prohibited from including the merged money purchase plan account in the distribution before age 62. This has been confusing to plan participants and administratively burdensome. The law, beginning in 2020, now allows the employer to lower the age 62 requirement to age 59-1/2, which will significantly simplify the plan’s in-service distribution feature. To learn more about this law change, please contact our team at ACSI.
