I receive long term disability from my employer and have been found permanently disabled and have qualified for social security disability. I just turned 55. My employer HR Benefits administer tells me I can not access a distribution from my 401k until I reach 65 or I terminate from the company at which point I would not receive the long term disability payments any longer. Does this sound right? From what I am reading I should be able to take a distribution ( lump sum payment ) and not pay the extra 10% penalty and still receive my long term disability payments from employer . Any advice would be appreciated. I think she is just not clear on the law.
The particular plan rules are what govern your ability to take a distribution from the plan. If the 401k plan continues to treat an LTD recipient as an active employee and the plan does not allow you to take a distribution until you are 65 or cease to be an active employee under the plan rules then what she is telling you is correct. Just because the law would permit you to take a distribution without penalty does not mean the plan has to be as generous as it could be under the law.
The specific plan rules will govern your situation. Yu may wish a consult w/ a local attorney to review the exact plan language.
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