When Can a Retirement Plan Distribute Benefits?


Unless you elect otherwise, benefits under a qualified plan must begin within 60 days after the close of the latest plan year in which you:

  • turn 65 (or the plan’s normal retirement age, if earlier);
  • complete 10 years of plan participation; or
  • terminate service with the employer.

Distributable events

The law permits a plan to distribute an account after certain events (distributable events). Different distributable events apply to different types of plans, and different types of contributions or accounts within those plans. The plan is not required to allow distributions for every possible distributable event.

The plan document must clearly state when a distribution will be made. Consult your summary plan description or other disclosure documents to find out when you can request a retirement plan distribution.

401(k), profit-sharing, and stock bonus plans

Employee elective deferrals (and earnings, except in a hardship distribution) -- the plan may permit a distribution when you:

  • terminate employment (by death, disability, retirement or other severance from employment);
  • reach age 59½; or
  • suffer a hardship.

Employer profit-sharing or matching contributions -- the plan may permit a distribution of your vested accrued benefit when you:

  • terminate employment (by death, disability, retirement or other severance from employment);
  • reach the age specified in the plan (any age); or
  • suffer a hardship or experience another event specified in the plan.

Form of benefit - the plan may pay benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or a purchased annuity with monthly lifetime payments. 

Defined benefit and money purchase pension plans

Full accrued benefit -- the plan will set a normal retirement age, which is when you will be eligible to receive (or begin to receive, in the case of annuity or installment payments) your full accrued benefit.

Early or phased retirement -- the plan may permit earlier distributions when you:

  • turn age 59 1/2 (even if still employed); or
  • terminate employment (by death, disability, early retirement or other severance from employment).

The plan may require a reasonable period of time after your request to calculate the benefit and determine the payment schedule, or to value the account balance and to liquidate any investments in which the account is invested.

Form of benefit --Defined benefit and money purchase plans must offer a benefit in the form of a life annuity, which means that the participant will receive equal, periodic payments, often as a monthly benefit, that continue for the rest of the participant’s life. A married participant must be offered a Qualified Joint and Survivor Annuity. The plan may also offer other payment options.

SEP and SIMPLE IRA plans

These plans use IRAs to hold participants’ retirement savings. You can withdraw money from your IRA at any time.

A 10% additional tax generally applies if you withdraw IRA or retirement plan assets before you reach age 59½, unless you qualify for another exception to the tax.

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