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Company bought out, Employees told IRS put hold on 401k is this legal?

Jun 04, 2014 by Shirley from Drexel, NC in  |  Flag
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Hi Shirley,

What's probably going on is something referred to as a "blackout period" that generally occurs with corporate mergers or acquisitions.

When a blackout period occurs, the company is under obligation to notify you that your ability to make changes to your investments, take loans, or obtain distributions are suspended. I assume that's the notice you received that prompted your question.

During the blackout period, the company is waiting on the IRS to sign off on a new 401k plan that will cover the combined companies. Most companies give you an estimate of when the blackout period will end.

Here's a link to the IRS you may find helpful: Search "blackout": http://www.irs.gov/Retirement-Plans/IRC-401(k)-Plans-Operating-a-401(k)-Plan

If you aren't in the blackout period yet, make sure that your investments are appropriately diversified beforehand so that you'll be okay no matter how long the blackout period lasts. Hopefully it won't be long and the transition to a combined plan will go smoothly for you! Please reach out with any additional questions.

1 Comment   |  Flag   |  Jun 05, 2014 from Suffolk, VA
Travis Robert Scott

Stephen is correct in thinking it most likely due to a "blackout period". Contact the company that bought yours out and the plan administrator should be able to give you an idea on the time frame until your funds are active and open in the new plan. If they do not know, ask for a number of the new plan provider. It is their job to give you a nice warm fuzzy feeling being that you are a new client of theirs!

Flag |  Jun 11, 2014 near Indianapolis, IN

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