previous employer pension partial rollover and personal disbursement

You should be able to do an early withdrawal of the $5K, probably plus enough for the 10% penalty and taxes, and a direct rollover of the rest to the new plan, assuming the old and new custodians will agree to do that.

You could withdraw the whole amount and then contribute that minus $5K to the new plan, but that's usually a bad idea because they withhold

10% of the whole thing. You can get back the 10% eventually for the part you re-contribute, but in your situation it sounds like eventually is exactly what you don't want.

You need to talk to the old and custodians and see what their rules are. Some are more cooperative than others. If the new custodian isn't cooperative, a perfectly good alternative is to put the money in a rollover IRA which has the same tax benefits and preserves the option of moving the money back into a 401(k) later if you want. Any of the usual fund managers will be happy to have your money and help walk you through the required steps.

Don't forget there is a mandatory 20% withholding on any amount not directly transferred to a new custodian (IRA or employer retirement plan).

Ira Smilovitz

Your post is hard to answer as there are not enough facts, so I will make some assumptions. I will assume that the amount sitting in your former employer's plan (~$24000) has no cost basis. I.e., it consists of pre-tax contributions and untaxed earnings.

The first thing you need to find out is whether your new employer's plan accepts rollovers from another plan. There is no requirement in the law that qualified employer plans accept rollovers. Let's assume that your new plan accepts rollovers. You would inform the administrator of your old plan that you want to close your account by rolling over $X to your new plan and taking a distribution of the balance. Your old plan would issue two checks. One check made out to you that would be net of 20% mandatory federal tax withholding and another check made out to the new plan and issued to you. There would not be any withholding on this check. You would give that check to the new plan. This is a direct rollover that is tax free.

So... if you actually needed $5000, you would have your old plan distribute $6250 to you. After withholding of $1250 (the 20%), you would have $5K. The second check would be for $17,750 ($24000 - $6250) made out to the new plan. When you file your taxes for the year, you would report taxable pension income of $6250 and you would include $1250 in income tax withholding on page 2 of the 1040.

If your new employer's plan does not accept rollovers and you still need $5K and you don't want to leave the balance with your old employer, the easiest solution is to rollover the retirement plan to an IRA by having your former employer make the direct rollover check for the full balance payable to your IRA. As a direct rollover it is tax free. You could then withdraw the amount you need from the IRA. Note, that there is a 10% withholding requirement from an IRA only if you fail to make an election. You can elect to withhold any amount you want, even zero!

Lastly, depending upon your age, you may be subject to a 10% early withdrawal penalty on the taxable amount of any distribution.

See this link for an explanation of the age 50, 55 and 59 1/2 exceptions to the penalty. Disregard any reference to New York as the rules are the same for everyone.

As this was a long reply, please remember the original assumption.... your employer plan has no cost basis.

You might also find this helpful: