Can I rollover my 401(k) during a Leave of Absence?

Okay, my 401(k) plan investment options suck. I want to roll the money into an IRA so I can choose better (lower fee) options.

However, our plan does not offer in-service withdrawals, and I like my job.

Can I arrange a scheme with my employer where I "quit" for a period of time, unpaid, and then I am hired back? If so, can I rollover the funds while I have "quit"?

I am fully vested in my 401(k), and my employer has a written policy in place where employees who are re-hired within four years keep all their seniority benefits like vacation time and 401(k) vesting schedules, so the only thing I would lose would be my paycheck while I am in "quit" status.

If this is legal and works, how long would I have to "quit" for in order to do all the required paperwork? What risks am I incurring by trying this?

-->Adam

You pretty much answered your own question. The plan does not offer in-service withdrawals.

ERISA seems to get pretty upset with selective treatment. If they would do this 'scheme' for you, then they need to offer it to all Plan participants.

You could see if your Plan allows for a hardship distribution (and if you qualify); however, there are also monetary and other restrictions involved in that. You could also see if you Plan allows loans, but in my experience the interest rates have been approximately Prime. (Let alone it probably isn't a good strategy.)

My advice would be to complain to whomever is in charge of your Plan's investments. It costs you nothing and you might get different fund options out of it. Almost all other options are shady or will cost you more than they are worth.

In response to "quit" in doing paperwork. A termination is a termination. Once the Plan Sponsor (usually your employer) notifies the TPA or custodian, things get rolling fairly quickly. However, inquiry and preparation by a participant helps. Expect 30 - 60 days before funds are transferred.

I have done something similar to this when I canged contracts with a contracting agency. I think it is all up to your employer. If you roll it over into a rollover IRA there is no risk in the transfer but you will have a lot more investment choices and you could lose a lot of money if you don't invest wisely.

Quitting is different from a leave of absence. If you truly quit, then you can roll over your 401K to an IRA. But be careful - they might not hire you back.

It would probably take 30-90 days to get all the paperwork and the actual transfer done.

Whether this would be allowed depends on your plan's rules.

what if you quit and they decide they need a replacement right away and you have no job to come back to? What would you live on - you don't get unemployment if you quit? It might take a month or two to get the money out of your 401k plan - It's not like they write you a check the day you leave. Just the fact that you're willing to go without w paycheck just to get a better return on your retirement benefits seems insane. Any gains (which won't be huge), would be offset for a long time by the lost wages.