When can I take a distribution from The Boeing Company Voluntary Investment Plan?
Boeing Company Voluntary Investment Plan (VIP)
I often get this question from Boeing employees. (If you know about the types of contributions provided by Boeing, you can skip the first part of this article.)
A little background about the Boeing Company VIP. The Boeing VIP is a 401(k) plan allowing employees to make both traditional pre-tax contributions and after-tax Roth contributions. If you were hired after January 1, 2008, you were automatically enrolled at 4% of pay (pre-tax). You must make an active election to choose a different rate. In addition, your 401(k) contribution will automatically increase by 1% of pay each year until your contribution reaches 8% of pay.
In addition to the employee 401(k) contribution, Boeing can match the employee’s contribution. This match is up to the discretion of Boeing.
Whether you make a 401(k) contribution or not, Boeing will make an employer contribution equal to 4% of pay for all eligible employees.
All contributions are 100% vested, meaning the employer or matching contribution is made on Friday and you quit on Monday, the contributions are all yours.
If you do not direct where your contributions are invested, the funds will be invested in a target date fund. (We will discuss in a later blog, why this may not be the best option for a participant.)
When can I take distribution?
The Boeing VIP has some generous distribution options. It has the normal option of taking a distribution when you no longer work at Boeing. (By distribution I mean either take the money and run or roll to an IRA. If you “take the money and run” you will have ordinary income tax, plus you may have a 10% penalty tax. Rolling to an IRA will avoid both of these until you take a distribution from the IRA.)
In addition to the normal “when you leave” distribution, if you are over age 59 ½ you can take your all or a portion of your account balance out (either as a rollover or as a taxable distribution).
If you have been employed for 5 or more years, you are eligible to take all or part of your matching contribution account, even if you are under age 59 ½. Remember, if you do this and you continue to make 401(k) contributions, the matching contribution will be suspended for 6 months.
Why take an In-service distribution?
The Boeing VIP has a limited number of investment options. It has 15 mutual funds, plus 8 target date funds. By rolling the funds to an IRA you control, you may have more investment strategies. You may begin to implement a plan that guarantees income for life. You should be aware that rolling to an IRA may increase investment fees.
Everyone is in a different, unique situation, you should consult with a tax/financial adviser before making any decision.
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(The information in this article is subject to change, but is believed to be true at the time it was written.)
Investment adviser representative of and advice provided by Royal Fund Management, LLC, a SEC registered investment adviser.