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quitting recurring job and IRA rollover
Old 08-22-2008, 02:01 PM   #1
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quitting recurring job and IRA rollover

I work as a contractor (for my former employer), as a W-2 employee
of a "professional services" agency. I've just finished a job. I don't
know if they'll want me again in a month, or never again. It's hard
to say, and I'm cool with it.

But I have a 401K, with the last two year's contributions, through the
agency's plan, and I'd like to roll that money into my IRA now, to
simplify my portfolio and because the choices in the 401K plan are
kinda lame. I'm tempted to simply resign from the agency, ASAP,
and then initiate the rollover.

I reckon this simply means that if the client (my former employer)
wants me again, I'll simply be re-hired by the agency. I imagine
it just means I'd have to maybe fill out some forms again, perhaps
the verification thing (where you show your passport). Is there
something I'm missing, some reason it might bite me to resign if
suddenly I'm wanted again next month ?
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Old 08-22-2008, 02:06 PM   #2
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Quote:
Originally Posted by RustyShackleford View Post
I work as a contractor (for my former employer), as a W-2 employee
of a "professional services" agency. I've just finished a job. I don't
know if they'll want me again in a month, or never again. It's hard
to say, and I'm cool with it.

But I have a 401K, with the last two year's contributions, through the
agency's plan, and I'd like to roll that money into my IRA now, to
simplify my portfolio and because the choices in the 401K plan are
kinda lame. I'm tempted to simply resign from the agency, ASAP,
and then initiate the rollover.

I reckon this simply means that if the client (my former employer)
wants me again, I'll simply be re-hired by the agency. I imagine
it just means I'd have to maybe fill out some forms again, perhaps
the verification thing (where you show your passport). Is there
something I'm missing, some reason it might bite me to resign if
suddenly I'm wanted again next month ?
With the 401K, do you get a match from the company??
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Old 08-22-2008, 02:08 PM   #3
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If the 401k is with a former employer, you should be able to roll it over immediately without "resigning" from your contract position. You are now an independent contractor and not a direct employee. You are also no longer able to contribute to it. I would recommend you look into a SEP-IRA for your new self-employed status.
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Old 08-22-2008, 03:23 PM   #4
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If your ex-employer contracts with ABC Temp and you are an employee of ABC Temp Staffing you need to sever with them to rollover the funds to an IRA. Read the SPD carefully re: match and time constraints.
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Old 08-22-2008, 04:54 PM   #5
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Quote:
If the 401k is with a former employer, you should be able to roll it over immediately without "resigning" from your contract position. You are now an independent contractor and not a direct employee. You are also no longer able to contribute to it. I would recommend you look into a SEP-IRA for your new self-employed status.
I've done an awful job of explaining myself, sorry. I do not have, and
never had, a "contract position". I am a W-2 employer of an agency,
who leases me out to my "real" employer.

Quote:
If your ex-employer contracts with ABC Temp and you are an employee of ABC Temp Staffing you need to sever with them to rollover the funds to an IRA.
Yes, exactly. And my question is: what happens if I sever with ABC
Temp, and I'm wanted again (by ABC's client) next month ? Obviously,
ABC Temp will have to re-hire me. Other than a little hassle, could
this bite me somehow ?

Quote:
Read the SPD carefully re: match and time constraints.
There is no 401K matching.
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Old 08-22-2008, 05:16 PM   #6
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Are you eligible to participate in the 401(k) on day 1? Many companies don't allow it for a period of time (3, 6, 9 12 months).

When DS started work last July it was 6 months before he could participate.
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Old 08-22-2008, 05:18 PM   #7
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Are you eligible to participate in the 401(k) on day 1? Many companies don't allow it for a period of time (3, 6, 9 12 months).

When DS started work last July it was 6 months before he could participate.
My point here is that if you resign to roll over your 401(k) and hire on the following month, you may not be eligible for a while.
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Old 08-22-2008, 05:21 PM   #8
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In addition to answering the questions about 401k participation, vesting, etc. you may want to probe ABC Temp to determine if they would be willing to rehire you in the event thay need you again.
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Old 08-22-2008, 07:18 PM   #9
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Originally Posted by RustyShackleford View Post
I've done an awful job of explaining myself, sorry. I do not have, and
never had, a "contract position". I am a W-2 employer of an agency,
who leases me out to my "real" employer.

I followed what you were saying.

Yes, exactly. And my question is: what happens if I sever with ABC
Temp, and I'm wanted again (by ABC's client) next month ? Obviously,
ABC Temp will have to re-hire me. Other than a little hassle, could
this bite me somehow ?

Simple enough for ABC to re-hire you. It is routine to temp agencies and contracting job shops. No reason it should bite you at all. Just leave on good terms at the end of the sub-contracted job assignment with your previos employer. I do have experience in an industry that did a lot of this.

There is no 401K matching.
No match you say... No problem, you just deferred some income. Time to get it into an IRA or Roth where you can invest it properly.

As others have pointed out they may restrict you from playing in the 401K for a while upon rehire. But, I tend to doubt that with a NO-MATCH plan. Also, traditional and ROTH IRA's are available.
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Old 08-23-2008, 01:14 PM   #10
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As a job shop employee, I resigned from the job shop after the client work was done and rolled the 401K into my own IRA. Job shops usually don't match anything. After some down time the job shop found a new client, I interviewed with the client, they wanted me and I filled out a new job shop employee application. The 401K started up immediately.

The only down side I found, was not collecting unemployment, since I resigned. But this was an almost insignificant amount of money, and the collection time would have been very short.
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Old 08-23-2008, 02:22 PM   #11
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Thanks folks.

I checked, and there is no startup delay for the 401k (since, as
several surmised, there's no matching for this sort of employment,
and with no matching no one cares about making you wait to start).

As far as re-hired, the agency shouldn't care. If they want the actual
business, and the client wants me, they'll have to re-hire me. Or maybe
I'll just try to get 'em to take me as a 1099 contractor and keep some
of the agency's overhead - now THAT'S an idea !

I guess I have to send the agency a resignation letter ...
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Old 08-23-2008, 04:07 PM   #12
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If you can go 1099 there are other deferal options that might be better than a 401k.
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