It depends on your age and how your plan is written. In most cases, rolling over an active employer plan while still employed is not permitted, but there are two situations where it may be possible.
The IRS permits employers to restrict in-service distributions, meaning you generally cannot take your 401(k) balance out of your current employer's plan and roll it to an IRA while you are still working there. Most plans take advantage of this restriction and do not allow it.
Once you reach age 59½, federal law requires that your employer's plan allow an in-service distribution if you request one. At that point, you can roll the balance (or any portion of it) to a self-directed IRA regardless of whether you're still employed. If you've reached this age, check with your plan administrator to initiate the process.
Some plans are written to allow in-service distributions before age 59½. Eligibility thresholds vary. Some plans allow it after a certain number of years of service, others at a lower age threshold such as 55. The only way to know is to review your plan's Summary Plan Description (SPD) or ask your HR department or plan administrator directly.
If an in-service distribution is available, there may be restrictions on how much you can roll over, or whether the full balance must be distributed at once. Get those details before initiating anything.
Funds you previously rolled into your current employer's plan from a prior job should be eligible for distribution even if other plan funds are not. Most plans allow these "rollover contributions" to be distributed separately. Again, your plan administrator or SPD is the authoritative source.
If you are still working, under 59½, and your plan does not allow early in-service distributions, your current employer 401(k) is not available to roll over yet. Your options at that point are to focus on other existing accounts (old IRAs, former employer plans) or wait until you separate from employment or reach the qualifying age.
How do I find out if my plan allows in-service distributions?
Request a copy of your plan's Summary Plan Description (SPD) from your HR department or plan administrator. The SPD will specify whether in-service distributions are permitted and under what conditions. You can also ask your plan administrator directly. They are required to answer this question.
If I'm eligible for an in-service distribution, do I have to roll over the full balance?
Not necessarily, but it depends on your plan. Confirm with your plan administrator before assuming a partial rollover is available.
Does rolling over part of my current employer's 401(k) affect my ongoing contributions?
No. Rolling over a portion of your existing balance does not affect your ability to continue making contributions to your employer's plan while still employed. The two are independent.
What if my current plan has both pre-tax and Roth funds?
Pre-tax and Roth balances must be rolled to compatible account types: pre-tax to a Traditional IRA, Roth to a Roth IRA. They cannot be combined into a single IRA. If you want to self-direct both pools, you will need to establish two separate IRA accounts.
This information is provided for educational purposes only and should not be interpreted as tax, legal, or investment advice. Readers are encouraged to consult a qualified professional who can offer guidance based on their personal situation.