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From: lbl@druhi.UUCP (LocklearLB)
Newsgroups: net.taxes,net.invest
Subject: Re: New penalty on 401k plan withdrawals
Message-ID: <954@druhi.UUCP>
Date: Wed, 3-Sep-86 16:40:05 EDT
Article-I.D.: druhi.954
Posted: Wed Sep  3 16:40:05 1986
Date-Received: Thu, 4-Sep-86 21:27:33 EDT
References: <2fc05008.2a75@apollo.uucp>
Organization: AT&T Information System Labs, Denver, Co
Lines: 55
Xref: mnetor net.taxes:562 net.invest:1173

In article <2fc05008.2a75@apollo.uucp>, tbg@apollo.UUCP writes:
> 
> 
> >If anyone can explain any reason for there being a penalty for 
> >withdrawing money from a savings plan, let me know.  
> >Sounds like the investment banking 
> >lobbyists got their way on this one.  They probably wanted to 
> >make it completely illegal to withdraw funds from savings plans
> >but didn't have enough money ^h^h^h^h^h^h influence to convince
> >congress, so settled for this compromise :-).
> 
> 
>     If they had lowered the marginal tax rates, as they did,
>     WITHOUT adding a penalty for early withdrawal from 401K
>     plans, everyone who had been shielding their income in 
>     401k plans for the past couple of years could withdraw their
>     money next year with considerably less exposure to taxes.  It may
>     not be that 28%+15% will equal out to what your original tax would
>     had been on your 401k contribution, if 401ks had never existed,
>     but how much complexity do you want?
> 
>     Instead of calling a 401k plan a "savings plan", why don't you
>     call it a tax shelter for rich people?  You talk as though the Feds
>     have decided to tax withdrawals from piggy banks.  
		.
		.
		.
> 
>     Tom Gross
>     Apollo Computer, Inc.
>     Chelmsford, MA

The reason that the original poster talked about savings plans is because she
MEANT savings plan as opposed to 401k plan.  Here at AT&T we have a 401k plan 
to which we can contribute pre-tax dollars and a company savings plan to which 
we can contribute after-tax dollars.  I assume that this situation also exists 
at other large compnies. The MONEY magazine article that the original poster 
referred to talked about penalizing early withdrawals from 401k plans AND 
company savings plans. 

It doesn't matter to me that early withdrawals from 401k plans will be 
penalized since I will use mine to replace my IRA. But the talk of penalizing
withdrawals from company savings plans really irritates me.  Why should
I get penalized for using my savings plan the way it is intended to be used?
What is an early withdrawal from a savings plan?!?!?!?

Never having heard of this provision until the MONEY article, the only 
rational explanation that I can think of is that the MONEY magazine
article used "401k" as a synonym for "savings plan" in the same way the Tom
used it in his posting.  I certainly hope that this is the case.  Can anyone
shed some light on this subject?

Barry Locklear
AT&T Information Systems Labs
Denver, CO