Ask Our Experts
By: Compiled by Carole Fleck; Source: AARP Bulletin Date Posted: 2006-09-13 12:53:00-04:00
The AARP Bulletin 's Ask Our Experts column provides answers to important questions affecting older Americans. Read below for this month's column, or review our archive of previously published questions and answers sorted by topic. (Note: Recent news or changes to regulations may affect the guidance offered in this previously published column.)
Submit your own question to the Ask Our Experts column via our easy-to-use online form.
Q. I'm still working, but I borrowed half of my 401(k) plan to pay off a bill. Do I have to pay this back with interest?
A. Many plans allow participants to take loans from their accounts, but they must be repaid with interest so that the funds intended for your retirement are not depleted.
However, an employee age 59½ or older is permitted to make withdrawals while working for the company sponsoring the plan. There's no penalty on the amount withdrawn, but you'll still have to pay income tax. Anyone under 59½ must pay income tax on any withdrawals plus a 10 percent penalty.
For more information about 401(k) plans, go to the Internal Revenue Service online, and use the search box to find the "401(k) Resource Guide."—Expertise provided by John Turner
Q. My mother gave me her assets four years ago. She has been in a nursing home for three years, funded by a long-term care insurance policy that covers only three years of care. She will be going on Medicaid soon to pay for her nursing home. Can New York, the state we live in, seek reimbursement for her Medicaid expenses after she passes away?
A. Before the Deficit Reduction Act became law in February 2006, there was a three-year "look back" period for most asset transfers, meaning that nursing home residents were not eligible for Medicaid if they had given away their assets within three years of going into a nursing home. Because this look-back period was in effect when your mother transferred her assets four years ago, the state of New York cannot attempt to recover assets from you. The state will, however, attempt to recover any assets in your mother's own name after her death.
Anyone who transferred assets after February 2006 will face tougher rules: the look-back period to determine Medicaid eligibility is now five years.
For details, go to the Kaiser Family Foundation online. —Expertise provided by Enid Kassner
Q. A friend just learned that her employer has been withholding Social Security deductions from her check but hasn't paid into the Social Security Administration for two years. What should she do?
A. It's against the law for employers to withhold and keep an employee's Social Security contributions, and they may be subject to criminal sanctions for failing to pay such employment taxes. Of course, it's also possible that the employer is not at fault and that the Social Security Administration mistakenly omitted her contributions on her statements for those two years. If your friend's W-2 statement from her employer does not reflect withholdings, she should contact Social Security at (800) 772-1213.—Expertise provided by Laurel Beedon
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