Many people retain 401(k) retirement accounts with former employers even after they have stopped working. For individuals seeking Supplemental Security Income (SSI) benefits, it is important to know that these accounts are treated as an asset, which can result in ineligibility for SSI.
401(k) plans are counted as a resource under the federal rules. If the funds in the 401(k) exceed the resource limit for SSI either by themselves or when added to other countable resources, then a person will be found ineligible for SSI. The resource limits in 2015 are $2000 for an individual or $3000 for a couple.
An otherwise low-asset applicant for SSI may become eligible by withdrawing the funds from the 401(k) plan, paying any early withdraw penalties, and then spending down the balance to fall below the resource limit listed above.
For more information read Social Security’s policy brief No. 2006-01.
For more information on how to “spend down” a lump sum in order to remain eligible for SSI benefits, see our blog post here: http://www.tcnf.legal/how-to-avoid-being-cut-off-ssi-benefits-when-you-get-a-sum-of-money/