Q: My 401(k) plan was terminated and assets frozen when the company was sold close to a year ago. What is a normal and reasonable period of time for the plan to be frozen? I'm eligible to be making withdrawals; what happens if it is still frozen when I am required to make mandatory required distributions? Are penalties for failure to do so rescinded due to the circumstances? Is there any recourse for accessing my funds? This is one risk I seldom see addressed in the discussion of 401(k)s. Thanks, Mark

A: You're right, the risk of being frozen out of your 401(k) for a period of time after a merger is seldom discussed yet more common than I realized before researching your question. After all, companies are merging all the time. That said, the danger isn't that you'll lose your retirement savings. Instead, it's that you won't be able to tap the money until management resolves what to do with the acquired 401(k).

"There is nothing simple with retirement plans," says Mary Komornicka, attorney at Larkin Hoffman Daly & Lindgren. "It takes time for adjustments to be made."

For example, management of the acquiring company may decide to merge 401(k)s. As you can imagine bringing two separate plans with distinct mutual fund choices and other differences together is a complicated process that has to be done carefully. The plan is frozen until the task is completed.

Alternatively, management may decide to terminate the 401(k) of the target company (which is what happened to you). The plan is frozen upon termination while the acquiring company asks for a letter from the IRS saying everything is OK — go ahead and distribute the retirement savings to participants. Management wants assurance that there isn't a problem with the 401(k) — perhaps some overpayments or underpayments — before sending the money out. Management would understandably prefer to deal with any issues the IRS may flag first.

"Most plan sponsors will wait for a determination from the IRS," says Todd Perala, director of strategic initiatives at BMO Retirement Services."It can take up to a year to 18 months."

If the acquiring company plan allows for rollovers, the distributed money may be rolled into its plan. If not, participants can establish a rollover IRA. Either way, the retirement savings maintain its tax-sheltered status.

You should still receive statements from your 401(k) plan. You should be able to change your asset allocation within the plan, too. For example, if you were heavily invested in stocks and wanted to shift some money into fixed-income securities — or vice versa — you should be able to make the change. What you can't do is borrow from the plan or make withdrawals even if eligible to do so without penalty.

However, by April 1 of the year after you reach age 70 ½ you are required to begin taking minimum distributions from your 401(k). The jargon term for the mandatory withdrawal is "RMD" — required minimum distribution. According to Perala, even with a frozen plan the sponsor will usually pay out RMD since sufficient assets remain in the plan and, more importantly, it's the law. If you are facing an RMD with a frozen plan I would document your efforts in writing in case there is a snafu. The written trail will show that you made a good-faith effort to meet your RMD and, therefore, you shouldn't get dinged by the IRS.

Chris Farrell is economics editor for "Marketplace Money." His e-mail is cfarrell@mpr.org.