Chapter 8 - Distributions Flashcards
RMD Distribution Calendar Year
Calendar year for which the RMD is required.
RMD valuation year
The calendar year preceding the distribution calendar year.
Suspension of elective deferrals for participants who have taken hardship
Must be prohibited for at least 6 months after the financial hardship.
RMD Required Beginning Date
If a 5% owner must begin they year after they reach age 70.5
Not not a 5% owner, it is the later of April 1 following the end of the calendar year in which they turn 70.5 or retires.
QJSA
If the QJSA form of benefit applies, the participant may elect any other form of benefit if available in the plan. (If the QJSA rule applies to a participant, the QJSA form of payment is mandatory unless the participant elects a different form of payment available under the plan. The participant may elect another form of benefit, if desired.)
A plan is required to provide a QJSA form of benefit unless specifically exempt from the requirement.
If the QJSA is required, it applies to the entire vested accrued benefit, including after-tax employee contributions and rollover contributions.
A profit sharing plan may be exempt from the QJSA requirement if the death benefit is payable in full to the surviving spouse.
QJSA payments made to a surviving spouse will continue until that spouses’ death and are not dependent on the marital status of the surviving spouse.
The survivor annuity must be no greater than 100% and no less than 50% of the annuity paid during the participant’s life.
Annuity Contracts
Annuity contracts may be held by the plan with the plan acting as a conduit by receiving payments from the insurer and transmitting them to the participant.
Annuity contracts may be distributed to the participant, who will then receive the annuity payments directly from the insurance company.
An annuity distribution may be guaranteed for the participant’s lifetime.
The plan sponsor/employer/fiduciary/any third party, may NOT have the discretion to choose the type of payment method available to a participant.
An installment distribution is a periodic payment made for a specific period of time.
Hardship Withdrawals
Profit sharing plans are not required to have the same restrictions on hardship withdrawals that are applicable to 401(k) plans.
Safe harbor 401(k) contributions may not be distributed on account of hardship.
Hardship withdrawals may be taken to pay for medical expenses incurred by the participant’s beneficiary.
QDRO
Do not need to include the DOB of the alt payee
QDROs must include the name and last known mailing address of the participant
and the alternate payee covered by the order, the name of the plan involved, the
amount or percentage of the participant’s benefits to be paid to the alternate
payee and the number of payments or the period to which the order applies.
