Distribution Flashcards
In-Service Distributions
The employee is still active with the employer. Typically needs to be the Normal Retirement Age (NRA) as defined in the Adoption Agreement (AA)
Rollover Distributions
Withdrawal using funds that were brought over from an old retirement account
Indirect Rollovers
Also known as a 60-day rollover:
-Provider distributes funds directly to the participant
-They have 60 days to deposit funds into an approved retirement account to still be considered a rollover and not a taxable distribution
Hardship Distribution - Allowable Reasons?
Costs related to the purchase of a principal residence
Prevention of foreclosure or eviction from a primary residence
Post-Secondary education expenses
Funeral expenses
Certain unpaid medical expenses
Certain expenses related to the repair of a principal residence due to a natural disaster
Hardship Distributions - What does the client need to collect from the Employee?
- Proof of hardship (documentation) from the Employee
- Special Tax Notice needs to be given to the Employee
- Client Confirms with Guidant that they have the documentation and have given the notice (Guidant does not need copies)
Hardship Distributions - What is Needed on File?
Completed Hardship withdrawal application
All current and prior Investment Management (IM) Statements or 401(k) bank statements
Census data for all outstanding plan years including current
Termination Withdrawals
Once an Employee terminaties (leaves the company) they can withdraw their vested account balance to either rollover into a new account or take a taxable distribution
Distribution Taxation
Taxes assessed on a distribution taken from the Plan or another qualified account
Special Tax Notice
Communicates taxation regulations with participants
1099-R
1099-R reports on money which left a qualified retirement account
Form 945
Summary of taxes withheld on certain dists
Form typically filed by the custodian (IM provider)
Force Out Distribution
Employer can “Force Out” terminated participants that have a vested account balance of less than $5,000
What are the Force Out Notice Requirements?
Need to provide EEs with STN (Special Tax Notice) and options on what to do with funds: Taxable dist or rollover
“Proper Notice” = about 30 days
Normal Retirement Age (NRA)
Age employees are considered to be of retirement age within the plan
Our plan default = 62
Vesting
Relates to how long an employee must be with a company to receive 100% of the employer contributions made to the plan.
Deferral
Money taken out from an participant’s paycheck and deposited into their 401(k) Plan account
Employer Contributions - Profit Sharing
A contribution made to the Plan based off of profits the corporation made that year. Contributions must be made to all employees equitably.
Employer Contributions - Matching
A match made to deferrals by the employer. Typically is discretionary, up to the employer. Employer determines how much they would like to match annually.
What contribution types are people 100% vested?
- Employee Deferrals
- Safe Harbor Contributions
- Rollover assets
Distribution Taxation
Depends on an individual’s overall income and tax bracket
Under 59.5 = Pay extra 10% early distribution tax penalty (in addition to the tax bracket taxation)
What four pieces of information do we need to request from the client with a non-online access provider?
- Distribution Form
- Employee Census Data
- Investment Management Statements
- 1099-R Questionairre filled out - if Guidant is preparing it
What two pieces of information do we need if the client uses an investment management firm in which we have online access to?
- Employee Census Data
- 1099-R Quesionaire filled out - if they need Guidant to prepare it
When would we not ask a client for census data?
If they use Guidant’s Payroll Services
