Lesson 5: Distributions from Qualified Plans Flashcards
Pension Plan Default Benefit
Single Life Only Annuity
Qualified Joint and Survivor Annuity (QJSA) if Married
Pension Plan In-Service Distributions
Not allowed before 59.5yrs old
Pension Plans Early Termination
Lump Sum distribution.
Rollover to IRA or other qualified plan allowed
Profit Sharing In-Service Distributions
- EE after tax contributions immediately available
- ER contributions (not CODA) are ava after 2yrs of plan participation
CODA/ 401k EE & ER contributions not ava before 59&1/2. Not including hardship exceptions
Profit Sharing Hardship Distribution Limit
Equal to an EE elective deferral contributions plus earnings. ER contributions not ava
Pension Plan Lump Sum Spouse Notes
Must offer QJSA. If Lump sum option selected. Requires Spousal Waiver
What qualified plan types do not allow loans
SEPs, SARSEP and IRAs
Although DB and cash Balance are unlikely to offer loans
Most common on CODA/401k
Tax rule for plan loans
Lesser of 50k or 1/2 vested account balance
(If balance is less than 20k. Loan ava is lesser of vested balance or 10k)
must be paid back over a 5yr level ammort (mortgages not included)
Plan Loan Maximum Deeper Dive
Lessor of:
- 50k minus the HIGHEST loan balance in last 12mo
- 1/2 of vested account balance (not less than 10k) reduced by OUTSTANDING loan balance
QRDO
Qualified Domestic Relations Order
Judge direction detailing the right of a third party to receive benefits from another individual’s plan
Qualified (tax free) Roth 401k Distribution
Must be 5yrs into plan
AND one of following.
Dead
Disabled
Age 59 & 1/2
NUA Formula for Lump Sum Distribution
Fair Market Value at date of distribution
MINUS (-)
Value of stock at date of employer contribution
