Topic Archive: Mandatory Distribution

Can We Require Employees to be Employed at Year-End to Receive a Safe Harbor Contribution?

DWC | 07/30/19

Facts

Our company sponsors a safe harbor 401(k) plan.  Each participant receives a safe harbor nonelective contribution equal to 3% of his or her annual pay.  Our TPA calculates the safe harbor contribution for us after the close of each year, and we deposit it sometime before we file our company tax return for that year.  Each year, we have a couple of participants who terminated employment before year end, and we end up making contributions for them even though they are long gone by the time we make the deposit.

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How Does a Participant's Divorce Affect our 401(k) Plan?

DWC | 07/23/19

Facts

One of the participants in our 401(k) plan is going through a divorce, and we just received a court order directing us to provide a portion of his account to his ex-spouse.  I thought that retirement plan accounts had special protection against legal judgments.

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Are We Required to Force Former Employees to Take Their Money Out of Our Plan?

DWC | 04/23/19

Facts

We just received our year end testing and it mentioned that we have several terminated participants with small balances that we are required to distribute from the plan.  I remember seeing something in one of our documents that mentioned distributions for account balances below $5,000, but I’m not entirely sure what that means or how I’m supposed to accomplish it.

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What is the Form 8955-SSA and What Does It Do?

DWC | 04/2/19

Facts

Our company has been very fortunate to have low turnover over the years.  Those that have left either were not eligible for our 401(k) plan, or they had very small balances and had their accounts forced out when they terminated.  We recently did have one longer-term employee leave us.  She was an active participant in our plan and has a sizeable balance that is well above our plan’s mandatory distribution threshold.  Our TPA said that we now have to file some new form – an 8955-SSA, I think – that has something to do with this former employee.

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