Topic Archive: Plan Distributions

Facts

The participants in my company’s 401(k) plan are regularly inquiring about how much money they have available for a loan.  When I report back the amount available to them, it’s not unusual for me to hear groans and exclamations from them that “this is my money” (particularly if they’re disappointed they aren’t able to access more). I know there are certain parameters related to participant loans set forth in the plan document, but it seems like there’s more to the magic formula that I’m just not able to explain to the participants.

Just about anyone who has dealt with a 401(k) plan – either as a plan sponsor or a service provider – for any amount of time has had to deal with the issue of participants not timely cashing plan distribution checks.  There are all sorts of potential concerns that range from tax implications to fiduciary responsibilities, but neither the IRS nor the DOL have been especially forthcoming with guidance.

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.

Facts

Our company has several wholly-owned subsidiaries, and each of them has signed onto our 401(k) plan as participating employers.  We sold 100% of the stock of one of those subsidiaries – Glen’s Fiddich, LLC – to an unrelated company.  As a result of the sale, Glen’s Fiddich is no longer related to us and has discontinued participation in our retirement plan as of January 1, 2019. The employees of Glen’s Fiddich are now participating in the purchasing entity’s retirement plan, and a few of them are eager to roll their accounts from our plan into the new plan.

Facts

We have a participant who took a loan from his 401(k) account at the beginning of the year.  Yesterday, he gave us notice of his resignation, effective in two weeks, but he still has an outstanding loan balance.

Facts

Our company sponsors a 401(k) plan.  One of our participants lives in the Florida panhandle and lost her home in Hurricane Michael.  She is under age 59 ½ and is not eligible to take in-service withdrawal, and a loan would only impose a greater burden.  I’ve not seen any direct guidance that permits hardships distributions for those affected by Hurricane Michael the way I have for previous federally declared natural disasters.  She really needs the cash to rebuild her home, but I do not want to approve a hardship that isn’t allowed.

Facts

I sponsor a 401(k) Plan for myself and my staff. I recently processed a hardship distribution for the purchase of my primary residence in October 2018.  I know the rules require me to suspend my deferral elections for six months following a hardship distribution, but I recently came across an article that said I don’t have to impose the suspension anymore.  I’d really like the opportunity to continue deferring if I am allowed.

Facts

We have an employee who attained age 70 ½ earlier in 2018 and will retire by the end of 2018. However, she has agreed to enter into a contract to provide services to our firm and will be reclassified as an independent contractor on December 1, 2018.

Nearly a year after Congress passed changes to the hardship distribution rules in the Bipartisan Budget Act and the Tax Cuts and Jobs Act, the IRS has published proposed regulations to fill in some of the details on how to implement the new rules. 

Facts

We have a non-owner participant in our 401(k) plan who is age 74 and retired in 2014.  That means that he has already been taking required minimum distributions for the last few years. We just recently rehired him in October 2018. Now that he is re-employed he has inquired as to whether he can suspend his RMDs this year.