Our 401(k) plan allows participants to take loans from their accounts. We have a written policy that describes how the loans work and spells out the requirements that the plan and participants must follow. Among other details, the loan policy indicates that payments must be made via payroll deduction.
The annual compliance report that our TPA provided to us indicates that we over-funded matching contributions for certain employees and instructs us to transfer the excess amounts out of the affected participants’ accounts and into a plan suspense account. The only problem is that I am not sure what a suspense account is. When I spoke to our recordkeeper, they said we have a forfeiture account but not a suspense account.
It’s been a while, but we finally have them! Late last month, the IRS published the final hardship distribution regulations, nearly two years after Congress passed the Bipartisan Budget Act and the Tax Cuts and Jobs Act. The good news is that this final version follows the proposed version very closely. So closely in fact, that the IRS outright states in the final version that any plan that followed the proposed regulations will satisfy the final regulations.
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.
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.
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.
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.
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.
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.
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