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• Reasons to Have a Qualified Plan
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  • Traditional 401K Plan
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• Contribution Deadlines
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• Plan Distributions
  • Distribution
  • Rollover Rules
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Distributions

Participant distributions from a plan are not as simple as one may think.  There are many factors that contribute to what ultimately must be done to satisfy the requirements set by the IRS.  In some cases the payment from a qualified plan may be a simple rollover to another qualified plan or an IRA.  In other cases the payment may be a Required Minimum Distribution or a payment to a surviving beneficiary.  All cases are different depending on the circumstances.  When a plan is terminated or if an employee terminates their services and needs to be distributed from the plan one thing is for sure, there is paperwork to be completed and procedures to be followed.  Before a plan sponsor provides any guidance to a plan participant who is terminating and requesting a distribution from the plan it is best to research current laws, contact a retirement professional to make sure the distribution is done correctly.

Paying Taxes

As everyone knows, Uncle Sam wants his taxes!  To guarantee that taxes are withheld it was decided that all pension distributions that were not rolled into another qualified plan or IRA must remit the tax portion of the distribution electronically.  On December 7, 2010, the Internal Revenue Service published Final Regulations requiring electronic deposit of all tax withholding payments made by qualified retirement plans. This change is effective January 1, 2011

In-service Distributions

Many people ask about an In-service distribution.  The facts are that in-service withdrawals prior to normal retirement age are only permitted under Profit Sharing, 401(k) and Stock Bonus Plans.  Plans are not required to offer in-service withdrawals and can place restrictions on the availability of funds. Depending on the money type in the plan will determine the specific rule regarding the distribution.  If your plan permits In-service distributions it is recommended that you understand how they work before you discuss the option with a participant requesting the distribution.

Distributions are not as simple as writing a check.  Don’t take them lightly and they will not come back to haunt you in the future.