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ERISA Consultants |
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Over
20 years |
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MISCELLANEOUS SERVICES |
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INSTRUCTIONS
FOR LUMP SUM DISTRIBUTIONS - This package will be used most often for participants who have terminated employment with your company. This package should not be used to initiate a participant loan or a hardship withdrawal. It is important to understand that the methodology for executing a plan distribution may vary greatly from plan to plan. The provisions of your plan document and the structure of your plan investment are among the factors that dictate how and when a distribution is executed from your plan. If you have any questions regarding your distributions from your plan, you should contact the consultant assigned to your plan at ERISA. Our standard package contains a “Consent of Spouse” form. Many profit sharing and/or 401(k) plans no longer require a notarized spousal signature to execute a plan distribution. You should ask your consultant if this form is required for your plan. If not required, a “Waiver of Thirty Day Time Period”, which is available on our web site, should be used in place of the Consent of Spouse. Once the participant has completed the forms, they should be returned to the employer. The employer is the formal “Plan Administrator” of record. The form must be reviewed and signed by an authorized representative of the employer. Upon approval by the employer, you may send a copy of the completed forms to ERISA for further processing. In most cases, you will receive additional instructions and/or forms from ERISA for purposes of requesting and processing a distribution check (again, this depends on how your plan operates). At this point, it’s a matter of timing. The plan provisions will allow for one of the following: 1. Distributions to occur immediately 2. Distributions to occur following the close of the next valuation period (quarterly or semi-annually) 3. Distributions to occur following the end of the plan year If distributions are allowed immediately and the participants have their account balances in individual accounts, the check request should be held until the last deposit has been made to the participant’s account (if there are outstanding deposits, you must note this when the package is sent to ERISA). INSTRUCTIONS
FOR HARDSHIP WITHDRAWALS - The IRS "Safe Harbor" provisions for hardship withdrawals are intended to limit, somewhat significantly, the circumstances in which a participant will qualify for a hardship. The criteria for qualification are two pronged - the reason for the hardship must fall into one of four categories and the participant must be able to demonstrate that he/she has no other financial resources. One important thing to note - a participant loan is considered a financial resource - if the participant qualifies for a loan from the plan, he/she must exercise this option first. In addition, there are "penalties" for taking a hardship which involve limiting the amount of 401(k) elective deferrals may make to the plan following the hardship. These items are explained in further detail on the Hardship Withdrawal Form. Participants taking a hardship withdrawal from the 401(k) elective deferrals cannot receive a distribution of the investment gain associated with those deferrals. Therefore, the plan sponsor will need the amount of cumulative elective deferrals made to the plan by that participant from their inception in the 401(k) program to determine the maximum amount available for withdrawal. This form should be given to the participant for completion. The participant will return the completed/signed form to the Plan Administrator (the employer). Once approved and signed by the Plan Administrator, they will forward the form to ERISA Consultants for processing. The mechanics of "processing" depends on the specifics of your plan (investment vehicle, etc.). If you have any questions, contact your consultant. INSTRUCTIONS
FOR PARTICIPANT LOAN PROGRAM - The documentation necessary for the ongoing operation of a participant loan program will include the following three items: The plan must establish certain guidelines and restrictions with respect to its loan program. This item should be completed with the procedures desired and then it should be made available to participants for review at their request. It is important that a loan program be operated in a uniform and nondiscriminatory manner. Please
forward a copy of your completed Loan Procedures form to ERISA for your
file. This is an original form which should be photocopied and provided to participants applying for a loan from the plan. Once the participant has completed and signed the application, he or she should return it to you. On page two of the application, you may choose to have the maximum loan amount calculated by ERISA or you may calculate the amount available utilizing the formula provided. The form should then be signed and sent to our office. If
the loan meets the necessary requirements, we will send you the additional
paperwork necessary to finalize the loan (promissory note, security
agreement, amortization schedule, etc.). 3.
Letters for terminated participants with outstanding loan balances Upon termination of employment, any outstanding loan balances are immediately due and payable. The participant may not continue to make regular loan payments. If the loan is not repaid, the balance will be considered a taxable distribution at the end of the calendar quarter following termination. The first letter should be given to the participant upon their termination of employment. If the participant does not repay the outstanding loan balance in full within thirty days of the first letter, the second letter should be sent. At that point, the loan balance will be considered a plan distribution as stated above. Fees:If we are responsible for all loan recordkeeping, we charge $100.00 per loan package (unless otherwise quoted) and a $20.00 maintenance fee per year for each loan. You may (and most plans do) charge this fee to the participant by simply completing item #5 on the Loan Procedures Form. If we only provide limit services relative to loan recordkeeping, please see your quoted fees. |
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[Why
ERISA ?]
[Qualified Plans] [Section
125/132 Plans]
[ERISA Pay] [Professional Advisors]
[ERISA
Clients] |