Different Types of Distributions on a 401(k) Plan

If your company has a 401(k) plan, one of the areas to understand is if your plan allows for different types of distributions, what they entail, and some key items to note regarding each type. The main types of distributions are hardships, termination/rollovers, and in-service. Hardship distributions Not all plans allow for hardship distributions; however …

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Do You Have a Hardship?

Ever since Congress changed the rules to allow plan hardship withdrawals, hardship distributions have been continually increasing among plan participants. There are six safe harbor expenses which the IRS deems to be an immediate and heavy financial need: Purchase of a principal residence College tuition Funeral expenses Eviction from principal residence Medical expenses Repair expenses …

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Pre-Tax v. Roth 401(k): Which is Better for Your Financial Portfolio?

Some plans allow participants to make Traditional (pre-tax) contributions and also Roth (after-tax) contributions. Making a decision on which contributions are right for you can be a difficult choice, as there are current and future tax consequences that you should consider. With a Roth 401(k), you can eliminate concerns about your retirement tax rates, but …

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Hardship Distribution Documentation

IRS requirements are surprisingly vague regarding hardship distributions. In the absence of clear-cut rules, we sometimes see hardship distributions with very little or no supporting documentation. As a plan administrator you should not only comply with the IRS requirements, but also document your compliance with these requirements. Let’s look at a few of the requirements …

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Hardship Distributions – IRS Guidelines

According to the IRS website, a retirement plan may, but is not required to, provide for hardship distributions. If a 401(k) plan provides for hardship distributions, it must provide the specific criteria used to make the determination of hardship. For example, a plan may provide that a distribution can be made only for medical or …

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What Happens If I Don’t Update My Plan Document?

One of the benefits to establishing a qualified retirement plan is that they are subject to favorable tax treatment.  Did you know that failing to timely amend your plan document for changes in Federal tax laws can affect your plan’s status as a tax-qualified plan?  Companies often engage third party service providers to ensure that …

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Should You Take A Loan from Your 401(k)?

In August 2011, Rex talked about reasons to take a loan from your 401(k) plan. Hopefully you also noticed the caveat at the bottom that all financial situations are different, so here are a few things to consider for why you shouldn’t take a loan from your 401(k) plan (or similar plan) even if the …

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401k Loan Basics

Below are some basics about 401k loans.  Please review your Summary Plan Description for specific guidelines for loans in your 401k plan. • 401k plans can offer loans to participants however, they are not required to. • 401k loans do not require a credit check. • Most 401k loans are required to be paid back over a maximum …

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