Taxation of Corrective Distributions

As we enter January of every year, it is time to start thinking about personal income taxes. While this is not a favorite to many, there are many important tax reporting forms that individuals must be on the lookout for over the next coming months.  One of these is Form 1099-R – Distributions from Pensions, …

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Failure to Comply with Hardship Distribution Requirements

Plan Sponsors often fall short in one simple area of plan administration: record keeping. It is important that Plan Sponsors keep proper documentation for each area of the Plan.  One important area for this documentation is administering hardship distributions to participants. As described in our blog, “Hardship Distribution Requirements”, if your plan allows for hardship …

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Hardship Distributions Requirements

If your plan allows for hardship distributions, as a Plan sponsor you are required to verify that proper evidence has been obtained which verifies the participant has immediate and necessary need for the distribution. The Internal Revenue Service (“IRS”) has stated that certain expenses are considered immediate and necessary. These expenses include the following: • Medical …

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Required Federal Income Tax Withholdings from 401k Distributions

The IRS has various rules related to income tax withholding from 401k distributions. The most common rule is the minimum 20% that is required to be withheld from eligible rollover distributions. However other withholding requirements can result in either no required withholding or withholdings based on withholding tables used for wages. Eligible rollover distributions are …

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Partial Plan Termination

If your company has had a significant employer-initiated reduction in workforce and sponsors a 401(k) plan, it is important to consider whether a “partial termination” of the retirement plan has occurred. When a partial termination has occurred, all participating employees who had a severance from employment during the period must be fully vested in their accrued …

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