ESOP participants frequently asked questions

If you are a participant in an Employer Stock Ownership Plan (ESOP) that your employer offers, then you probably have a few questions about your rights and benefits as a participant. Here are some of the most common ESOP FAQs. How do I learn more about the ESOP I am in? As a participant in …

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When is a loan considered a deemed distribution?

Many 401(k) plans permit participants to borrow from the plan and it’s becoming a more and more common practice. The plan document must specify if loans are permitted. The majority of those loans are repaid according to the terms of the loan agreement. However, there are instances when a participant defaults – and then it’s …

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Forfeitures – how do they affect you as a plan participant?

401(k) plan forfeitures occur when a participant terminates employment (voluntarily or involuntarily) prior to satisfying the required service years to become fully vested in his/her account. Required service years will vary by plan, but can be found in your summary plan description. The portion of your account subject to forfeitures is the portion that is …

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Understanding automatic enrollment in your 401(k) plan

We’ve all been there: starting a new job. The amount of information and paperwork can be overwhelming. It’s no surprise that reading up on and enrolling in a 401(k) plan isn’t at the top of everyone’s priorities. What may be surprising is that about half of all households age 55 and older have no 401(k) …

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Why did I receive a refund of my 401k contribution?

If you contributed to your 401k plan, then received a refund for a portion of your contributions for that year, chances are your plan failed the annual IRS required compliance (discrimination) testing. This test, or series of tests (based on your plan’s elections), provide for equal tax breaks to all participating employees – not just …

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Plan document: the summary plan description

All 401(k) Plans have a plan document which contains a comprehensive detail of all the rules surrounding the Plan. This plan document can be lengthy and overwhelming and therefore, 401(k) Plans also have a Summary Plan Description (“SPD”) document. The SPD is a concise summary of the Plan’s key features, some of which include the …

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The do’s and don’ts of participating in a 401(k) plan

Whether you’re currently enrolled in a 401(k) plan, or about to enroll in a 401(k) plan, consider the following: The do’s Do participate if there is an employer match, and make sure you receive the maximum match If your employer offers a 401(k) plan, they likely also offer an employer match. The employer match can …

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Reviewing and implementing plan level controls

Many payroll companies and third-party administrators (“TPA”) ascertain Service Organization Controls (“SOC 1”) Reports on the Suitability of the Design and Operating Effectiveness of Controls. These reports summarize the opinion and results of the audit of internal controls in place at the service provider. In addition, these reports provide complementary user entity controls, which list …

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Is your 401(k) plan properly insured?

There are two common insurance policies that relate to employee benefit plans: an ERISA fidelity bond and fiduciary liability insurance. Both help lower risk but only one of the policies – the ERISA fidelity bond – is required by the Employee Retirement Income Security Act (ERISA) administered by the Department of Labor (DOL). An ERISA …

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Utilization of service organizations

Service organizations exist to assist companies of all sizes in performing certain tasks that the company is not capable of performing or would rather outsource to a third-party. Examples of service organizations include: Payroll providers 401(k) record-keepers IT backup and cloud services And more But do companies understand and review the controls within the service …

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