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MoreFrequently Asked Questions

What are the requirements for a qualified retirement plan?	The plan must be in written form, conform to all government regulations, and be communicated to all employees.
What are 'catch-up' contributions?	Congress has concluded that there may be too little time left for workers over age 50 to save fully for retirement. This is in consideration of the fact that 401(k) plans are relatively new. To help these older workers catch up on missed savings they are allowed additional salary deferral contributions that are not subject to any testing. In 2005 the amount that can be considered catch-up is $4,000.
What are Minimum Required Distributions (MRD's)?	Retirement plans cannot be used to house money on a tax favored basis forever. A terminated participant, and any owner whether terminated or not, must begin paying out the account by receiving required minimum distributions for the year that he reaches 701/2. A table of factors is used to determine what percentage of the account must be paid out each year. Failure to make the payment results in a 50% excise tax!
What is a multiple employer plan?	A multiple employer plan is a plan sponsored by at least two or more unrelated employers.
What is a multiemployer plan?	A multiemployer plan is a plan maintained due to one or more collective bargaining agreements to which more than one employer is required to contribute.
When can I take money out of the plan?	The Department of Labor and Internal Revenue Service limit a participant’s access to their retirement assets until some 'distributable event' occurs. The following are common distributable events: termination of employment, retirement, death, disability. There are a few instances when an active participant can access their account: hardship distributions, limited in-service distributions, and participant loans. Even though the IRS and DOL may allow the aforementioned access a plan’s document can further limit the access to the assets.
What is a hardship distribution?	A hardship distribution is an in-service distribution (a distribution taken while still employed) that meets the criteria of the plan’s hardship distribution rules. The basic criteria for a safe harbor hardship distribution are: 1) to pay eligible medical expenses incurred by you or your family, 2) the purchase (not including mortgage payments) of your primary residence, 3) tuition for the next twelve months of college for your or a member of your family, and 4) payments needed to prevent the eviction from or foreclosure on the mortgage of your primary residence. In 401k plans, hardship distributions are limited to the contributions made by the employee via salary deferral.
What happens to the plan if my company is sold or terminated?	It all depends on what kind of sale takes place. If the company’s stock is being sold the plan may continue to operate as it had prior to the sale, be merged with the new company’s plan (if they have one), or be terminated if the new owners so choose. If the company’s assets are being sold or the company decides to close, the plan may be terminated and employees paid out, or some continuation may be negotiated.
What is a Qualified Domestic Relations Order (QDRO)?	Normally, with a qualified retirement plan, a participant’s benefit cannot be assigned to any person other than the participant or beneficiary. Further, payouts can only occur as a result of some distributable event. A QDRO is a relations order that provides for the payment of all or a portion of the participant’s accrued benefit to an alternate payee typically resulting from a divorce. The alternate payee may be a spouse, former spouse, or dependant of the participant.
When do I need to make deposits to my plan?	It depends on the type of contributions you are depositing. For participant 401(k) contributions the general deadline is the earliest possible date that assets can be segregated from the employer’s general assets and no later than the 15^th business day of the month following. If payroll is done weekly, the DOL standard is that deposits be made weekly as well. For deductible employer contributions all deposits must be made prior to filing your tax return including extensions.
Who has fiduciary responsibilities?	Any person who has the ability to exercise any discretionary authority or discretionary control relating to the management of the plan, or the management or disposition of plan assets.
What is fiduciary liability?	A fiduciary is personally liable for any breach of responsibility that he/she directly commits, either by act or omission. This liability can arise from mismanagement of plan assets, lack of prudent oversight, misuse of plan assets for personal gain, or repeatedly making late deposits of participant contributions to the plan.
When can I pay out terminated participants?	Paying out terminated participants depends on how the trust is being maintained. Is the trust pooled or allocated in separate participant accounts? Is the plan valuated on a daily, on a quarterly or annual basis? Finally, it depends on the participants vested account balance when they can be paid out and if the plan is subject to the Qualified Joint and Survivor Annuity rules.
Can I force a terminated participant to take a distribution?	Generally, you can force a terminated participant out if his vested account balance is under $5,000.00 after giving him a rollover notice and a reasonable period to respond. Beginning in March 2005, an IRA account will need to be established for these former employees, as opposed to writing a check.
What is an investment policy?	An investment policy provides general instructions or guidelines applicable to the plan investments. Compliance with the investment policy statement is a factor in assessing whether a fiduciary has breached his duty to the plan. Having a written statement is advised to support the choices offered in the plan.
How often should I review my plan?	It should be reviewed annually to ensure that it is meeting the company’s objectives as changes to the company’s demographics might cause the plan not to work as well as it was intended.