Retirement Plan FAQs

For Medical and Dental Practice Owners and Their Staff

  • My employer has a profit-sharing 401(k) plan. Isn’t this two different plans?

    A profit-sharing 401(k) plan is a single plan that tracks employer and employee money separately. Different rules apply to the funds employees contribute vs. the funds employers contribute. Amounts rolled over into the plan from another plan or account are also tracked separately.

    What are my plan’s eligibility requirements?

    Eligibility requirements vary from plan to plan. Consult the Summary Plan Description (SPD), a document that your employer can provide.

    Why is a particular employee in the plan?

    All employees who meet the plan’s eligibility requirements are participants and are included in non-discrimination testing. Participants may need to meet additional requirements to be eligible to receive an allocation of employer contributions.

    I was rehired. When will I re-enter into the plan?

    Your eligibility to participate in the plan and/or make 401(k) deferrals depends on 1) definitions in the plan document; 2) whether you met the eligibility requirements before you left employment; and 3) how long you were gone. Your employer will tell you when you can re-enter the plan.

    What is my balance?

    Your most recent account statement shows your balance. If you have not received this statement, please contact the plan sponsor.

    Your balance is determined at regular intervals. If all participants’ accounts are pooled in a single trust, then the trust is valued once per year on the last day of the plan year, or perhaps quarterly.

    When can I get my balance?

    The plan administrator must value the trust after the end of the next scheduled valuation date, which is typically the end of the plan year. This work is usually completed two to six months after the valuation date.

    What is vesting?

    Vesting is the portion of the employer-funded contributions in your account to which you are entitled. Your vested percentage is determined by the number of years you have worked for the employer, as well as the plan’s vesting schedule. Your own contributions (401(k) deferrals and/or rollovers) are always fully vested. For your plan’s vesting schedule, consult the Summary Plan Description (SPD), a document that your employer can provide.

    What are forfeitures?

    Forfeitures are the non-vested portion of your account after you have received a distribution of the vested portion.

    When will I get the annual report and participant statements?

    The annual report is prepared as soon as possible after the end of the plan year and after the contribution calculation is complete. For a plan year ending December 31, the contribution calculation is typically prepared between February and April, and the report is completed sometime between April 15 and July 31. However, there are circumstances where the final reports may not be available until October 15, the final filing deadline for most retirement plans.

  • How much can I contribute?

    You can contribute up to the yearly limitations set by the IRS for Qualified Plans.

    For the 2015 plan year, you can defer up to $18,000, plus $6,000 as a “catch-up” 401(k) contribution if you will be age 50 or older by the end of the year. Add that to an employer-funded profit-sharing contribution and the total may not exceed $53,000 ($59,000 for those who will be age 50 or older by the end of the year.) The same overall limits also apply for 2016.

    Is my current contribution sensibly invested?

    We recommend consulting the plan sponsor or an investment advisor.

    How do I change my 401(k) deferral amount?

    Complete a 401(k) Salary Deferral Election form, which your employer can provide. Your election is effective beginning on the following pay period end date.

    How does payroll handle my 401(k) deferrals?

    At the end of each pay period, the deferral amounts for all participants are summed, withdrawn from the sponsor’s payroll account, and sent to the investment firm electronically or as a check. At the end of the year, each employee’s Form W-2 will show taxable wages exclusive of deferrals with the total deferrals for the year reported in a separate box.

    Does my plan sponsor need to offer the 401(k) election annually?

    We recommend plan sponsors offer the 401(k) Salary Deferral Election Form at least annually and upon request.

    How much should I defer into the 401(k) feature to receive the maximum match?

    This can vary from plan to plan. However, in many plans you’ll need to defer at least 5% of your wages to be eligible for the maximum match. Some matches may not exceed 4% of wages. For exact limits, please refer to your Summary Plan Description (SPD), which your employer can provide.

    What’s the difference between “Safe Harbor” and “Safe Harbor Match”?

    IRS regulations require every 401(k) plan to pass a non-discrimination test. The regulations also allow employers to automatically pass that test by making a Safe Harbor contribution. Each year the employer can choose between two types of Safe Harbor contributions: a Safe Harbor Match is given to only those who make 401(k) deferrals; a Safe Harbor contribution is given to all employees in the plan, even those who choose not to defer.

  • Where is my money invested?

    Questions about plan investments should be directed to the employer. An investment committee or plan Trustee is typically responsible for decisions about the plan’s investments, sometimes in partnership with a professional investment manager (such as Thomas Doll).

    Do I have any control over how my money is invested?

    If your plan sponsor allows you to have a separate account, then you may control how your money is invested. Plan sponsors who utilize a group trust, where all assets are invested together, select an investment committee or plan trustee to make decisions about the plan’s investments.

    What is the difference between a traditional pooled account and a daily valuation platform?

    Plans with a pooled account or group trust invest all employees’ accounts together. These accounts are valued periodically to determine each participant’s portion of the account.

    A plan using daily valuation also uses a group trust, but each participant’s balance is tracked in stock or mutual fund units. The price of each investment unit can be applied to the number of units owned to determine the value for that day. Each participant can use a web portal or phone to view account balances and deposits, and to direct investments.

  • How does the distribution process work?

    If you terminate employment, you will receive a distribution request package and form from the employer or plan administrator. This form will allow you to select how you wish to take your distribution, usually either as a rollover to an IRA or other qualified plan, or in cash.

    The distribution request is mailed to you automatically after the plan accounts for all contributions through the date of termination. Usually this is two to six months after the end of the plan year in which you terminated employment. Earnings may also be allocated.

    Submit the completed form to your former employer or plan administrator, and the distribution will follow. Make sure that the employer or plan administrator has your current address. Once you return the form, your vested account balance will be disbursed.

    I’m still working, but I’d like a plan distribution. How do I qualify for an “In-Service” and/or “Hardship” distribution?

    Refer to your plan’s Summary Plan Description (SPD), which your employer can provide. If your plan allows for In-Service or Hardship distributions and you meet the requirements, you will need to complete a distribution request form and return it to the plan administrator.

    What do I need to do to obtain my money?

    To be eligible for withdrawal, there must be a “triggering event,” usually limited to retirement, death, disability, or termination of employment.

    If you’re still employed, your plan may allow you to take a loan from your account, or withdraw money to alleviate a financial hardship. You may also meet the requirements for an in-service withdrawal. For details specific to your plan, please refer to your Summary Plan Description (SPD), which your employer can provide.

    If you leave your job, make sure your former employer has your current address. Your plan provider should prepare the necessary paperwork automatically. Your employer will forward you the forms to request a distribution.

    What happens to the non-vested balance in a prior employee’s account?

    The non-vested balance, also referred to as forfeitures, is either reallocated to the remaining eligible participants’ accounts, used to reduce future employer contributions, or used to pay plan expenses.

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