TPA & 401(k) FAQs

You can request a Salary Deferral Change Form from your Plan Administrator.

Yes, many plans allow you to cancel your deferrals at any time. Other changes can be made during the allowed deferral change times. To reinstate your deferrals you must fill out a new form with the new percentage or dollar amount.

This amount varies from plan to plan, but generally the amount can range from 0% to 100% of your compensation or $18,500 per year, whichever is less.

In most plans if you become permanently disabled, you will be able to withdraw money from your retirement account. Certain criteria must be met in order to obtain a disability distribution. Contact your Plan Administrator to determine if you meet the criteria.

Occasionally, after you have already received a check for the balance in your account, you may receive a dividend from one of your mutual funds, a company match, or an additional salary deferral. If this happens, you may call your Plan Administrator to request a withdrawal of these funds.

When you terminate employment with the company that sponsors your 401(k) plan, you may leave your 401(k) savings in your account depending on your vested account balance. Please check with your Plan Administrator on the specific dollar amount required.

Depending on your plan document provisions, you may be required to begin taking distributions from your account.

If you are a spouse beneficiary, you can either have the money sent directly to you or you can roll it into an IRA. If you are not a spouse beneficiary, then you may not roll the money into an IRA. The money will be sent directly to you and is taxable in the year in which you receive it. If you are the spouse or children you may be able to keep the money at the plan.

If you are the beneficiary on someone’s retirement account and that person passes away, you should contact your Plan Administrator to request a Death Distribution form.

If you request that a benefit payment be made directly to you, the Plan Administrator is normally required to withhold 20% for U.S. income taxes from the taxable portion of the distribution. The withheld amount is sent to the IRS. If the payment is directly rolled over to an IRA or another qualified retirement plan, there will be no withholding. Detailed information about the tax rules on benefit payments is provided when you request a payment from the plan. You will receive an IRS Form 1099-R at the end of the year reporting this withholding and the taxable portion of your payment.

If you die, your account will be paid to the beneficiary you designated. If you do not designate a beneficiary, the plan will pay the amount to your spouse, children, or your estate.

If you are going through a divorce and your retirement account is included in a division of property, you should inform your attorney that a QDRO will be involved. If you do this, the parties involved can negotiate the terms and the attorney can make certain the court order or divorce decree includes the provisions required by the IRS and U.S. Department of Labor.

In some divorce cases, the court will award some or all of a retirement account’s assets to the participant’s ex-spouse. If this is done, the court order must meet the conditions of a Qualified Domestic Relations Order as stipulated by the IRS and the U.S. Department of Labor.

A Qualified Domestic Relations Order (QDRO) is a court order that assigns all or a portion of the benefits which would otherwise be payable to a participant under a qualified retirement plan to another person. If the court order does not meet all of the requirements for a QDRO, the plan is prohibited from paying plan benefits to anyone other than the plan participant.

This provision varies with each plan. Please contact your Plan Administrator to see if this provision is included in your company’s plan document.

Yes, as long as the money comes from a qualified retirement plan and the plan allows rollovers, you may transfer funds into your new employer’s 401(k) plan. Please contact your previous 401(k) administrator to request a Direct Rollover Transfer form.

When you contribute to your 401(k) account, the money comes out of your paycheck before federal and most states’ income taxes are assessed. This means that you will pay lower income taxes than you would have paid if you had not contributed to your 401(k) plan during the year. Your contributions are invested and start earning interest and capital gains on a tax-deferred basis. When you start withdrawing money from your account, usually at retirement when you may be in a lower tax bracket, you will pay regular income taxes on the contributions and earnings you withdraw.

A 401(k) plan is a type of retirement plan which is named for a section of the tax law that allows employees to contribute a portion of their compensation, before income taxes, to a company-sponsored retirement plan. The amount the company withholds from your paycheck is called a ‘deferral’.

A qualified plan is a plan that qualifies for special tax consideration under section 401(a) of the Internal Revenue Code. Your funds must come from this type of plan if you wish to roll them into your company’s 401(k) plan.

In a traditional profit-sharing plan, the employer makes contributions to the accounts of eligible employees regardless of whether they choose to contribute to the plan. In a 401(k) plan, the participant chooses to contribute to the plan and the employer may or may not make matching contributions to the 401(k) plan in addition to the amounts the participant elects to defer. 401(k) plans may also have a profit-sharing feature allowing the employer to make profit-sharing contributions to the 401(k) plan accounts of eligible employees.

You have the option of paying off your entire loan balance early. Please contact your Plan Administrator to request a loan payoff amount.

If you already have the maximum number of loans outstanding, depending on the reason for which you need the money, you may have one or two options. Your first and best option is to entirely pay off one of your outstanding loans. If paying off your loan is not financially feasible for you, depending on the reason for your financial need, you may be able to take a financial hardship withdrawal. The drawback to this type of withdrawal is that, unlike a loan, this is a permanent withdrawal from your account. Refer to the questions related to financial hardship withdrawals for more details about this option.

Yes. You will pay interest on your loan, however, both the principal and interest you pay will be deposited directly into your account as your payments are made.

If your plan allows loans, you may generally borrow up to 50% of your vested balance. The minimum loan amount and number of loans you may take varies from plan to plan.

If utilizing the TRA prototype document, if you terminate employment with your company prior to paying off your loan, you have two options. Your first option is to pay off your entire loan balance within 30 days of your termination date. Please contact your Plan Administrator to request a loan payoff amount. If you choose not to pay off your loan, then the outstanding amount will be considered a taxable distribution from your account and you will receive a Form 1099-R for the year in which your loan defaulted.

An amortization schedule is a timeline that illustrates your principal and interest payments for the life of your loan. You will receive an amortization schedule with your loan promissory note when you first request your loan.

Since your 401(k) account is set up for your use after you retire, any money that you withdraw before you retire is no longer generating earnings to maximize your retirement savings. In order to make up for the fact that your loan money is not currently invested, the government requires that you pay yourself interest and therefore, continue to increase your retirement savings.

The plan document sets the earliest age at which you may request a retirement distribution.

The TRA Solo(k) Plan allows loans. The maximum loan amount is 1/2 of a participant’s account balance or $60,000, whichever is less.

Yes, money may rollover from an IRA, a SEP or a qualified plan such as a Keogh. However, after-tax money may not roll into the TRA Solo(k) Plan.

Yes. The TRA Solo(k) Plan is designed for new and take-over plans.

A business owner can make employer matching contributions and profit sharing contributions in addition to their salary deferrals subject to eligible plan compensation and plan limits. Employer contributions must be deposited into the plan’s trust no later than the due date of the company’s tax return including extensions.

Employee salary deferrals may be combined with a Defined Benefit plan. Generally, profit sharing contributions cannot be made to the 401(k) plan when combined with a Defined Benefit plan.

A spouse or additional owner may participate in the plan as long as he or she is on the company’s payroll and meets the plan’s eligibility requirements. Employees other than a spouse or additional owner are not allowed in the TRA Solo(k) Plan. However, the TRA Solo(k) Plan may be used if a business has employees that can be excluded from the plan.

The following types of employees may be excluded:

• Employees who are under 21 years of age.
• Employees who work less than 1,000 hours per year.

The following types of employees are automatically excluded:

• Employees who belong to a collectively bargained unit (union).
• Employees who are nonresident aliens and receive no U.S. income.

The TRA Solo(k) Plan can be established by a business that is 100% owned by an individual, individual and spouse, or additional owner. The business may be incorporated or unincorporated. Unincorporated businesses include C-corporations, S-corporations and LLCs electing to be taxed as such.

The plan can be amended to another type of 401(k) plan administered by TRA that is designed for business owners and employees. This plan can be designed with the business’s future growth in mind.

The deadline for establishing a TRA Solo(k) Plan is the last day of the business’s fiscal year, generally December 31st.

Any investment can be used in the plan including stocks, bonds, CD’s and mutual funds. Life insurance is not allowed.

If the business is unincorporated, the deadline for depositing salary deferrals is generally the due date of the company’s tax return (April 15th).

If the business is incorporated, the deadline for depositing salary deferrals is the earliest date on which the deferrals can be segregated from the company’s general assets.

If the business is unincorporated, a salary deferral election specifying the amount deferred must be completed by December 31st. If the business is incorporated, a salary deferral election specifying the amount intended to be deferred must be completed before the compensation is paid. This means the business owner must have some form of compensation such as regular salary, bonuses or commissions that they have not received prior to signing the salary deferral election form but would be received by the last day of their fiscal year.

Generally, if you receive a distribution from your retirement plan account prior to age 59½, a 10% penalty tax will apply in addition to the applicable federal (and in some cases, state) income taxes. In some cases, such as distributions due to death, disability, or termination of employment after age 55, the 10% early withdrawal penalty tax does not apply.

A 1099-R form is used for tax reporting purposes and is sent to any individual who has withdrawn funds from a retirement plan account.

A 1099-R form is used for tax reporting purposes and is sent to any individual who has withdrawn funds from a retirement plan account.

If you had a taxable distribution the 1099-R will be mailed no later than January 31st of the following year.

To be fully vested means that when you leave your company, you are entitled to receive all of the money that the company has contributed to your account and any earnings on that money. (Note: You are always fully vested in the money you contribute to the plan and any earnings on that money.)

If you leave your company before you are fully vested, then you will receive only the vested percentage of your company contribution account. The percentage is based on the plan’s vesting schedule.

A vesting schedule is a timeline that shows the percentage of your company contribution account that you are eligible to receive after a specified number of years of service.

A financial hardship withdrawal is actually removed from your retirement savings permanently. Unlike a loan, you may not repay this money to your account. Therefore, if you decide to withdraw funds from your account for a financial hardship, you generally must pay regular income taxes on the amount you withdraw. You may elect an amount be withheld for federal income taxes (and some state income taxes) at the time of the withdrawal, but if no election is made, the IRS requires that 10% of the withdrawal be withheld for federal income taxes.

A financial hardship withdrawal is generally allowed for six specific reasons:

1. Expenses for medical care (described in Section 213(d) of the Internal Revenue Code) previously incurred by you, your spouse or your dependent or necessary for you, your spouse or your dependent to obtain medical care;
2. Costs directly related to the purchase of your principal residence (excluding mortgage payments);
3. Tuition, related educational fees, and room and board expenses for the next twelve (12) months of post?secondary education for yourself, your spouse or dependent;
4. Amounts necessary to prevent your eviction from your principal residence or foreclosure on the mortgage of your principal residence;
5. Payments for burial or funeral expenses for your deceased parent, spouse, children or other dependents; or
6. Expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under the Internal Revenue Code.

Many plans allow you to withdraw money if you have a financial hardship. Generally, a financial hardship withdrawal is a type of withdrawal that is allowed by the IRS for six specific reasons. The purpose of this type of withdrawal is to alleviate financial difficulties when no other monetary resources are available. For this type of distribution, you may usually only withdraw as much as you have put into the plan (up to the amount of your immediate and heavy financial need). For most plans, any funds that the company has put into your account will not be available for withdrawal.

Some plans allow participants to withdraw money from the plan before retirement even though they do not qualify for a hardship withdrawal. In some plans, once employees reach age 59½ they may withdraw all or a portion of their account. You may contact your Plan Administrator to find out if your plan allows in-service withdrawals.

The IRS strictly limits the reasons for which you may make a financial hardship withdrawal. Your plan may require documentation concerning the amounts you need to withdraw (for example, medical bills) or your financial information to determine if you qualify for a withdrawal.