Empower Retirement Special Tax Notice

Date:

Notice When Plan Applies To Irs For A Determination Letter For Qualification Or Plan Termination

When a plan sponsor submits an application to the IRS for a determination letter on the qualified status of a new or amended plan or on plan termination, participants are allowed to comment to the IRS and/or DOL regarding the plan’s qualification and must be notified of their right to comment with an Interested Party Notice. The notice should contain the following:

Notice When The End Of The Plan Year Has Passed

When the end of the plan year has passed, participants should receive a Summary Annual Report . The SAR should include the following:

  • administrative expenses incurred by the plan
  • amount of benefits paid to participants and beneficiaries
  • total value of plan assets
  • a pension plan’s compliance with the minimum funding standards and
  • right to receive a copy of the full annual report, or any part thereof.

The SAR is provided the later of nine months after the end of the plan year or two months after the Form 5500 is due .

Notices Of Survivor Annuities

QJSA: Certain retirement plans may contain a QJSA feature that provides a participant with a lifetime annuity plus a survivor annuity for the participant’s spouse if the spouse outlives the plan participant. It is given between 30 and 180 days prior to the date benefits are paid. The QJSA notice explains:

  • the QJSA’s terms and conditions,
  • the effect of waiving the QJSA and choosing a different benefit payment form,
  • a participant’s spouse’s or non-spouse beneficiary’s right to not consent to waiving the QJSA,
  • the participant’s right to revoke a waiver, and
  • the participant’s right to revoke the election of the benefit during the immediate 90-day period before the date benefit payments begin.

QOSA: A QOSA notice must be given to plan participants in plans that contain a qualified optional survivor annuity feature. A participant who waives a QJSA may elect to have a QOSA. The amount paid to the surviving spouse under a QOSA is equal to the certain percentage of the amount of the annuity payable during the participant’s life.

The QOSA notice is given between 30 and 180 days prior to the date benefits are paid. The QOSA notice explains:

  • the QOSA’s terms and conditions,
  • the effect of waiving the QOSA and choosing a different benefit payment form,
  • a participant’s spouse’s right to not consent to waiving the QOSA, and
  • the participant’s right to revoke a waiver.

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Notice Of An Individual’s Benefits

The individual benefits statement shows the benefits earned by a participant and his or her vested amounts. It must be given to a participant upon his or her written request, but no more than once in a 12-month period, and automatically to certain participants who have terminated service with the employer. Plans that provide for participant-directed accounts must furnish individual benefits statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.

The statement should identify the participant’s accrued benefit and vested pension amount. An accrued benefit for a participant in a defined contribution plan , is the amount in that participant’s individual account at any given time. In a defined benefit plan, the accrued benefit is the benefit that will be provided when the participant reaches the plan’s normal retirement age. A vested benefit is the portion of the participant’s benefit that is not at risk of being forfeited.

Notice That A Lump Sum Is Eligible For Rollover

A participant should receive this notice when he or she receives a distribution from the plan that is eligible to be rolled over. The plan is also required to offer a non-spouse beneficiary the opportunity to roll over the deceased participant’s account balance and must notify the non-spouse beneficiary that the deceased participant’s account balance is eligible for rollover.

The notice should describe the effects of rolling an eligible rollover distribution to an IRA or another plan and the effects of not rolling it over, including the automatic 20% withholding. Notice 2009-68PDF contains two sample explanations that satisfy the requirements of the notice employers must provide to employees leaving with retirement assets. The sample explanations state, in plain language, an employee’s options when receiving an eligible rollover distribution. The sample explanations include information on distributions from a designated Roth account under an employer plan and explain rules that apply in special situations, such as when a distribution is made to a surviving spouse or other beneficiary.

The employer must give the notice between 30-180 days before an employee receives a distribution. However, the employee may waive the 30-day period. If a participant dies, then his or her spouse or beneficiary, if unmarried, must receive this notice.

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Notice Of Waiver Of Minimum Funding Requirement

This notice must be given to plan participants, beneficiaries and alternate payees when the employer requests a waiver of the minimum funding requirement from the IRS. The notice should contain the following:

  • name of the plan and the plan sponsor
  • the plan year for which the waiver is being requested
  • right to submit relevant information regarding the application for waiver of the minimum funding requirement
  • right to receive a copy of the latest annual plan report
  • the present value of vested benefits under the plan
  • the present value of benefits, calculated as though the plan terminated
  • the fair market value of plan assets and
  • the interest rate used in calculating the present values.

    It should be given within 14 days of the date that the application for a funding waiver is filed with the IRS.

Notice That The Employer Is Terminating The Plan

When a plan is to be terminated, participants should receive a written notice of the company’s intention to terminate the plan and a notice of plan benefits. See Terminating a Retirement Plan.

Notice of intent to terminate: The Notice of Intent to Terminate should contain sufficient information to notify the participant of the termination of the plan. The notice might include identifying information such as:

  • the plan name and number
  • the proposed termination date
  • a statement concerning the cessation of accruals and
  • a statement that there are sufficient plan assets to meet the accruals provided under the plan.

The notice must be provided to all affected plan participants and/or beneficiaries at least 60 days and no more than 90 days before the proposed date of termination.

Notice of Intent to distribute benefits: The notice is provided to each affected participant or beneficiary and specifies the amount of the participant’s benefit as of the proposed termination date. The notice should identify the amount and form of each participant’s benefit including any personal data used in determining the amount of the benefit, including lump sum conversions, mortality and interest rates used to compute the benefit. It should be provided promptly to any affected participant or beneficiary after the proposed termination date and on or before the distribution date.

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Notice For Safe Harbor 401 Plans

When the plan is intended to be an IRC section 401 or safe harbor plan, an annual notice must be provided to all employees eligible to participate in the plan. The notice must contain the following:

  • the safe harbor matching or non-elective formula used in the plan
  • level of matching contributions, if any, other contributions under the plan, and the conditions under which they will be made
  • the type and amount of compensation that may be deferred
  • the method of making deferrals under the plan
  • the periods available for making elections
  • the withdrawal and vesting provisions applicable to contributions under the plan and
  • how to obtain additional information about the plan.

The notice must be given to each eligible employee within a reasonable period before each plan year and other times where an employee doesn’t receive the annual notice because he or she becomes eligible after it has been distributed.

Notice Of Domestic Relations Order

A divorce, separation, or other domestic relations proceeding may result in an order or decree that divides a participant’s retirement plan benefit between the participant and an alternate payee. An alternate payee may be the participant’s spouse, former spouse, child or other dependent. These orders are commonly referred to as DROs, domestic relations orders. The plan administrator is required to pay benefits in accordance with any qualified domestic relations order.

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Notice For Automatic Enrollment

Prior to automatically enrolling an employee in either an EACA or QACA plan, the employer must give the employee a noticePDF at least 30 days, but no more than 90 days, before the employer automatically enrolls the employee. If the employee is newly hired and the plan has immediate eligibility, then the employer may give the employee this notice on the date he or she is hired.

Special Rules And Options

If your payment includes after-tax contributions

After-tax contributions included in a payment are not taxed. If you receive a partial payment of your total benefit, an allocable portion of your after-tax contributions is included in the payment, so you cannot take a payment of only after-tax contributions. However, if you have pre-1987 after-tax contributions maintained in a separate account, a special rule may apply to determine whether the after-tax contributions are included in the payment. In addition, special rules apply when you do a rollover, as described below.

Similarly, if you do a 60-day rollover to an IRA of only a portion of a payment made to you, the portion rolled over consists first of the amount that would be taxable if not rolled over. For example, assume you are receiving a distribution of $12,000, of which $2,000 is after-tax contributions, and no part of the distribution is directly rolled over. In this case, if you roll over $10,000 to an IRA that is not a Roth IRA in a 60-day rollover, no amount is taxable because the $2,000 amount not rolled over is treated as being after-tax contributions.

You may roll over to an employer plan all of a payment that includes after-tax contributions, but only through a direct rollover plan). You can do a 60-day rollover to an employer plan of part of a payment that includes after-tax contributions, but only up to the amount of the payment that would be taxable if not rolled over.

If you are not a Plan participant

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Notice When A 401 Plan Fails Nondiscrimination Tests

When an IRC 401 plan fails the actual deferral percentage test or actual contribution percentage test, the plan administrator should issue a notice of correction letter to all affected highly compensated employees, or when applicable, a notice that a corrective distribution is being made.

If the plan corrects the tests via distributions, the plan sponsor will send the participant a letter that describes the refund process and any taxability issues. The participant will also receive a check for the amount of the distribution and a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The Form 1099-R amount will include the returned contributions and any income earned on that amount.

Returned excess contributions or excess aggregate contributions, along with earnings, are reported on Form 1099-R as taxable to the recipient in the year of distribution.

Notice Of Blackout Period

In an individual account plan, the plan may impose a blackout period where there is a temporary suspension, limitation or restriction on the ability of participants to direct or diversify assets, to obtain loans, or to take plan distributions. The most common reasons for imposition of a blackout period include changes in investment alternatives or recordkeepers, and corporate mergers, acquisitions, and spin-offs that affect the pension coverage of groups of participants. When a blackout period of three or more business days is imposed, affected participants and beneficiaries should be notified.

A blackout notice should contain information on the expected beginning and end date of the blackout. The notice should also provide the reason for the blackout and what rights will be restricted as a result. The notice must specify a plan contact for answering any questions about the blackout period. For additional information on blackout notices, see DOL Regulation Section 2520.101-3 and the Department of Labor – Employee Benefits Security Administration.

Each participant should receive a blackout notice at least 30 days, but not more than 60 days, in advance of any blackout. If extenuating circumstances prevent the plan administrator from sending the notice out at least 30 days prior to a blackout period, the administrator must provide the notice as soon as administratively possible under the circumstances.

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Icipant Letters And General Notices:

  • Seafarers 401 Plan investment changes effective April 1, 2021
  • Empower Transition Update and Year-End Message
  • Investment Fund Update: This information may or may not apply to your personal portfolioMassMutual Select and Premier FundsEffective May 1, 2021 the MassMutual Select and Premier Funds will be renamed without Premier and Select in their fund names. The name change will have NO impact on the current value of your account.
  • Empower Retirement Acquisition Disclosure
  • MassMutual® Workplace Solutions Privacy Notice
  • Seafarers 401 Plan Qualified Default Investment Alternative Notice for Plan Year 2022
  • SMPPP and Seafarers 401 Plan Safe Harbor Notice for Plan Year 2020
  • Seafarers 401 Plan Summary Annual Report for Plan Year 2019

Notice When The Plan Is Amended

When the plan is amended or when the information in the Summary Plan Description has changed, participants should receive a Summary of Material Modifications . The SMM would generally include changes to the following:

  • name and address of the employer, plan sponsor, plan administrator, trustees
  • collective bargaining agreements
  • eligibility for participation & plan benefits
  • circumstances which may result in plan disqualification
  • circumstances which may result in denial or loss of benefits or ineligibility
  • plan year-end date and
  • benefit claim procedures and remedies available for denied claims.

The SMM must be provided no later than 210 days after the close of the plan year for which the modification was adopted. The SMM or changes in information in the SPD don’t need to be furnished separately if the changes or modifications are described in a timely SPD.

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General Information About Rollovers

How can a rollover affect my taxes?

You will be taxed on a payment from the Plan if you do not roll it over. If you are under age 59½ and do not do a rollover, you will also have to pay a 10% additional income tax on early distributions , unless an exception applies. However, if you do a rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax will not apply if those payments are made after you are age 59½ .

What types of retirement accounts and plans may accept my rollover?

You may roll over the payment to either an IRA or an employer plan plan, or governmental section 457 plan) that will accept the rollover. The rules of the IRA or employer plan that holds the rollover will determine your investment options, fees, and rights to payment from the IRA or employer plan . Further, the amount rolled over will become subject to the tax rules that apply to the IRA or employer plan.

How do I do a rollover?

There are two ways to do a rollover. You can do either a direct rollover or a 60-day rollover.

If you do a direct rollover, the Plan will make the payment directly to your IRA or an employer plan. You should contact the IRA sponsor or the administrator of the employer plan for information on how to do a direct rollover.

How much may I roll over?

If you wish to do a rollover, you may roll over all or part of the amount eligible for rollover. Any payment from the Plan is eligible for rollover, except:

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Notice Of A Defined Benefit Plan’s Annual Funding

Defined benefit plans must give each participant an annual funding notice no later than 120 days after each plan year. It must include, among other things, the plan’s funding percentage, a statement of the value of the plan’s assets and liabilities and a description of how the plan’s assets are invested as of specific dates, and a description of the benefits under the plan that are eligible to be guaranteed by the PBGC. Small plans must give the notice upon the earlier of: the date that Form 5500 is filed or the due date of Form 5500 .

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Notice For Simple Ira Plans

If an employer adopts a SIMPLE IRA plan, it must notify each employee of the following information before the beginning of the election period.

  • The employee’s opportunity to make or change a salary reduction choice under a SIMPLE IRA plan.
  • The employees’ ability to select a financial institution that will serve as trustee of the employees’ SIMPLE IRA, if applicable.
  • The employer’s choice to make either matching contributions or nonelective contributions.
  • A summary description provided by the financial institution.
  • Election period. The election period is generally the 60-day period immediately before January 1 of a calendar year . However, the dates of this period are modified if the employer sets up a SIMPLE IRA plan in mid-year or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan.

    Notice When Excess Pension Plan Assets Are To Be Transferred

    An employer sponsoring a defined benefit plan may transfer excess pension assets to fund retiree health benefits or retiree group term life insurance. All plan participants should receive a notice of the employer’s intent to transfer these assets. The notice should contain plan and financial information concerning the transfer of excess defined benefit assets. Participants and beneficiaries should receive the notice no later than 60 days before the transfer date.

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