A confluence of events has a few plan sponsors seeing more assets distributed from their plans than put into them.
Workers in the U.S. still have plenty of time to file their 2021 taxes with the IRS, but advisers can take steps now to remind their clients of the potentially disastrous consequences of early retirement plan cash-outs.
It also provides a way for retirement plan sponsors to avoid a partial plan termination.
A calm, measured approach will help retirement plan participants make the right decisions.
Under the SECURE Act, more flexibility has been granted to participants who want to draw on retirement savings to help offset the cost of childbirth or adoption—though care must still be taken to avoid unnecessary taxes and fees.
The model notices have been updated to reflect changes made by the SECURE Act.
Participant communications about coronavirus-related distributions should include language that state tax treatment may vary, or that participants should check with an expert about what state taxes may apply.
The fee waiver will remain in place until further notice, depending on circumstances in the economy and financial markets.
The program offers participants one-on-one sessions with a financial planner to discuss their various distribution options.
“There can be huge consequences from making the wrong decision, ranging from taxes and penalties to higher fees and risky or poor performing investments," says Ric Edelman, with Edelman Financial Engines.
Participants who were age 60 or older when they retired were more likely to keep assets in the plan if it permitted installment payments, according to Alight Solutions.
Users can now push their distribution data that was collected in Wolters Kluwer's Distribution Tracking Software into ftwilliam.com's 1099 software, which automatically populates the data appropriately into 1099 forms.
The tool includes accountability features and data collection options.
“If a plan sponsor can invest in an adviser or other person to provide direction for terminating or retiring employees, that would be extremely helpful,” Terry Dunne, from Millennium Trust Company, told 2018 PLANSPONSOR National Conference attendees.