Links to an external site this is a very basic form

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(Links to an external site.)Links to an external site. . This is a very basic form. The distribution code (box 7) will tell the IRS if the distribution was pre-mature and therefore subject to the early distribution 10% penalty, if it was a normal distribution, or if it was a qualified rollover. Part of managing the distribution process is to supervise any plan loans and repayment procedures. The last significant duty is to amend plan documents as needed. Such amendments will potentially ripple down through SMM reports and SPD reports. Plan amendments could be adjusting vesting schedules or eligibility rules. It could also mean altering the contribution formula or matching scheme. A plan termination would also fall into this category. You will learn about plan terminations in the next lesson. Q: Are plan sponsors required to distribute a new SPD every time they change a small issue?
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A: No, small issues will be updated in a fresh SPD every 10 years. Q: Are plan sponsors required to distribute a new SPD every time they change a significant feature like a vesting schedule? A: No, small issues will be updated in a fresh SPD every 5 years when significant changes are made. Q: How are significant changes communicated to participants? (select all that apply) A: An SPD is updated after 5 years when significant changes have been made. An SMM is provided at the time of a significant change. Sometimes Mistakes Happen I don’t know about you, but I never make mistakes…really, just ask my wife. All joking aside, sometimes accidents do happen. This is one reason why plan administrators need to provide the SPD and the SMM to participants who should always be able to cross-check the actual benefits with the promised benefits. Participants should be checking their statements as they receive them. One common mistake is that not all compensation gets factored when calculating benefits. By now, you already know that every employer must have a consistent definition of “compensation” that must be uniformly applied to all employees. Occasionally, a company will provide one definition but calculate benefits based on something else. Software glitches can happen and they do happen as our world becomes more and more digitized. Another common mistake is for the years of service to be incorrect . Is the participant's birth date accurate with HR? Maybe it is as simple as the system did not count a few years due to the age 18 rule for eligibility. Maybe there is an error in recording over 1,000 hours in a given year so credit for a year-of- service was withheld. These can be easily fixed with HR. Sometimes basic personal information is simply wrong, like birth dates, addresses, or beneficiary elections. The addition of a new child and updates on marital status are the two most common missing pieces of personal information. An adjustment to marital status could affect access to plan loans and QJSA/QPSA arrangements.
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  • Spring '14
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