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10 plan distributions a distributions from tsa plans

  • RMU
  • FIN 3300
  • ConstableCheetah7533
  • 175

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10. Plan distributionsa. Distributions from TSA plans are subject to the qualified plan distribution rules.1.) Many plans provide for distributions in a lump sum at termination of employment. a.)Lump-sum distributions from TSAs are not eligible for the same favorable tax treatmentthat may apply to some lump-sum distributions from qualified plans (NUA, 10-yearforward averaging, and pre-1974 capital gains).2.) TSA plans can allow participants to make in-service withdrawals for hardship. 3.) Alldistributions from TSAs are subject to ordinary income tax. In-service distributions fromTSAs may also be subject to the 10% early withdrawal penalty tax. [See Section XV(D):Early Distribution Penalty for a list of exceptions to the early withdrawal penalty]4.) Many TSA plans have loan provisions for participants. a.) Such plan loans follow therules for loans from qualified plans.5.) Hardship distributions a.) Only an employee-participant's elective deferrals (salaryreduction contributions) may be distributed to the plan participant in the event of afinancial hardship.b.) Earnings on an employee's contributions to the plan may not be distributed forfinancial hardship.c.) The distribution may be subject to the early withdrawal penalty in addition to ordinaryincome tax11. 403(b) plan legislationa. Requirements: 1.) A 403(b) plan must have a written plan document. 2.) The plandocument must outline all material plan provisions and allocate the responsibilities ofthe employer, the annuity contract issuer, other service pro-viders, and participatingemployees.3.) Plans must satisfy specific requirements that prohibit discrimination in favor of highlycompensated employees with respect to employer contributions and after-tax employeecontributions.
a.) When hired, all new employees must be notified of their opportunity to participate inthe 403(b) plan.b.) Employees working less than 1,000 hours in a given year may be excluded.4.) Certain types of nontaxable transfers are permitted with the 403(b) plan. 5.) Amountsattributable to employee elective deferrals can be distributed from the plan only whenthe employee has separated from service, has a hardship, becomes disabled, orreaches age 591⁄2.6.) There is a required 20% withholding on any eligible distribution that is not directlyrolled over to another plan.7.) The special 15-year catch-up contributions must be exhausted for each year beforeusing the age-50 catch-up.12. Roth 403(b) plansa. Overview1.) A Roth 403(b) plan is a 403(b) plan in which employee contributions are made on anafter-tax basis.2.) Contributions to a Roth 403(b) plan, and earnings on the contributions, can bereceived in a qualifying distribution without the imposition of income taxes.3.) Organizations offering a Roth 403(b) plan option will be required to separately trackan individual's regular 403(b) plan balance and her Roth 403(b) plan balance.

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