Frequently Asked Questions



When can participants get their money out of the plan after they’ve terminated?

Distribution timing is directly related to your Plan Document; however most plans have either immediate distributions (upon termination) or distributions after the anniversary date of the Plan Year in which the participant has terminated. Your Plan Document or Summary Plan Description will have this information in the Distribution section.

Is there any way for participants to get their money out of the Plan if they’re still employed?

Withdrawals from the Plan while still employed are, again, dependent upon your Plan’s document. The most common withdrawals of this type are Loans, In-Service withdrawals, and Hardship withdrawals. There are specific regulations to each of these withdrawals and not all Plans contain these options. Please refer to your Plan Document or Summary Plan Description, or call our office for assistance.

Are taxes due on all distributions?

If the participant is terminated and taking the distribution as a lump sum, there is a mandatory 20% federal withholding deducted from the total vested balance. If the participant is not 59 ½, or does not meet other IRS criteria, there may also be a 10% penalty assessed when the participant’s taxes are configured. Rolling the total amount into an IRA or another qualified plan can avert this. Recent EGTRRA amendments have stipulated that no withholding is necessary on Hardship withdrawals and, in most cases, the participant requesting the In-Service withdrawal may indicate whether taxes are to be deducted at the time of the withdrawal. Since Loans are paid directly back to the individual accounts, they are not subject to taxes.

Does our Plan have loans and how do participants get one?

If your Plan allows Loans, your Plan Document will refer to this or you may have a separate Loan Policy included with your documents. Again, each Plan may choose certain criteria to follow in allowing participant loans; however the IRS mandates that the participant may only borrow up to 50% of the vested balance, to a maximum of $50,000, of their account. The requirements for qualifying for a loan are specific to the Plan Document or Loan Policy and each loan must be approved by the Plan Administrator of your company. The Plan Document determines the interest rate for each loan and the participant pays his/her account back (including interest) through payroll deductions over a period of up to 5 years (sometimes longer for primary residence loans).

Can participants roll money into their accounts?

If Rollovers into the Plan are allowed, the sources eligible for rollover will be stipulated in the Plan Document.

When are employees eligible to enter the Plan?

The eligibility of your company’s employees to enter into your benefit plan is specifically designated in your Plan Document, and is usually one of the first items listed. The requirements for eligibility in the Plan as well as the “entry dates” will be included in this information.

When do we get our annual reports?

Bates & Company provides yearly reports and financial statements for your Plan. When you will receive this information depends on your Plan’s year end (calendar or fiscal), as well as the timeliness of receiving the requested annual information from your company’s Plan Administrator or Trustee. Calendar year reports are completed from February until October of each year, depending upon receipt of information and the time needed to complete the reports according to IRS and DOL regulations.

What tax forms need to be submitted and when?

There are basically 3 IRS forms that need to be submitted each year. The DOL Form 5500, which is your Plan’s financial information, is due within 7 months of your Plan’s year end (for calendar year-end Plans, this would be July 31st). If the information cannot be completed by this date, an extension can be filed with the IRS that allows for an additional 3 ½ months to complete and file the return. The second form is Form 945 that must be filed by January 31st of each year, if Federal Withholding was taken from any participant’s distributions for the previous calendar year. The third form is Form 1096. This is a required form that must be filed for ALL distributions for the previous calendar year, regardless of whether taxes were withheld. This form must be filed by the last day of February each year. All 3 of these forms will be completed by Bates & Company and sent to the Plan Administrator for signatures and filing.

When will the 1099 forms be sent and what tax forms need to be filed?

Plans for which Bates & Company completes the 1099 forms: we include a Verification of Distribution form with each participant’s initial distribution information, to be completed by the Plan Administrator and returned to our office. This information is necessary for our office to complete the 1099 forms each January. All 1099 forms are prepared and mailed to the participants by January 31, with copies of this information to the company’s Plan Administrator.

What happens if the company’s Plan is terminated?

IRS regulations determine that, upon a Plan’s termination, each participant automatically becomes 100% vested in their account. Distribution forms for all participants will be prepared and a final 5500 form will be completed at your Plan’s year-end. Please contact our office for additional information and further instructions.

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