Frequent Asked Questions

Vested means the amount of the employer contribution which you are entitled to based on your years of service with the company. All employee deferrals are 100 percent vested. Employer contributions such as match and profit sharing are generally subject to a vesting schedule which increases with your years of service with the company. Your vesting computation stops on the date which you terminate service with the employer.

There are very strict rules under which a participant in a plan can withdraw money prior to retirement or service termination. Some plans allow for features such as loans, financial hardship distributions, and in-service distributions. In order to determine if these options are available and if you are eligible to take advantage of these options, please refer to your SPD or see your plan sponsor.

Loans are an optional feature in a plan that allows participants to borrow funds from their account and pay the money back with interest, within a set time frame (usually no longer than 5 years). Generally there is a minimum dollar requirement and many plans limit the number of outstanding loans to one. Not all plans offer this feature. If you have further questions regarding this feature, please refer to your SPD or see your plan sponsor.

Distributions from retirement plans are generally taxable and may be penalized if the participant is under the age of 59 ½. All cash distributions (excluding loans) are taxable and subject to penalty. To avoid tax consequences and penalties, a participant has the option to roll their accounts over to an IRA or other qualified retirement plan upon termination of service or retirement. Loans are not taxed because the participant pays the loan amount, with interest, back to their account. If a participant defaults on their loan, they will be subject to taxes and penalties as if the loan was a distribution.

A Highly Compensated Employee is defined as a 5 percent owner or an employee whose compensation in the previous year exceeded a limit set by the IRS ($120,000 in 2018 and $125,000 in 2019).

A catch-up contribution is an additional amount that may be deferred to the plan by participants who are age 50 or older. A participant may make a catch-up contribution if they are going to be age 50 by the plan year end. The catch up amount is $6,000 in 2018 and $6,000 in 2019.

There are several definitions of a key employee: More than a 5 percent owner; a 1 percent owner who makes more than $150,000; an officer who makes more than $175,000 in 2018 or $180,000 in 2019; and a family member of a 5 percent owner (spouse, children, grandchildren, or parents.)

The Summary Plan Description (SPD) is a document that is provided to employees by the employer outlining the specifications of the company’s retirement plan. It is written in a question and answer format to be user-friendly to the employee. The SPD should be referred to for general questions about the plan’s requirements, such as eligibility, and its features, such as loans and in-service distributions, among other things.

As an eligible participant in the plan, you may elect to defer a percentage of your compensation each year on a pre-tax basis. Your total deferral amount can not exceed the maximum amount each year as set by law. The limit is $18,500 for 2018 and $19,000 for 2019. In addition, a participant over the age of 50 may be eligible for a catch-up contribution.