NEWSLETTERS

WHAT’S RIGHT, AN IN-SERVICE DISTRIBUTION OR
AN INVESTMENT ELECTION CHANGE?

With volatility in the investment market, participants may come to the plan sponsor asking about taking in-service distributions.  They may actually want an in-service distribution, or they may be looking for a way to reduce the risk their retirement monies are exposed to, thinking the  distribution is the way to do that. 

In-Service Distributions
When a participant takes a distribution while actively employed, it is called an in-service distribution.  When a participant is actively employed, his distribution options are limited.  The plan adopts the in-service distribution provisions it will offer in the plan document. 

Below is a brief description of in-service distributions that a retirement plan could offer.  Your plan may or may not allow these options.  Please review your Plan Highlights or Plan Document to confirm the in-service distributions your plan offers.  If you are not certain of your plan’s provisions, or would like to change the options your plan allows, please contact your Administrative Retirement Services, Inc. (ARS) Plan Administrator.

In-Service Distribution - A participant may take a distribution of their monies while actively employed.  Attainment of age 59.5 (or age 65) is commonly required in order to take an in-service distribution.  The monies may also be required to be invested at least two (2) years prior to becoming available for an in-service distribution.

Loan Distribution - A participant may borrow monies from his retirement plan account.  Loans are not taxable, but must be paid back.  The minimum loan is typically $1,000 and the maximum loan is 50% of the participants vested account balance or $50,000 whichever is less.

Hardship Distribution - If a participant encounters an immediate, heavy financial burden that he cannot relieve with any other resources, such as a plan loan, a hardship distribution is available.   Hardship distributions are allowed for only the amount of the financial need, and are limited to six safe harbor hardship reasons.  Contact your ARS Plan Administrator for a list of the six safe harbor hardship distribution reasons.

For complete details regarding in-service distributions, reference your plan document, or contact ARS Plan Administrator.

Changing Investment Elections
If a participant wants to change his investment elections and would like advice as to what funds are best for his objectives, direct him to the plan’s investment advisor.  If you are not certain who the plan’s investment advisor is, please contact your ARS Plan Administrator and we will provide you with the advisor’s name and phone number. 

If the participant knows the changes he wants to make to his investment selections, direct him to the investment company.  The investment company’s participant help line phone number and web address are in the Plan Highlights.

If you have any questions about in-service distributions or an investment election changes, contact Administrative Retirement Services, Inc.

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