Many people are not completely familiar with all the facts associated with a 401(a) plan. If your company offers this type of plan, be sure to take the time to learn what the plan is and how it works. Also learn the rules regarding contributions and withdrawals. Spending a little time asking questions will help when you begin to contribute to the plan. The following questions are commonly asked and they will give you some important answers.
Any employee, whether full or part-time, who works more than 20 hours per week is eligible to join the plan. You must have more than one year of service with the company and must have worked at least 1,000 hours within that year. If an employee is participating in another type of retirement plan, they may be eligible to participate in the 401(a) after three months, as long as they are not receiving any benefits from the other plan.
A new rule went into effect in January of 2002 stating that all NOAO employees that are participating will be vested 100% immediately.
You may not. Your employer completely funds the 401(a) plan.
There are actually two available funds. These are the Teachers Insurance and Annuity Association College Retirement Equities Fund, known as TIAA-CREF, and Fidelity Investments. Once you choose which company to deal with, you will be allowed to choose from whatever funds are available from that particular company. You are not allowed to contribute to both funds.
You are not allowed to make early withdrawals if you are still employed with the company. If you leave the company or retire, you may then withdraw the money from the account. If you do not want to withdraw it, you can transfer the balance or roll it over into a different type of retirement account.
If you are under the age of 59 ½, you will be subject to a 10% penalty if you withdraw funds early.
Once you have reached 59 ½, you have the option to withdraw from the account without incurring any penalties. You will be required to pay taxes on the amount withdrawn.
Rules require you to name a spouse as a beneficiary for at least 50% of the amount in the account. This can be avoided if the spouse signs a waiver.
You may rollover money from qualified plans but this must be approved by the plan administrator. If you have concerns whether your prior plan is compatible, you can contact your investment company at any time.
All documentation associated with the 401(a) plan must be made available to all employees.
Quarterly statements are issues from your employer. These statements will inform you of the balance in the account and how much was contributed in that quarter. This information is also available from your investment company.
As long as you remain with the same investment company, you can change investment allocation.
As long as you stop investing with one company, you may switch to the other at any time.
You are allowed to leave the money in the account until you determine what you wish to do with it. If you withdraw and have not met the withdrawal eligibility requirements, you will be subject to penalties. It is best to transfer the funds into another account. This way you will avoid penalties and taxes at that time.
At this point, you should have a long term financial goal, and you should know what funds you have available.
Rocco Beatrice, CPA, MST (Master of Science in Taxation), MBA (Master of Business Administration), BSBA (Management/Accounting), CWPP (Certified Wealth Preservation Planner), CMMB (Certified Mortgage Broker), CAPP (Certified Asset Protection Planner), Managing Director, Estate Street Partners, LLC. Mr. Beatrice is an asset protection, award-winning trust, estate planning and tax expert.
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