section 1 - The American College Online Learning Center

(2) From the previous employer(s) plan(s)(3) Planning Point: Planners should inquire not only about the opportunitiesfor distributions from the current employer’s plan, but they should also askwhether there are plans with previous employers.b. Clients may need to deal with distributions when changing jobs.(1) Clients may have a distribution option(2) Clients may choose to defer or rollover to an IRA or other employer plan3. Distributions from the many types of employer-sponsored tax-advantaged plans candiffer on the type of plan involved.a. More complex requirements exist — qualified plans, 403(b) plans and 457 plansthan for IRAs, SEPs, and SIMPLEs (e.g., ability to make a direct rollover, subjectto the qualified joint and survivor requirements)b. Simplified distribution or hardship withdrawal requirements (roll any distributionother than a required minimum distribution)(1) IRA(2) SEP(3) SIMPLE4. Qualified plan distributionsa. Limited distribution options(1) Plan will have clearly defined optional forms of distribution and methods todetermine the amount paid under each option.(2) Discretionary withdrawals that can be taken as needed (which is thecommon approach in an IRA) are not typically allowed in a qualified plan.b. Timing of payments(1) The plan can require that benefits are deferred to a specified retirementage.(2) Almost all defined contribution plans, and even some defined benefit plans,do allow a distribution at termination of employment.(3) Some plans may even allow in-service withdrawals.c. Ability to defer benefits(1) Even if the plan allows an immediate distribution, participants can generallyelect to defer the receipt of the distribution to normal retirement age.(2) Unless plan has involuntary cash-outs for small benefits.d. Defined-benefit plan benefits(1) In most cases, the basic benefit value is tied to a life annuity.(2) A participant electing any other form of benefit will receive the actuarialequivalent of the basic benefit form.(3) Example: Cedric is eligible for a retirement benefit of $2,000 a monthpayable beginning at age 65 in the form of a single life annuity. If hereceives instead a 100% joint and survivor annuity with his wife as thebeneficiary, the monthly benefits will be $1,600, the actuarial equivalent ofthe life annuity. The reduction reflects the longer payout period and theamount is derived under the terms of the plan.4.2