As a plan participant, you may be curious about different retirement plan arrangements. In the following post, http://christinegurneyuspension.com/2012/10/02/ebsa-retirement-plan-comparison-chart/, you can go to a government chart that includes general rules such as vesting that contract different retirement plans.
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Showing posts with label Summary Plan Description. Show all posts
Showing posts with label Summary Plan Description. Show all posts
Tuesday, October 2, 2012
Saturday, September 8, 2012
Participating in a Retirement Plan
On Monday, we commemorated Labor Day. The law that governs retirement plans, ERISA, was signed into law on Labor Day 38 years ago. I find it only fitting that we discuss participating in retirement plans this week. Due to the variety of retirement plans, participation can be an active or rather passive process. If you are in an defined benefit plan or any retirement plan that only allows for employer contributions and you are unable to direct plan investments, you may only need to complete a beneficiary form.
Regardless of your plan type, you should receive a Summary Plan Description (SPD), or a brief summary of the plan document written at a layman level, within ninety days of becoming eligible for the plan. If you direct investments, you will need to make a choice on an enrollment or investment election form. If you are able to make employee contributions, you will also need to make a choice on an enrollment form. Regardless of plan type, you will need to complete beneficiary forms. The form will determine how your vested benefit will be distributed if you die. Sometimes these elections will be on three separate forms or they can all be combined on the same form. As a result, terms other than investment election, beneficiary or enrollment form may be used by your plan administrator.
I would encourage everyone to participate if they haven't already. If you think you should be eligible and you haven't received any paperwork or instruction about how to sign up, a brief call to your benefits department may be useful. They should be able to help you out with signing up or advise you regarding when you should be eligible. If you are not expected to meet eligibility, for example due to hours worked, they should also let you know that. Many employers gladly discuss the plan and/or give out SPD's before participants are not even eligible yet, if an employee is interested. They are not required to, but they often want to share the great benefits that you may qualify for in the future.
Thanks for reading and have a wonderful day! Please be sure to subscribe to my blog and follow me on twitter @ChristineGurney.
Regardless of your plan type, you should receive a Summary Plan Description (SPD), or a brief summary of the plan document written at a layman level, within ninety days of becoming eligible for the plan. If you direct investments, you will need to make a choice on an enrollment or investment election form. If you are able to make employee contributions, you will also need to make a choice on an enrollment form. Regardless of plan type, you will need to complete beneficiary forms. The form will determine how your vested benefit will be distributed if you die. Sometimes these elections will be on three separate forms or they can all be combined on the same form. As a result, terms other than investment election, beneficiary or enrollment form may be used by your plan administrator.
I would encourage everyone to participate if they haven't already. If you think you should be eligible and you haven't received any paperwork or instruction about how to sign up, a brief call to your benefits department may be useful. They should be able to help you out with signing up or advise you regarding when you should be eligible. If you are not expected to meet eligibility, for example due to hours worked, they should also let you know that. Many employers gladly discuss the plan and/or give out SPD's before participants are not even eligible yet, if an employee is interested. They are not required to, but they often want to share the great benefits that you may qualify for in the future.
Thanks for reading and have a wonderful day! Please be sure to subscribe to my blog and follow me on twitter @ChristineGurney.
Saturday, August 25, 2012
Summary Plan Description (SPD) Part I Vesting
Last week, I touched on different documents that you will want to retain as a plan participant. A document of particular importance is the Summary Plan Description (SPD). An SPD is a summary of the plan document written for a layperson to understand. From my first post about participant statements, you may have noticed an item called vested percentage and/or amount on your statement. Vested means the portion of your benefit that you have already earned. Any unvested benefits will not be yours and are considered forfeited or given up when you separate from service.
Any employee contributions you make to your retirement plan are 100% vested. Based on the type of plan you are in these contributions include: 401(k), 403(b), Roth, Rollover, Voluntary, and Mandatory. Other names are also used, but the general rule is if you elect your own money to go into the plan, it cannot be forfeited. Employer contributions can be 100% vested but are typically subject to vesting schedules. The type of employer contribution is important because different types are subject to different vesting schedules. This is where your SPD comes in to play.
Are you in a retirement plan that has employer match contributions and employer profit sharing contributions? You will want to look under vesting in the SPD for the appropriate schedules. Generally, you will see a table with the number of years of service you need to reach different percentages. For example, you may be 0% at one and two years of service for profit sharing contributions. In year three, you become 100% vested. You will want to check your participant statements to see if they match the service you have earned. Once you have earned vesting, it cannot be taken away from you.
The SPD should explain how vesting service is calculated. Some plans are written to only count plan years employed. More often plan documents are written to calculate based on having worked a certain number of hours. Most often the requirement is 1000 hours in one year. However, sometimes a document does not require as high a threshold of 1000 hours and chooses something like 900 hours in one year. Other provisions to be aware of are restrictions on service you earned prior to establishment of the plan or a certain age. If those provisions apply, they should be disclosed in the SPD.
Other factors such as amendments to the vesting schedule, lapses in service, grandfathered service, and changes in plan years also affect service. If you see that your vested percentage is different than what you feel it should be, consult the contact for the plan. Often times, your participant statement will have a phone number to call. Some of the other factors mentioned briefly above may explain these differences, and your plan administrator should be happy to provide an explanation. If there is an error, they should fix the percentage.
Thanks for reading and have a wonderful day! Please be sure to subscribe to my blog and follow me on twitter @ChristineGurney.
Any employee contributions you make to your retirement plan are 100% vested. Based on the type of plan you are in these contributions include: 401(k), 403(b), Roth, Rollover, Voluntary, and Mandatory. Other names are also used, but the general rule is if you elect your own money to go into the plan, it cannot be forfeited. Employer contributions can be 100% vested but are typically subject to vesting schedules. The type of employer contribution is important because different types are subject to different vesting schedules. This is where your SPD comes in to play.
Are you in a retirement plan that has employer match contributions and employer profit sharing contributions? You will want to look under vesting in the SPD for the appropriate schedules. Generally, you will see a table with the number of years of service you need to reach different percentages. For example, you may be 0% at one and two years of service for profit sharing contributions. In year three, you become 100% vested. You will want to check your participant statements to see if they match the service you have earned. Once you have earned vesting, it cannot be taken away from you.
The SPD should explain how vesting service is calculated. Some plans are written to only count plan years employed. More often plan documents are written to calculate based on having worked a certain number of hours. Most often the requirement is 1000 hours in one year. However, sometimes a document does not require as high a threshold of 1000 hours and chooses something like 900 hours in one year. Other provisions to be aware of are restrictions on service you earned prior to establishment of the plan or a certain age. If those provisions apply, they should be disclosed in the SPD.
Other factors such as amendments to the vesting schedule, lapses in service, grandfathered service, and changes in plan years also affect service. If you see that your vested percentage is different than what you feel it should be, consult the contact for the plan. Often times, your participant statement will have a phone number to call. Some of the other factors mentioned briefly above may explain these differences, and your plan administrator should be happy to provide an explanation. If there is an error, they should fix the percentage.
Thanks for reading and have a wonderful day! Please be sure to subscribe to my blog and follow me on twitter @ChristineGurney.
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