Employers are allowed to place language in their plan that permits loans to employees. Examinations of plans show a trend of violations when dealing with loans. Violations include employees not making payments after receiving the loan and employees not paying the 10% excise tax for not repaying the loan. Administrators need to keep current with all loans given to employees and explain to them the importance of repayment of the loans.
Required Minimum Distributions
The Internal Revenue Code mandates that, generally, required minimum distributions begin after an employee turns age 72 (70 ½ if reach 70 ½ before January 1, 2020). Many employees request for their distributions to begin before this date. Therefore, administrators sometimes let this requirement slip their minds. Examinations indicate this is a trend.
Hardship and Emergency Distributions
Employers can also provide in their plans the option of having employees request hardship distributions and/or emergency distributions. Examinations of plans have found trends that these arrangements are not being administered properly. Administrators are not getting adequate documentation from the employee that there is a hardship or emergency.