Distributions

At the time a participant terminates employment, they should be given a Retirement Plan Settlement of Account Election form.  Terminated employees should be encouraged to take their funds from the plan as soon as they are able.  Not only does this save dollars to your plan, it eliminates headaches in trying to locate individuals years later. 

Please use the most current version of the Settlement of Account Election form from this site.  Please note that only current versions of the Settlement of Account Election form, Loan Application and Hardship Application will be accepted.  Old, outdated forms may be returned and will delay processing the participant’s distribution.  

The first two pages of the form are to be completed by the separated employee.  The third page needs to be completed and signed by a plan trustee.

Once the paperwork is completed, it can be mailed or faxed to our office for processing.  We will prepare the necessary paperwork or letter required to release the funds from the investment company.  Incomplete or incorrectly completed forms will be returned for completion and may delay the processing of the distribution.

Once the appropriate form or letter is prepared by our office, it will be emailed or faxed to the company with further instructions.

It is the company plan administrator’s responsibility to make sure employees are paid out of the plan. Not only does the company pay fees at annual administration for each terminated participant’s account that is still open, the IRS requires an additional form, SSA, be filed on behalf of these accounts.  We charge $50 at administration for this additional form to be prepared.  Routinely following up on terminated employee accounts saves the employer money.   

A participant may receive their retirement plan benefits during or after they leave employment. However, when actual benefits are paid out will depend on:

• What the Plan Document states regarding distributions Some documents allow immediate payouts; others specify longer periods.
• The amount of the benefit to which the participant is entitled. If the participant's vested benefit is over $5,000, several requirements need to be met before payout.
• Paperwork that has been completed. Plan participants must receive information outlining the choices for plan distribution (IRA's, Plan to Plan Transfers, cash distributions). The plan administrator must have signed completed forms within a given time period before releasing plan dollars.

Most benefits may be received in cash and/or rolled into an IRA or another qualified plan.

• If the amount is over $200 AND IS REQUESTED IN CASH, the IRS requires 20% to be withheld and transmitted on to the IRS immediately via a retirement tax coupon. It is then reported annually on a form 945. (See below.) Oregon tax law requires state taxes be withheld UNLESS the participant indicates otherwise.
• If the distribution requested is to be directly rolled over into an IRA or qualified plan, there is no tax withholding.
• Employees over age 70 1/2 who leave employment after retirement age must begin taking distributions even if they have over $5,000 in their retirement plan account.

A tax form 945 is required to report all tax with holdings from the retirement plan. A tax form 1099R is required for each individual who receives a retirement plan distribution during the plan year. Both the 945 and 1099R are due the January 31st following the calendar year during which the distribution occurred.

Retirement plan distributions can be complicated.  Please call us at 1-800-982-2012 or email us at retirement@profben.com if you have any questions regarding the correct procedure for your plan.

Click here for a printable version of our Settlement of Account Election Form

Distribution Facts

• Some plans permit loans, hardships and 59 !/2 inservice distributions.
• Distribution forms are located in pdf format on this website.
• All cash distributions are subject to taxes. Cash distributions to individuals under 59 1/2 are subject to an additional 10% early withdrawal fee.