Los Angeles Divorce Attorney Divorce and Family Lawyer in Los Angeles RETIREMENT PLANS FAQ #4 4. Payment of Benefits Once you understand what type of plan you or your spouse have, how you/spouse earn benefits, and how much your/spouse's benefits will be, it is important to learn when and how you can receive them. When can you begin to receive retirement benefits? There are several points to keep in mind in determining when you can receive benefits: Federal law provides guidelines, for when plans must start paying retirement benefits. Plans can choose to start paying benefits sooner. The plan documents will state when you may begin receiving payments from the plan. You must file a claim for benefits for your payments to begin. This takes some time for administrative reasons. Under certain circumstances, your benefit payments may be suspended if you continue to work beyond normal retirement age. The plan must notify you of the suspension during the first calendar month or payroll period in which payments are withheld. This information should also be included in the Summary Plan Description. A plan also must advise you of its procedures for requesting an advance determination of whether a particular type of reemployment would result in a suspension of benefit payments. If you are a retiree and are considering taking a job, you may wish to write to your plan administrator and ask if your benefits would be suspended. Federal law guidelines show the general requirements for when payments begin. Listed below are some permitted variations:
When is the latest you may begin to take payment of your benefits? Federal law sets a mandatory date by which you must start receiving your retirement benefits, even if you would like to wait longer. This mandatory start date generally is set to begin on April 1 following the calendar year in which you turn 70½ or, if later, when you retire. However, your plan may require you to begin receiving distributions even if you have not retired by age 70½. In what form will your benefits be paid? If you are in a defined benefit or money purchase plan, the plan must offer you a benefit in the form of a life annuity, which means that you will receive equal, periodic payments, often as a monthly benefit, which will continue for the rest of your life. Defined benefit and money purchase plans may also offer other payment options, so check with the plan. If you are in a defined contribution plan (other than a money purchase plan), the plan may pay your benefits in a single lump-sum payment as well as offer other options, including payments over a set period of time (such as 5 or 10 years) or an annuity with monthly lifetime payments. Can a benefit continue for your spouse should you die first? In a defined benefit or money purchase plan, unless you and your spouse choose otherwise, the form of payment will include a survivor’s benefit. This survivor’s benefit, called a qualified joint and survivor annuity (QJSA), will provide payments over your lifetime and your spouse’s lifetime. The benefit payment that your surviving spouse receives must be at least half of the benefit payment you received during your joint lives. If you choose not to receive the survivor’s benefit, both you and your spouse must receive a written explanation of the QJSA and, within certain time limits, you must make a written waiver and your spouse must sign a written consent to the alternative payment form without a survivor’ s benefit. Your spouse’s signature must be witnessed by a notary or plan representative. In most 401(k) plans and other defined contribution plans the plan is written so different protections apply for surviving spouses. In general, in most defined contribution plans if you should die before you receive your benefits, your surviving spouse will automatically receive them. If you wish to select a different beneficiary, your spouse must consent by signing a waiver, witnessed by a notary or plan representative. If you were single when you enrolled in the plan and subsequently married, it is important that you notify your employer and/or plan administrator and change your status under the plan. If you do not have a spouse, it is important to name a beneficiary. If you or your spouse left employment prior to January 1, 1985, different rules apply. For more information on these rules, contact the Department of Labor toll free at 1.866.444.EBSA (3272). Can you borrow from your 401(k) plan account? 401(k) plans are permitted to – but not required to – offer loans to participants. The loans must charge a reasonable rate of interest and be adequately secured. The plan must include a procedure for applying for the loans and the plan’s policy for granting them. Loan amounts are limited to the lesser of 50% of your account balance or $50,000 and must be repaid within 5 years, or 15 years for residential loans. Can you get a distribution from your plan if you are not yet 65 or your plan’s normal retirement age but are facing a significant financial hardship? Again, defined contribution plans are permitted to – but not required to – provide distributions in case of hardship. Check your plan booklet to see if it does permit them and what circumstances are included as hardships. Contact a Los Angeles Divorce Attorney at Law Offices of Warren R. Shiell today! Please call to make an appointment at 310.247.9913. ADDITIONAL RESOURCES
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