FEBRUARY 2006 Pension Plan tip of the month...

Originals of all following documents should be maintained in the personnel file for each employee:

• beneficiary forms
• enrollment forms
• address changes
• name changes
• loan forms including promissory notes, loan application, etc
• spousal consent (if necessary)
• distribution requests
• any other forms directly related to the individual

When providing a participant with any plan form, it is important to use the most recent document available. Failure to use the most recent form could result in delays in processing or other issues. When possible, we strongly suggest you obtain forms from your record keeper’s website to assure you have the most updated form possible.

The Paragon Alliance Group, LLC and, with some possible exceptions, your investment provider will accept and work from a readable photocopy or faxed copy of any of the above forms.

If your plan allows for both hardship distributions and loans, remember that prior to taking a hardship the participant must exhaust all other means of obtaining the amount needed. This includes any available loans from the plan.  While some plans require a longer wait, for the most part, if a participant takes a hardship distribution, he or she must stop deferring into the plan for 6 months. Amounts taken for hardship distribution, unlike a loan, are not repayable to the plan and are taxable. If a participant is under 59.5, generally a 10% tax penalty will also apply.

Reasons for a hardship distribution include: 

              Acquiring of a primary residence

              Medical expenses (unpaid medical bills)

              Secondary education for yourself, spouse or dependent child

              To prevent eviction or foreclosure

              Starting in 2006, the cost of home repairs due to natural disasters

              as well as funerals are accepted reasons for hardship withdrawals.

It is vital that proper documentation for a hardship distribution (mortgage information, medical bills, tuition bills, note from the courts, hardship affidavit) be kept in the participant file.  In the event of a plan audit, this information may be required.  Also please note that since this withdrawal is intended to be used for a financial hardship, it can not be rolled over to another account.