For frequently asked questions about:
Investment Options
Participant Statements
Wage and Contribution Reporting
Quarterly Billing
Re-Hired Employees
Account Maintenance Forms
PlanWeb and the Voice Response System (VRS)
Distributions for Terminated Employees
Employee Transfers
Voluntary Withdrawals and In-Service Withdrawals
Hardship Withdrawals
Plan Loans
Required Minimum Distributions
Rollovers
Direct Voluntary Contributions
Changes at Our Company
Profit-Sharing and Discretionary Match Contributions
Contribution Nondiscrimination Test
Form 5500
RAI
Top Heavy Testing
USERRA and Military Reservists Called to Active Duty
Qualified Domestic Relations Order
About Investment Options
What investment choices does NADART offer?
In the NADART Classic Plan any voluntary after-tax contributions (if allowed by your employer) are invested in the Income Fund (pdf), while all other employee and employer contributions are invested in the NADART Fund (pdf).
NADART offers a variety of investment options to its Investment Choice Plans, including Balanced Funds, Income Funds, International Funds, Large Cap Funds, Mid Cap Funds, Small Cap Stock Funds and Target Dated Funds. Review your investment choices (pdf) (including the new Target Dated Funds insert (pdf)) to learn about your available options. Participants who do not make investment elections will have their employee contributions and their employer contributions plan-directed into the NADART Fund (pdf) and their employee after-tax voluntary contributions plan-directed into the Income Fund (pdf).
How do participants make investment elections? (Investment Choice Plans Only)
Internet based PlanWeb and an automated Voice Response System (VRS) with a toll free number (877-487-4015) provide participants with the ability to review and modify their investment elections 7 days a week, 24 hours a day. Before accessing PlanWeb or the VRS, participants may want to complete an Investment Election Worksheet (pdf) to guide them through their options.
How will participants select how their future contributions are invested? (Investment Choice Plans Only)
Each participant should be provided with an Investment Choice 401(k) Plan Investment Election Worksheet (pdf), which can be prepared in advance of using PlanWeb, our online system. In addition to, or in place of PlanWeb, participants can use our Voice Response System (VRS) to select how their future contributions are invested. Participants make their selections on PlanWeb or the VRS by using their computer or telephone to designate the percentages. Participants will be able to choose, by contribution source, how their contributions are invested. For example, they can choose to have their employee after-tax voluntary contributions invested differently than their pre-tax employee contributions. Or they can invest all contributions in the same way.
What will happen if a participant does not make an investment election? (Investment Choice Plans Only)
If participants do not make investment elections prior to their first contribution or the effective date of their Investment Choice 401(k) Plan, their future pre-tax employee contributions and employer contributions will be plan-directed into the NADART Fund (pdf) and their future employee after-tax voluntary contributions will be plan-directed into the Income Fund (pdf). Use Reviewing Your Investment Choices (pdf) to learn more about the plan-directed funds, as well as all other funds. If a participant’s future investment elections do not total 100%, the unallocated employee contributions and employer contributions will be plan-directed into the NADART Fund, and the unallocated employee after-tax voluntary contributions will be plan-directed into the Income Fund.
How will rollovers and direct voluntary contributions be invested?
In the Classic Plan, rollovers are invested in the NADART Fund (pdf), while direct voluntary contributions are invested in the Income Fund (pdf).
Rollovers and direct voluntary contributions into an Investment Choice Plan will be invested according to the participant’s current investment elections. Rollover contributions will be invested according to the current investment elections for the employee pre-tax contribution source, and direct voluntary contributions will be invested according to the current investment election in the employee after-tax voluntary source.
If participants choose to invest their rollover or direct voluntary contributions differently than their current investment elections, they should either use PlanWeb or call the VRS to change their future investment elections before submitting the contribution. They may also contact the NADART Plan Information Center at nadart@nada.org or by telephone at (800) 462-3278 for additional instructions.
If the participant has not designated any investment elections, these contributions will be invested in the plan-directed investments in place at that time (currently the NADART Fund for rollovers and the Income Fund for direct voluntary contributions). Use Reviewing Your Investment Choices (pdf) to learn more about the plan-directed funds, as well as all other funds. The participant may move the funds from the plan-directed investment after they have been invested by initiating a transfer through PlanWeb or the VRS.
How are loan repayments invested? (Certain Investment Choice Plans Only)
Loan repayments are invested according to the participant’s current investment elections. Loan repayments are returned to the source from which they were distributed. For example, assume a participant requests a loan of $1,000--$500 is borrowed from his/her employer contribution monies and $500 from his/her employee contributions. If the participant is investing all of his/her current employer contributions in Fund A and all of his/her current employee contributions in Fund B, 50% of the loan repayment will be invested in Fund A (employer contribution source) and 50% will be invested in Fund B (employee contribution source). If the participant has no investment elections, the total loan repayment will be plan-directed into the NADART Fund (pdf) with 50% going into the employer contribution source and 50% into the employee contribution source.
How should participants invest their money? (Investment Choice Plans Only)
All participants must make this decision for themselves. Neither the plan administrator nor NADART staff members can offer investment advice to participants. However, NADART provides educational materials designed to help participants determine their investment strategy in the Library section of this Web site on the Participant Information page.
If participants are unsure what their current investment elections are, please refer them to PlanWeb or the Voice Response System at (877) 487-4015.
Must all of a participant’s contributions be invested in the same way? (Investment Choice Plans Only)
No. You may choose different investments for your pre-tax employee contributions, your employer contributions, and your employee after-tax voluntary contributions.
How often can participants make changes to their investments? (Investment Choice Plans Only)
They can make investment changes on a daily basis. However, there are certain mutaul funds are restricted from frequent trading within any 30-day period. Please review our Frequent Trading Policy (pdf) for more information about these funds.
Will additional investment options be offered in the future? (Investment Choice Plans Only)
NADART regularly reviews the performance of the available investment options and may add or replace funds in the future at the discretion of the NADART Board of Directors.
Are asset management fees charged to the participant accounts?
As with any investment, the managers for the various investment choices available in the plan charge fees for managing these funds. The fees are deducted from a fund’s unit price before the fund’s performance figure is calculated. The performance figures you see on participant statements are the returns after the asset management fees have been deducted. These fees are used for expenses that may include portfolio managers, securities traders, research analysts, auditing costs and the publishing of prospectuses. If you are a Classic Plan participant please see the NADART Fund (pdf) and Income Fund (pdf) sheets, and if you are an Investement Choice Plan participant see the Review Your investment choices (pdf) to learn about fees and expenses.
Is the price the participant receives on his/her investment before or after a basis charge?
All returns are reflected after deduction of basis charges, also referred to as asset charges or annual fund operating costs.
About Participant Statements
When can participants expect to receive their participant statements?
Participants can expect to receive their NADART Participant Statements during the first month of each calendar quarter. Statements are mailed as soon as administratively possible following the close of each quarter (about 3-4 weeks after the end of the quarter). Classic Plan participant statements are mailed to the employer (Plan Sponsor) and should be handed out to each participant as soon as possible. Investment Choice participant statements are mailed directly to the participant's home address.
What should I do with the Participant Balance Listing?
Keep this report with your plan records. The Participant Balance Listing is a summary list of account information for all active participants with a balance in the plan and should be kept with other important plan documents for use in an audit by the Department of Labor or Internal Revenue Service. This listing not only provides account balance information, but also provides vesting information and a detailed breakdown of contribution type.
One of our former employees has money in a NADART deferred account. Why didn’t he receive a participant statement along with my other participants' statements? (Classic Plan Only)
An individual with a NADART deferred account or one receiving periodic payments from a NADART installment account receives an annual statement from the NADART Installment Department. NADART sends these statements to the individual’s home address.
The owner of the company shows a negative amount in the column, of his participant statement, labeled Contributions. Why?
Usually this situation occurs when a highly compensated employee (like an owner) has received a large contribution refund as the result of the Contribution Nondiscrimination Test or the Annual Additions Test. If a refund of this nature is higher than the amount of contributions currently received, a negative amount will be recorded in the column labeled Contributions. If you are unsure about the cause of this situation, please send an e-mail to nadart@nada.org or call our Plan Information Center at (800) 462-3278. If you have questions about the Contribution Nondiscrimination Test, please refer to the Contribution Nondiscrimination Testing page of this Web site.
The amount in the column labeled Investment Earnings is in parentheses… Does this mean my account lost money?
If your account lost money, the loss will appear within parentheses ( ). If the numbers in this column are not in parentheses, your account has earned income.
Can I request copies of old participant statements for my employees?
Yes, but please be aware that a nominal fee is charged for this service. You may send an e-mail to nadart@nada.org or call our Plan Information Center at (800) 462-3278 for assistance.
About Wage and Contribution Reporting
If a participant becomes eligible in the middle of a payroll cycle, how do I report the wages? Example: Joe Smith’s date of participation falls on January 3. The plan’s payroll cycle runs from January 1 to January 7. Joe’s total compensation for the payroll period was $400.00.
When a participant becomes eligible in the middle of a payroll cycle, rather than trying to calculate a split between eligible and pre-eligible wages, you should consider the entire payroll cycle as consisting of eligible wages. Example: Joe’s eligible wages for the period January 1 to January 7 are $400.00.
Should I add newly hired employees to my payroll file or Wage Reporting Form (WRF)?
Yes, if the employee is expected to become eligible within twelve months of his/her hire date, you should add identifying information and wages to your payroll file or the end of your WRF.
Do I need to report wage information for employees who have chosen not to participate in the plan?
Yes, whether or not a participant contributed, his/her wage information must be reported to NADART. We need accurate wages for all participants to perform government-required compliance testing of your plan.
What do I do if I over-report contributions for a participant? Can I report a negative contribution to reverse the error?
If you are the Plan Coordinator of an Investment Choice Plan you can report negative contributions on the payroll files you submit to NADART and a reversal will be done to reconcile the over-reported contributions.
However, if you are the Plan Coordinator of a Classic Plan, you should not report negative contributions on your WRF or on the electronic file you submit. If too much was reported and the participant continues to contribute, the over-reported contributions need to be reconciled on the employer’s account records and deducted from future payroll files. If too much was reported and the participant is no longer contributing, a letter detailing the error must be submitted to our office.
How can I be sure the contributions reported were invested? (Investment Choice Plans Only)
We will provide the plan sponsor with a Payroll Confirmation Letter verifying that the funds were invested. Please contact our Plan Information Center if you do not receive a letter within ten days of submitting a matching payroll file and deposit. You may send an e-mail to nadart@nada.org or call (800) 462-3278. Also note, participants may verify their account balances by accessing PlanWeb or calling the Voice Response System after the payroll files have been submitted.
Why are some of my employees listed on the Wage Reporting Form (WRF) twice? (Classic Plans Only)
Participants are most frequently listed twice on the WRF because they became eligible in the middle of the quarter. The WRF requests wage information for the period after the participant became eligible.
Other possible explanations are:
- The participant was accidentally enrolled twice (with different Social Security Numbers).
- The participant withdrew from participation in a Classic Pension Plan in the middle of the quarter (wages will be requested for both the withdrawn and active periods).
Can I use the same NADART Deposit Tickets I have been using under the NADART Classic Plan to send contributions to our trust account now that we have converted to an Investment Choice Plan? (Investment Choice Plans Only)
Yes, the NADART Classic and Investment Choice Plans use the same NADART Deposit Tickets (pdf). These may be completed and submitted with your regular deposits of employee contributions.
The first page of the Wage Reporting Form (WRF) asks for Total Wages for the Quarter. Is this my total payroll or the total of the wages listed on the WRF? (Classic Plans Only)
This is a request for the total wages listed on the WRF (including eligible and any waived participants in a Pension Plan). We use this total for verification of the accuracy of the key punched wage data.
About Quarterly Billing
Will we be billed for deferred or “lost” participants?
No. Although these participant accounts are still subject to the annual participant account charge, the entire charge will be paid from the account of the deferred or “lost” participant.
My bill reflects wage and contribution information for the entire year-to-date. Can NADART provide a bill that reflects only the information from the most recent quarter?
No. Although you are billed for employer contributions and fees for the most recent quarter only, our computerized billing system must track and present this information in the year-to-date format.
Why is my company being charged for "Participant Fees Owed by Plan" on this billing statement? I thought that we had chosen to have NADART charge these fees directly to participant accounts.
Although some plan sponsors elect to have NADART charge this fee (in whole or in part) directly to participant accounts, some employees do not have sufficient balances to pay it. The difference between the available participant fees and the calculated participant fees is properly charged to the Plan Sponsor as "Participant Fees Owed by Plan." As a non-profit organization, NADART operates on a conservative budget and it is vital that we collect all fees due to us. We appreciate your cooperation in this matter.
I mailed an employee contribution deposit for the second quarter to Cardinal Bank on July 3, but it doesn’t show as a credit on my Contribution Billing Form (CBF). I circled the second quarter on the deposit ticket. Is it okay to change the deposit received amount in the Billing Summary section of the CBF?
Yes, if you mailed a deposit for a particular quarter within a reasonable time following the close of the quarter, it is acceptable to adjust the deposit amount shown on your CBF to include this amount. NADART staff will research the situation and make any necessary adjustments.
My bill shows a delinquent fee, but I sent my Wage Reporting Form (WRF) in five days before the deadline. Why are we being charged this fee? (Classic Plans Only)
The delinquent fee is not directly related to the WRF. The fee is charged if the previous quarter’s Contribution Billing Form (CBF) was received more than 30 days after the close of the quarter.
My bill shows a delinquent fee, but I feel that the delay of the previous Contribution Billing Form (CBF) was beyond our control and I don’t believe we should be charged. What should I do?
If you feel strongly that the delinquent fee should be reversed, you can send a letter of explanation with the CBF and omit the fee. NADART staff will review the situation and make the appropriate adjustments.
One of my participants has been authorized to make a large Direct Voluntary Contribution. Should I include it in the Participant Detail of the Contribution Billing Form (CBF) and in my check?
No, Direct Voluntary Contributions must be handled separately from the CBF. Refer to the Administrative Manual (Chapter 10 (pdf) of the Classic Plan Administrative Manual or Chapter 7 (pdf) of the Investment Choice Administrative Manual) for details on submitting Direct Voluntary Contributions.
About Re-Hired Employees
Where should completed Participant Re-Enrollment Forms be sent?
Mail them to the P.O. Box listed on the forms, or fax them to (703) 883-2368.
About Account Maintenance Forms
Should participants who do not want to participate in the plan complete the Payroll Deduction Authorization Form?
Yes, all participants should complete and sign this form. If a participant doesn’t want to contribute to the plan, he/she should complete the form with zeros in the spaces for deferred cash contributions and voluntary contributions (and loan repayments if you are an Investment Choice Plan). Make sure the form is signed and keep it in the participant’s personnel file.
Which Payroll Deduction Authorization Form should my participants use?
If you have a Classic Pension or Profit-sharing Plan, they should use the PDA1 Form (pdf). If you have a Classic 401(k) Plan they should use the PDA2 Form (pdf). If you have an Investment Choice Plan they should use the IC-PDA Form (pdf), unless your plan offers the Roth Contribution option, in which case they should use the IC-RothPDA (pdf).
Where should completed Payroll Deduction Authorization Forms be sent?
Payroll Deduction Authorization Forms should be retained for your records. Do not send the form to NADART.
About PlanWeb and the Voice Response System (VRS)
What is a Personal Identification Number (PIN)?
Once a participant is enrolled in the plan, NADART will assign him/her a personal identification number. A letter will be mailed to the Plan Coordinator (for Classic Participants) or to his/her home address (for Investment Choice Participants) in a sealed envelope providing an assigned PIN so that the participant can access PlanWeb. Investment Choice Participants may also use their PIN to access the Voice Response System (VRS). Participants may keep the PIN assigned by NADART, or personalize it through PlanWeb or the VRS.
How can I be sure that my participants’ PlanWeb or VRS investment elections are processed correctly? (Investment Choice Plans Only)
Confirmation of any processed transactions will be sent to the participant’s home addresses, as most recently provided on your payroll file. Participants are responsible for monitoring the transaction activity that is requested using PlanWeb or the VRS. If they receive a written confirmation that is inconsistent with their instructions, or if they fail to receive a written confirmation after requesting a transaction via internet or telephone, they should contact NADART for clarification.
Since confirmations of processed transactions are sent to participants’ home addresses, should I instruct participants to notify NADART if their address changes? (Investment Choice Plans Only)
No. We receive updates to participant information, including address changes, through your payroll files, which are regularly submitted to NADART. Participants should notify your payroll department of any change to their address.
Is there a deadline for trades?
Yes. Funds traded via PlanWeb or the VRS must be completed before 4:00 p.m. EST (3:00 CST) in order for them to be processed at the closing price for that business day. Trades made after that deadline will be processed at the next business day's closing price. Please note that trades and prices can also be affected by early closings of the stock market.
About Distributions for Terminated Employees
Where are participant distribution checks mailed?
Participant distribution checks are always mailed to the Plan Sponsor. It is the responsibility of the Plan Sponsor to review the distribution check and calculation sheet, then distribute the check to the appropriate participant.
When will participants receive tax information (IRS Form 1099-R) for their distributions?
A 1099-R will be attached to all distribution checks. In the case of distributions from Installment/Deferred accounts, a 1099-R will be issued prior to January 31 and mailed to the home address of the participant.
Is it necessary to complete a different benefit request form for someone who is retiring vs. someone whose employment is being terminated?
No, the NADART Benefit Request Form (N-10) (pdf) would be used in both of these situations. Under item 10 on the form you must select the reason a benefit is being requested. Box A should be checked whether the participant is retiring or being terminated. Pleae secure all required signatures before submitting it to NADART.
Does an employee who is retiring have the option to take a lump sum distribution?
Yes, that employee can take all the money from his/her account at once. The NADART Benefit Request Form (N-10) (pdf) should be completed for a lump sum payment (check box A of item 11), but the retiree should note that the taxable portion of this payment is subject to a 20% federal income tax withholding.
Which forms must be completed if a participant dies?
The NADART Benefit Request Form (N-10) (pdf) should be submitted by the Plan Sponsor and the NADART Death Benefit Request Form (N-40) (pdf), should be completed and submitted by each beneficiary. A certified copy of the death certificate must also be attached. Depending on the distribution method selected, other forms may be required. For more details, refer to your NADART Classic Plan Administrative Manual or Investment Choice Plan Administrative Manual.
What happens to the account balance if a participant dies without naming a beneficiary?
As stated in section 9.12 of the Master Plan, the account balance would be distributed to survivors in the following sequence: 1) spouse 2) children 3) other descendants 4) parents 5) other ancestors 6) brothers/sisters 7) nephews/nieces 8) estate. For more information, refer to your NADART Classic Plan Administrative Manual or Investment Choice Plan Administrative Manual.
Participant X’s physician signed the Statement of Disability. We don’t agree that Participant X is disabled. Who makes the final decision?
If the employer (as Plan Sponsor) does not agree with the Statement of Disability, no disability benefit will be paid unless the Social Security Administration provides the participant with a Certification of Disability.
Where should completed distribution request forms be sent?
Forms can be mailed to the P.O. Box listed on the forms, or can be faxed to (703) 883-2370. Retain copies for your records.
About Employee Transfers
Participant A worked for Location 1 in our control group, quit and has now been hired by Location 2 in the group. Do we (at Location 1) report him as a re-hire?
No. You (at Location 1) should report him using his original date of hire at Location 1. Because this is a transfer within a commonly controlled group, the N-TFR Form (pdf) must be sent to NADART.
Will there be a loss of vesting credit when transferring between non-commonly controlled employers?
Vesting credit is earned at individual employers, not within all NADART plans. When an employee leaves an employer, he/she is entitled to his/her vested interest at that time, subject to the plan provisions. If he/she goes to work at a non-commonly controlled employer, the new employer will not count service with an unrelated employer toward vesting in the new plan.
When can an employee begin participation when transferring between non-commonly controlled employers?
Upon satisfaction of the waiting period and age requirements specified in the new employer’s plan.
When transferring employment, can a participant transfer his/her account if the old employer had a Classic Pension Plan and the new employer has a Classic 401(k) Plan or an Investment Choice 401(k) Plan?
Yes, the money will be transferred into the new account. If the new employer has an Investment Choice Plan the assets will be invested in the plan-directed funds until investment instructions are provided.
Where should completed transfer forms be sent?
Forms can be mailed to the P.O. Box listed on the back of the forms, or can be faxed to (703) 883-2370. Retain copies for your records.
About Voluntary Withdrawals and In-Service Withdrawals
What is the difference between an in-service withdrawal and voluntary withdrawal?
An in-service withdrawal requires a participant to be at least age 59 ½, in order to take a distribution from the fully vested portion of the plan assets. A voluntary withdrawal does not have an age restriction, but must include only voluntary after-tax contributions and related income.
How is the taxable portion of a voluntary withdrawal calculated?
The taxable portion is pro-rated based on the total amount in the voluntary account vs. the total taxable amount requested to be withdrawn.
If a participant is going to withdraw a small amount, such as $500, from his/her account, is spousal consent needed?
If the vested account balance is over $5,000, then the participant would need spousal consent for any amount that he/she is planning to take from the account. If the vested balance is less than $5,000, the participant would not need spousal consent to take a distribution from the account.
When will a participant receive tax information (Form 1099-R) for this type of withdrawal?
A Form 1099-R will be attached to all distribution checks.
About Hardship Withdrawals
What is a hardship withdrawal?
Participants in a 401(k) plan can withdraw their employee pre-tax contributions if they meet one of the following hardship criteria: a) are purchasing a primary residence, b) incur post-secondary tuition expenses for the next semester for themselves or dependents c) have extraordinary uninsured medical expenses for themselves or dependents or d) face a foreclosure on the mortgage of their primary residence or eviction from their residence e) have expenses for the repair of damage to their principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income) - Code Section 165 specifies that these damages must arise from fire, storm, shipwreck, other casualty or damage from theft f) has necessary and reasonable expenses related to the funeral or burial of their parents, spouse, children or dependants. Review Determining Eligibility for a 401(k) Financial Hardship (pdf) for a complete picture of your responsibilities in this area. The Hardship Withdrawal Request Form (N-HS) (pdf) should be completed and sent to NADART.
Is a hardship withdrawal an option for Pension and Profit-Sharing Plans? (Classic Plans Only)
No. Hardship withdrawals are only available for participants in a 401(k) plan.
When will a participant receive tax information (Form 1099-R) for a hardship withdrawal distribution?
A Form 1099-R will be attached to the distribution check.
About Participant Loans (Investment Choice Plans Only)
Are participants allowed to take loans from their accounts?
If the employer’s plan provides for loans, participants can request a minimum loan amount of $1,000 for any purpose. The maximum loan amount is the lesser of 50% of the vested account balance, excluding the outstanding balance of all other loans under the plan, or $50,000 reduced by your highest loan balance during the last 12 months..
Do the participants have to “qualify” for a loan and/or provide documentation that proves they need the money?
No. Participants do not need to qualify for a loan. Unlike a hardship withdrawal, they may take a loan for any reason and do not need to show documentation of need.
Are there any restrictions on the timing of the repayment of the loan?
You may choose to repay the loan over one year, two years, three years, four years, or 59 months. However, the repayment frequency must equal your payroll frequency. You may repay the loan in full without penalty at any time before the end of the loan term.
How many loans can a participant request?
A participant may have two outstanding loans at any one time. Either the first or second loan must be repaid in full before another loan can be established.
How is the loan interest rate determined? How often does it change?
The loan interest rate is determined by the prime rate plus 1%. It is updated quarterly. However, once a loan is processed, the rate is set for the term of the loan.
Does the loan interest rate fluctuate during the term of the loan?
No. Your loan interest rate will be maintained at the stated rate at the time the loan is taken.
Will participants be eligible to receive the same loan interest rate that they received on their first loan when requesting a second loan?
No. When a second loan is requested it will be subject to the interest rate at the time of that loan’s distribution.
Can a participant refinance a loan that is outstanding?
No. A participant cannot refinance a loan.
What happens when a participant with an outstanding loan balance goes on a leave of absence?
If a participant goes on an approved leave of absence without pay (or is receiving a rate of pay that is less than the amount of the loan repayment), no loan repayments are required for one year. However, the term of the loan cannot be extended past five years from the original loan request. Further, the loan repayment amount after the leave of absence must not be less than the payment required under the terms of the original loan.
Examples:
- Ben Baker requests a loan of $2,000 to be paid over three years. After the first year, he goes on an approved leave of absence without pay. He returns after one year and resumes his loan repayments. He pays off his loan in full after four years. (He would not be allowed to extend his loan for five years because his payment amount would be less than the payment required under the original loan.)
- Kemp Baker requests a loan of $2,000 to be paid over five years. After the third year, he goes on an approved leave of absence without pay. He returns to work after one year. He must increase the amount of his loan repayment so that the loan is paid in full by the five year anniversary of his loan origination date.
What happens if a participant with an outstanding loan balance terminates employment?
A participant with an outstanding loan balance who terminates employment has two options:
- He/she can pay the outstanding principal and interest back in a lump sum before requesting a lump sum payment This action allows the participant to avoid paying taxes on the outstanding balance.
- He/she can “cancel” the loan. This means their account will be offset by the outstanding loan amount when a distribution from the account is processed. For example, Jackie Wood has a vested account balance of $20,000 including an outstanding loan balance of $5,000. She terminates and requests a lump sum distribution without paying back the $5,000. NADART will deduct the $5,000 leaving her vested balance at $15,000. NADART will then withhold 20% of the $20,000 for federal income taxes. Her check amount would be $11,000.
About Required Minimum Distributions
When is a minimum distribution required?
When a participant is a 5% or more owner of the employer and reaches age 70 ½ in the current year, and is still working, they are required by federal regulations to begin receiving annual minimum distributions by December 31 of that year. They may delay the minimum distribution until April 1st of the next year, but each subsequent distribution must be made by December 31. A minimum distribution is also required for all employees age 70 ½ who have separated from service with the employer.
Do the new required minimum distribution rules change how quickly participants must withdraw money?
Yes, the new rules may let a participant keep more of his money growing on a tax-deferred basis. They also replace the complicated formulas that were required to calculate the required minimum with a simpler, more streamlined calculation. Review the NADART brochure, Required Minimum Distributions from Your NADART Account (pdf), for more detailed information.
When will a participant receive tax information (Form 1099-R) for a required minimum distribution?
A Form 1099-R will be attached to all distribution checks, unless the distribution is issued from a Periodic Payment or Deferred account. In that case a 1099-R will be issued prior to January 31 and sent to the participant’s home address.
About Rollovers
What does a participant need to complete a rollover to NADART from his/her previous employer?
Detailed instructions are provided in the Rollovers to NADART Section of this Web site.
Can participants roll over monies from a personal IRA into their NADART plan?
Yes. An eligible rollover distribution from an Individual Retirement Account (IRA) may be rolled over into the NADART plan. The amount that can be rolled into the qualified plan is generally the amount of the distribution from an IRA that is includible in gross income. Distributions from an IRA of after-tax contributions cannot be rolled over to the plan. Participants should consult their personal tax advisor before electing to roll over an IRA to the NADART plan.
What will happen if a participant waits more than 60 days to initiate a rollover from his/her previous employer?
NADART will not under any circumstances accept a rollover that has exceeded the 60-day period. Any check received that has exceeded the time limit will be returned immediately. Refer to Rollovers to NADART for additional information.
A participant is leaving his job and would like to roll over his NADART plan balance to an IRA or his new employer’s plan. What do I need to do to help him with this?
Refer to Rollover to an IRA or Rollover to a New Employer’s Plan for instructions and required forms.
Can a participant roll over contributions from a spouse`s qualified retirement plan into the NADART plan?
A living spouse's distribution cannot be rolled over into the NADART plan. However, eligible rollover distributions for a spousal beneficiary may be rolled over to the beneficiary's NADART plan if the spouse is deceased.
Once a rollover to NADART is complete, can the participant withdraw the funds?
Rollover contributions accepted by NADART are subject to the distribution rules of the new plan. The contribution can be withdrawn upon termination of employment, at age 59 1/2 or in the event of death or disability.
About Direct Voluntary Contributions
What are direct voluntary contributions, and where will they appear on participant statements?
Direct voluntary contributions are after-tax dollars submitted directly to NADART by the participant and in addition to any contributions made to NADART via payroll deduction. Direct voluntary contributions are reported as voluntary contributions on Participant Statements and are not segregated from voluntary contributions made via payroll deduction.
How do I arrange to submit a direct voluntary contribution for a participant?
Participants should use the Direct Voluntary Contributions Calculator on the Web site to calculate their direct voluntary contribution limit, and print out the associated page that includes the calculations. They should include this page, along with their Plan ID and Social Security Number with their check for any amount up to the maximum and submit to NADART.
A participant wants to submit additional pre-tax contributions. Can he/she send you a check for additional dollars to be applied as optional deferrals?
No, deferrals can only be made through payroll deduction.
Should I submit the direct voluntary contribution check with a deposit ticket and mail it to the Cardinal Bank address?
No, the check should be submitted with a copy of the authorization printout. It should be made payable to NADART and mailed to NADART Plan Accounting, 8400 Westpark Dr., McLean, VA 22102.
An employee rolled over $3,000 from a plan with his prior employer this year. Will that limit the amount that he can contribute as a direct voluntary contribution?
No, rollovers are not considered when calculating a participant’s annual additions limit, so they do not impact the calculation of the maximum direct voluntary contribution.
NADART authorized one of my participants to contribute $8,700 as a direct voluntary contribution. He only wants to send in $4,500. Is this acceptable?
Yes, a participant may submit any amount up to the maximum authorized by NADART.
About Changes at Our Company
Where should I send a request to update the name of our company’s contact person?
You should send a letter to NADART requesting a change of the daily contact person. You may fax (703-883-2368) or mail the letter to:
NADART
Attn: Plan Accounting Department
P.O. Box 9200
McLean, VA 22102-0200
Include the following information:
- Plan ID Number
- Effective date of change
- Signature of owner
The owner of our dealership just bought a coffee shop. Do we need to notify NADART since the acquisition is not related to the automobile industry?
Yes. Although the sale or acquisition may not be closely related to your dealership’s primary line of business, it is still important to notify NADART in writing immediately according to the instructions in your Administrative Manual. The change may impact the operation of your retirement plan in many areas, including the control group status, Contribution Nondiscrimination Test and Top Heavy Test.
I am a partial owner of two companies. If I provide ownership information for the two companies, will NADART make a determination of whether the two stores are commonly controlled?
We ask for a statement from the company’s CPA or attorney regarding the control group status of two or more entities that have some common ownership. Although we review these statements (including supporting evidence of the stock breakdown), the determination of control group status is not made by NADART.
About Profit-Sharing and Discretionary Matching Contributions
Does our company need to make a profit-sharing or discretionary matching contribution every year?
No, you have the flexibility to choose whether to make a contribution based on the profitability of the organization, prevailing economic conditions or any other factor.
If a plan participant terminates employment in January 2007, is he still entitled to share in the 2006 profit-sharing contribution?
Yes, any eligible participant who was employed on the last day of the plan year (December 31) is entitled to share in the profit-sharing contribution for the year in question.
What are relinquishments?
The unvested portion of employer contributions relinquished from the account of a terminating participant may be allocated to the accounts of participants eligible for the plan on the last day of the plan year if this option is elected in the plan’s joinder agreement. Alternatively, in some plan designs, the unvested portion of employer contributions in the account of a terminating participant is applied as a credit against employer contributions or plan expenses on future bills instead of being allocated to plan participants after year end.
The owner doesn’t want employees who don’t contribute to the 401(k) plan to share in the profit sharing contribution. Can this be arranged?
Yes, but you will need to amend your plan to include a discretionary matching contribution. This is a hybrid of a profit-sharing contribution and a matching contribution, meeting the needs of select NADART Plan Sponsors.
Can the plan participants withdraw their discretionary matching contributions before they retire or otherwise leave their job with us?
The same withdrawal restrictions that apply to other employer contributions in a 401(k) plan apply to discretionary matching contributions. Employees may remove fully vested employer contributions only after reaching age 59 ½ or when they terminate employment with your organization. Discretionary matching contributions are not available for hardship withdrawal.
Can I add a discretionary match provision to my NADART Pension Plan?
No, discretionary matching contributions are only permitted in 401(k) plans. If you are interested in converting your Pension Plan to a NADART 401(k) Plan, please contact our Marketing Department at (800) 248-6232 ext.7254 or send an e-mail to nadart401k@nada.org.
About the Contribution Nondiscrimination Test (CNT)
What is a Contribution Nondiscrimination Test (CNT)?
Your NADART retirement plan must be tested annually for compliance with Internal Revenue Service contribution nondiscrimination requirements. Regulations require a comparison of the average contribution percentage (ACP) of those employees classified as highly compensated and the ACP of those employees classified as non-highly compensated. If the difference between the ACP for the two groups is not within prescribed limits, corrective action must be taken. Corrective action can be either contribution refunds to highly compensated employees or additional employer contributions to non-highly compensated employees. If your Plan is a 401(k) Plan, this process is repeated for the average deferral percentage (ADP).
Who should be considered a highly compensated employee for the 2007 test?
Participants who earned in excess of $100,000 in compensation during the prior year should be classified as highly compensated for the 2007 testing year. Participants who own (directly or indirectly) more than five percent of the employer in the testing or prior year should also be classified as highly compensated employees, regardless of the amount of compensation earned in the prior year. The ownership interest of an individual must be considered as owned by the individual’s spouse, children, parents and grandparents. For more information, refer to your NADART Classic Plan Administrative Manual or Investment Choice Plan Administrative Manual.
Why does NADART primarily use the prior year testing method?
The prior year testing method virtually eliminates the guess work from determining the allowable contribution for your highly compensated employees in a given year. The NADART Contribution Nondiscrimination Test Projection provides the percentage limitation for your highly compensated employees. You are able to compare the limit to their contribution and deferral percentages and you know before the end of the year whether any highly compensated employees can expect refunds. If you have any questions about this process and how to use it for the advantage of your highly compensated employees, you may contact our Plan Information Center at (800)462-3278 or e-mail us at nadart@nada.org.
My highly compensated employees don’t want to receive any refunds. Do we have any other options to bring a failing test into compliance with these regulations?
Yes. The employer may choose to make a Qualified Non-Elective Contribution (QNEC). However, a QNEC requires advance planning when using the prior year testing method. A QNEC is a fully vested employer contribution made to certain non-highly compensated employees. The cost will vary based on individual test data. The QNEC is most commonly made to those non-highly compensated employees who earned the least eligible compensation during the plan year, subject to the appropriate annual addition limitation. Any QNEC intended for inclusion in the testing year for a plan using the prior year testing method must be received during the testing year.
For example, a QNEC intended for use in the 2008 testing year must now be received by October 15, 2008. This means that a QNEC estimate should be requested as soon as possible after receiving your Contribution Nondiscrimination Test Projection. For more information, refer to your NADART Classic Plan Administrative Manual or Investment Choice Plan Administrative Manual.
About Form 5500
Do I return Form 5500 to NADART?
No, we provide a copy of Form 5500 and the associated schedules for your records and file the information electronically with the Department of Labor on your behalf. Please keep copies of your Form 5500 and associated schedules with other important plan documents.
What is the penalty for failing to file a timely Form 5500?
The plan sponsor may be responsible for a penalty of up to $1,100 per day for late filing of Form 5500.
What should we do with the Summary Annual Report received with Form 5500?
It should be displayed in your business, or otherwise made available to all plan participants. Providing access to this report to your participants is both a legal requirement and an important part of the communication of your plan.
About RAI
What is Retirement Accumulation Insurance (RAI)?
RAI is a decreasing term life insurance plan offered to NADART Plan Sponsors at an additional cost. It is designed to replace retirement savings expected, but not yet accumulated, by a NADART plan participant who dies prior to his or her 65th birthday. The amount the beneficiary would receive in the event of the participant’s death decreases as the participant approaches normal retirement age.
Who is eligible for RAI coverage?
If a company sponsors an RAI plan, any participant who is eligible to participate in their NADART 401(k) or Profit-sharing Plan is enrolled in the RAI plan. Additionally, anyone making the mandatory contribution to the NADART Pension Plan is enrolled in the RAI if their employer sponsors an RAI plan.
How do I remove terminated participants from my RAI plan?
Complete a NADART Benefit Request Form (N-10) (pdf) and send it to NADART. This form does “double-duty,” removing the participant from both the retirement plan and the RAI plan. Remember to mark the box in Section 10 of the NADART Benefit Request Form (N-10) indicating that the dealership offers an RAI plan.
How long does it take to process an RAI death benefit request?
A check is generally issued within four weeks of the date the NADART RAI Department receives a certified copy of the death certificate and a completed NADART Benefit Request Form (N-10) (pdf). Please note: RAI benefit checks are sent to the Plan Sponsor unless the Plan Sponsor provides written authorization to send a specific check to a third party address.
Who receives the RAI benefit when a participant dies?
The benefit will be paid to the beneficiary indicated on the RAI Beneficiary Designation Form. (These forms should be completed by each participant and submitted to NADART). If no RAI Beneficiary Designation Form was completed, NADART must pay the benefit to any named beneficiary on record for the NADART Retirement Plan. If no beneficiary was named for the NADART Retirement Plan, the benefit will be paid according to the provisions of The National Automobile Dealers and Associates Retirement Trust Master Salary Deferral 401(k) Plan or The National Automobile Dealers and Associates Retirement Trust Master Pension and Profit-sharing Plan..
Please note that the Retirement Equity Act (REA) automatic survivor benefits do not apply to RAI. This means that spouses are not automatically entitled to 50% of the life insurance benefit. Consequently, a married plan participant may exclude his/her spouse and name any beneficiary.
About Top Heavy Testing
What is a top heavy plan?
A plan is top heavy if more than 60% of the plan assets, including all distributions made in the testing year and in-service distributions made in the prior four years, are held by key employees.
What is a Key Employee?
A Key Employee is:
- A more than 5% owner of the company.
- A 1% owner of the company with compensation in excess of $150,000.
- An officer who received compensation in excess of $145,000 (as indexed, 2007). (No limit on the number of officers.)
Should all of our corporate officers be designated as Key Employees?
Officers with only nominal administrative duties should not be designated as key employees. Officers considered key employees should be executives in regular and continued service, with a continuing voice in the management and administration of the corporation, who earned more than $145,000 in compensation during 2007.
What changes are made to our plan if it is determined to be top heavy for the 2007 plan year?
- All vesting schedules for Employer Contributions must be reduced to a schedule at least as rapid as the one found in the Administrative Manual (page 9b – 3 of the NADART Investment Choice Plan Administrative Manual or page 34-3 of the Classic Plan Administrative Manual) beginning January 1, 2007.
- All non-key employees who are eligible to participate in your plan on December 31, 2007 must receive a minimum employer contribution equal to the highest percentage of compensation received by any key employee, not to exceed 3%. NADART will provide a bill for any minimum contribution due during the year 2008.
Our highly compensated employees received refunds with the Contribution Nondiscrimination Test. How can our plan be top heavy?
The Top Heavy Test and the Contribution Nondiscrimination Test (CNT) are two different tests. The results of the CNT do not impact the results of the Top Heavy Test. The CNT examines contribution percentages for a given plan year while the Top Heavy Test looks at the total assets of the plan on a particular determination date.
About USERRA and Military Reservists Called to Active Duty
What is the Uniformed Services Employment and Reemployment Rights Act (USERRA)?
USERRA is the Act that protects the rights of employees who enter military service from a civilian job. Specifically, it provides direction to employers regarding returning employees’ rights to reemployment, certain retirement benefits and other benefits that would have accrued during their military service absence. USERRA protects the rights of individuals during a period of military service with respect to any retirement benefits or rights they would have accrued had they been employed continuously by the civilian employer.
What military service is subject to the provisions of USERRA?
USERRA applies to persons who perform voluntary or involuntary military duty. This duty may be performed in active or reserve components of the Army, Navy, Marine Corps, Air Force, Coast Guard, Army National Guard, Air National Guard or Public Health Service commissioned corps.
What does military service include?
Military service includes active duty (for training or otherwise), inactive duty training, full-time National Guard duty and absence from employment for an examination to determine fitness for military service.
Are small employers exempt from the provisions of USERRA?
No. USERRA applies to virtually all U.S. employers regardless of size.
How much military leave must an employer permit?
There is a five-year cumulative military service limit on the amount of voluntary military leave an employee can use and still keep reemployment rights. There are, however, a number of exceptions to the five-year limit, including: service mandated during a period of war or national security, federal service by National Guard members to handle certain situations and service required to complete an initial period of obligation.
When must an employee return to employment after being released from military duty in order to qualify for the benefits under USERRA?
If the period of military service is:
- Less than 31 days: Employees should return to work the first day following completion of military service.
- 31 days to 180 days: Employees must submit application for reemployment within 14 days of completion of military service.
- More than 180 days: Employees must submit application for reemployment within 90 days of completion of military service.
If an employee is hurt or becomes disabled during military duty, employement reinstatement may be extended up to two years for persons who are unable to work or unable to work at the same level due to disability incurred or aggrevated during military service.
Does the period of military service count for benefit accrual and vesting purposes upon a participant’s reemployment?
Yes. The period of military service counts toward the determination of benefit accrual and vesting under the provisions of the plan. A retirement plan may not treat a reemployed person as having incurred a break-in-service for a period of military service.
With respect to a 401(k) plan, may a re-employed participant make up pre-tax and/or after-tax contributions for the period of service during which he or she served in the military?
Yes. A participant has the right to make up any missed contributions that he or she would have had the opportunity to make if civilian employment had not been interrupted by the period of military service.
How much time does an employee have to contribute make-up contributions to en employer’s 401(k) plan?
An employee has three times the duration of military service (up to five years) to make up contributions after reemployment.
If an employee contributes make-up contributions, must the employer match these contributions?
The employer must match these contributions at the same rate the employer would have matched the contributions had the employee made the contributions during the period of military service.
Will the employer credit lost earnings to the account of a participant who contributes a make-up contribution?
No. An employer may not credit earnings with respect to make-up contributions.
Must an employer contribute fixed and/or discretionary contributions to the accounts of employees during their periods of military service?
No, but the employer must make those contributions when the employee returns to employees at the same rate that would have been provided during the period of military service.
Does an employer need to credit forfeitures that would have been contributed to an employee’s account during a period of military service?
No. Employee’s serving in the military do not share in forfeitures during the period of military service.
What compensation is used to determine the amount of any make-up contributions?
Generally, an employer must treat an employee as continuing to receive the same compensation as he or she would have received without regard to the military service. If this method is not reasonable, an employer may use the employee’s average compensation from the last 12-month period (or, if the period of service was less than 12 months, the average of the entire period of employment).
May the repayment of a participant loan be suspended during an employee’s period of military service without fear of violating rules regarding plan qualification, including the five-year loan repayment rule? (Investment Choice Plans Only)
Yes, but loan repayments must recommence after completion of military service.
Will interest accrue on a participant loan during an employee’s period of military service? (Investment Choice Plans Only)
Yes.
Does the Soldiers and Sailors Civil Relief Act require that the interest rate on a participant loan from a 401(k) plan be reduced to no more than 6 percent? (Investment Choice Plans Only)
Yes. The Soldiers and Sailors Civil Relief Act requires creditors, including 401(k) plans, to drop interest rates to no more than 6 percent on debt owed by those entering military service for the period of such military service.
Has NADART amended our plan to comply with the provisions of USERRA?
Yes. NADART incorporated the required USERRA provisions during the GUST readoption process (pdf).
Where can I get additional information about USERRA?
The U.S. Department of Labor Web site includes both A Non-Technical Resource Guide to USERRA (pdf) and frequently asked questions for reservists being called to active duty. The IRS also has an informative article in its quarterly retirement newsletter (pdf).You may also want to review our Handling Reservists Called to Active Duty page for Plan Sponsors.
About a Qualified Domestic Relations Order (QDRO)
What is a QDRO?
A QDRO is a Qualified Domestic Relations Order, which is a court order that creates a right for an alternate payee to receive all or some of a participant`s benefit in a qualified plan. QDROs direct benefits from a retirement account, usually for the purposes of child support, alimony payments, or marital property rights.
What should I do if I am contacted about a QDRO?
If you are contacted by an attorney concerning a participant`s QDRO, you should direct the inquiry to the NADART Plan Information Center at (800) 462-3278 or nadart@nada.org. NADART will then prepare a sample QDRO and send it to the attorney as a guide. This is done so that it conforms to the NADART Master Plan document as well as meets regulatory standards.
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