Frequently Asked Questions

What 401(k) Plan Sponsors Need to Know
Here are a few topics we thought you might find helpful.
Eligibility & Enrollment

How do I know if an employee is eligible for the plan or not?

Your Plan Document, Summary Plan Description, and Plan Highlights page will state the eligibility requirements and entry periods. Please refer to any of those three documents to learn the specific rules for your plan. Eligibility requirements normally include a statutory minimum age and a minimum service requirement. If an employee has satisfied the eligibility requirements, then he or she is most likely eligible – unless there is specific language in your Plan Document that excludes that employee, based on an IRS-allowable exclusion.

*Common Mistake – Part-time employees are not excluded from the plan simply because they are part-time. Part-time employees will become eligible for the Plan if they satisfy the eligibility requirements and they are not excluded by some other exclusion in the plan document.

What constitutes enrollment?

Enrollment into the plan is when the employee elects a contribution % or amount that they will have deducted from their pay and so that it may deposited into the 401(k) plan each pay period. This can be an elective deferral (pre-tax) or a Roth contribution (after-tax). Either way, their election will need to be set up in your payroll system.

How will I know if employees have enrolled?

Employees may change their contribution elections online, and our system will automatically send you an email notification when a change has been made that will impact payroll deductions. Click the link in the email notification to log in and view the deferral change report to see what change was made, and then make any necessary changes on payroll based on the report. Click here to learn more.

What are my enrollment obligations and duties?

You must furnish enrollment materials, which include a 404(a)(5) participant fee disclosure (available in their online account), a copy of the SPD (available in their online account), and provide a way for the newly-eligible employees to make a deferral election – either through their online account or on a paper enrollment form.  *Paper enrollment will incur a data entry fee.


What is required for an employee to take a 401(k) loan?

When a participant requests a loan, there is typically a process they must go through in order to have that loan approved. The loan application gives the details around the loan and usually includes an amortization schedule and promissory note. Employer approval is required in order for the loan to be granted. That approval is granted by signing the employer signature lines on the loan documentation.

Once the loan has been approved, you will need to see that the loan repayment is setup on payroll according the amortization schedule loan terms.

What happens if payments are not made?

A loan will be considered in default status if the borrower fails to make a payment for 3 consecutive months. Once the loan is in default status, the IRS requires that the loan be deemed a taxable distribution from the participant’s 401(k) account and the loan balance is added to the participant’s taxable income for the year in which the loan is defaulted upon.

What is the impact on payroll?

It is the plan sponsor’s responsibility to ensure that loan payments are deducted from the borrower(s) pay in accordance with the repayment schedule.


A distribution is any time a participant withdrawals funds from his or her 401(k) account. There are rules that determine when a distribution may be taken. The Plan Document contains these rules and should be reviewed before signing off on any distribution documentation.

The IRS allows for distributions to be taken once the participant has terminated employment with your company. However, not all plans allow for a distribution to be taken before termination of employment has occurred.

Even if the participant has terminated employment, it is important to coordinate with your 401(k) plan provider to make sure that all payroll contributions for that employee have been deposited into the plan before the distribution is processed. If the distribution is processed before all deposits have been made, then there will be residual amounts that are deposited and a second distribution will have to be processed in order to fully close the participant’s account. Therefore, it is best to wait and make sure all deposits have been made in order to cut down on the amount of paperwork for you and the participant.

Distributions may be paid out in a few different ways:

  • Directly to the participant in the form of a check or direct deposit
  • To an IRA that the participant has setup at another financial institution of their choice
  • To an 401(k) plan sponsored by their new employer

Direct payments result in federal withholding of 20% and sometimes state withholding as well. If participants elect to have the funds paid directly to them before the year in which they turn 55 years of age, they will also be subject to an additional 10% penalty when they file their tax return for the year in which the distribution was issued.

Employee Contribution Changes

Employees are able to make changes to their contribution elections online. When they make a change, you will receive an email notification that will prompt you to log in to our plan sponsor area and view the ‘deferral change report.’ This report will show the participant who has made a change online and what that change is so that you can update your payroll system to accommodate this change.

While we try to send out reminders to check this report any time we see a change come through, it’s best to be proactive and look at these reports when you receive a notification.

Account Statements

There are two ways in which participants receive statements.

  1. e-Statements – posted monthly to the participants’ online accounts
  2. Paper statements – mailed quarterly to the participants’ mailing addresses on file

e-Statements are the default option if the participant does not specify which method they would prefer. However, the e-Statements are only available if the participant has provided an email address. If there is not an email address on file, their statement preference will default to ‘paper’.

If a participant chooses ‘e-Statements’ but does not provide an email address, they will still receive paper statements.

If a participant has elected ‘paper statements’, then e-Statements will not show up in their online account.


Participants may designate the beneficiary to their 401(k) account online. They should log in to their online account and store the information there. This keeps you from having to keep paper beneficiary forms on file.

However, if a participant does not have access to a computer, they may wish to complete a paper beneficiary form. This information will need to be kept on file at your office location in the event that the beneficiary information is needed.

Keeping record of beneficiary elections is one of your duties as a plan sponsor, and we’ve provided the online account storage method to try to help cut down on the amount of paper you maintain on file.