Guideline FAQs

As discussed in our primer on nondiscrimination testing, given the significant tax benefits of a 401(k), a plan could fall into the trap of being almost exclusively enjoyed by company owners and officers. While the IRS permits participants to defer up to $19,000 (or $25,000 if the participant is over age 50) of compensation and receive annual contributions up to a combined total of $56,000, small business owners often overlook the nondiscrimination rules that limit contributions of certain owners, officers, and other highly-compensated employees (HCEs) if theydon'toffer a safe harbor plan.

Who is a Highly Compensated or Key employee?

Within the context of a 401(k) plan, certain participants are considered to be Highly Compensated Employees (HCEs) or Key employees. Participants are classified in this manner for the purpose of conducting required nondiscrimination testing to ensure the plan is not disproportionately benefiting highly-paid employees and owners.

a safe harbor plan

How is ownership determined?

For purposes of your 401(k) plan, owners with an interest of more than 1%, may be considered Key or Highly Compensated employees. A participants ownership interest is the highest level of vote or value held at any point during the year. A participant who holds restricted stock or an exercisable option to acquire stock is treated as owning the stock for purposes of determining ownership.

Family Attribution of Ownership

For purposes of your 401(k) plan, a participants ownership interest is calculated by combining their ownership interest with that of any family member who is also an owner of and earns income from the company. An employee who is a spouse, child, grandparent or parent of an owner is considered an owner for purposes of nondiscrimination testing. A grandchild, sibling, or in-law of an owner is not considered an owner based on attribution rules.

For example, if Jane owns 0.5% of ABC Company and her husband, John, owns 0.6%, they are both considered to be greater than 1% owners of ABC Company. Similarly, if Jane owns 2% and John owns 0%, both are considered more than 1% owners.

Who is an officer?

For purposes of your 401(k) plan, officers will generally include the president, vice-presidents, general managers, and others who perform duties normally corresponding to those positions. Determination of whether an employee is an officer is based on their actual authority as to the company and not on their title.SoI'man HCE and/or Key employee -- what does this mean for me?

As explained in our nondiscrimination testing overview, when HCE contributions or Key employee account balances are disproportionate relative to NHCE contributions or non-Key employee balances, corrective action may be required. Corrective action may include refunding deferrals made by HCEs or an employer contribution to non-HCE or non-Key employees or a combination of the two.

Occasionally, if a potential compliance testing failure becomes apparent during the year, we may recommend actions to increase the likelihood of passing and mitigate the impact of any required corrections. These actions include:

asking HCEs or Key employees to reduce or suspend their contributions, and/or

encouraging NHCEs to increase their contributions for the remainder of the year.

What if I receive a refund?

Dont be concerned, refunds to HCEs and owners are routine and Guideline tries to make this process as smooth and transparent as possible.

Frequently, corrections for ADP and ACP testing take the the form of refunds to HCEs with those HCEs who contributed higher dollar amounts receiving larger refunds.

Refunds are issued after the end of the year, typically beginning in February and are taxable as ordinary income in the year of distribution. Before any refunds are issued, the plan administrator will have the opportunity to review the correction and HCEs receiving refunds will be notified. Unlike other cash distributions, nondiscrimination testing refunds are not subject to early distribution penalties.

If you receive a refund, you will receive a 1099-R reporting the taxable income, which you will use in preparing your tax return for the year in which you received the refund. (For example, if excess contributions must be returned to HCEs for the 2018 plan year, these funds will typically be refunded in February 2019, which youll report on your 2019 tax return when you prepare your taxes in 2020.)

What can I do as a participant?

Guideline actively monitors compliance throughout the year, however changes in participation and employee base make exact prediction impossible. Plan to contribute to your 401(k) evenly over the course of the year. Avoiding dramatic contribution changes allows Guideline to better assess risk, and help you to maximize any matching your plan offers.

Educate your colleagues. If employees collectively save more, HCEs can also save more. Help educate employees who may not be participating on the benefits of 401(k) savings.

What can a plan administrator do?

Guideline helps plan administrators make informed decisions based on the information available. We conduct testing on an ongoing basis and display the results on the Compliance Status page of the Guideline dashboard. We have information on plan design, compliance testing, steps to mitigate risk, how corrections work, and are always happy to answer questions at Guideline Support.

We understand that it can be frustrating to not be able to contribute as much as you would like when you are responsibly prioritizing retirement savings. In addition to discussing other savings options with a financial advisor, consider speaking with your employer about switching to or using a discretionary match to stimulate broader participation.

Before requesting a distribution, its important to know that you're only able to withdraw funds from a 401(k) account if you meet the conditions defined under your plan rules referenced in your summary plan description.

The most common IRS distributable events include:

Terminating employment (with the company sponsoring your 401(k))

The company terminating the 401(k) plan

Death or qualified disability

If you are age 59 and still employed by the company that sponsors your account, then youre able to request an In-service Distribution.

If you qualify, please see the following helpful article How to Distribute (or Rollover) your funds from Guideline.

If you do not qualify under one of the IRS distributable events listed above, and would like to access your Guideline 401(k) funds, check to see if you qualify for a 401(k) Loan or Hardship Withdrawal.

When you request a Distribution of your 401(k), your plan sponsor will be asked to approve the request within 7 days. Once the request is approved by your sponsor (or the 7-day period has elapsed without response from your plan sponsor), Guideline will begin processing your request.

Generally, once Guideline receives your distribution request, processing takes about 7-10 business days. A final email notification is sent when your check is ready for mailing. Please expect approximately 7-10 business days for check delivery via USPS addressed from our custodian, Benefit Trust Company.

Please note: Ifyou'verequested a rollover between one Guideline account to another Guideline account, no check will be mailed; instead your funds will be transferred directly between your Guideline accounts in approximately 3-5 business days once prior employer approval and Guideline processing is complete.

If you are age 70 or above, and retired or a 5% owner of the company sponsoring the 401(k), you generally must start taking Required Minimum Distributions (RMD). If you are still working and are of age 70, you may defer the RMD until you retire, as long as you are not a 5% owner of the company.

What is an RMD?

RMD (required minimum distribution) is an annual distribution you must take from your retirement(s) account after you reach the age of 70 .

You must take your first RMD by April 1st of the year after you turn 70 . After you take your first RMD, you must take subsequent RMDs by December 31st of each year.

For example, if you turned 70 on July 15, 2019. You must take your first RMD, for 2019, by April 1, 2020.

Information Needed to Calculate your RMD:

Your retirement account balance as of December 31st of the previous year.

Your life expectancy given your current age per IRS life expectancy tables.

If eligible, this calculation will also appear in a dashboard task (Request Your Required Minimum Distribution) under the Tasks and Notifications section.

Tax Implications & Fees

A $50 distribution fee is incurred to process RMD distributions.

Failure to request an RMD, may be penalized with an excise tax equal to 50% of the difference between the actual amount distributed and the RMD for the relevant tax year. (1)

How can I begin my RMD Request?

If eligible, you will receive a task notification in your dashboards Tasks and Notifications section and will find the RMD Distribution Form within the Forms folder of your Resource Library.

How long until I receive my check?

Submit the form to us through the Request Your Required Minimum Distribution dashboard task. Standard processing and shipping will take approximately 3-4 weeks.

(1) This information is for general education purposes only and not intended to be tax advice. We encourage you to consult a qualified tax professional before requesting a distribution.

You may opt-out of participating in your Guideline 401(k) by adjusting your contribution rate in your dashboard.

Simply go to the Portfolio section of your account and click "Change Contribution button. There you will be able to update the contribution rate to 0% and select the Suspend Contributions button to affirmatively opt out of contributions.

If at any point you would like to contribute to your Guideline 401(k) plan, you can easily follow the instructions above to increase your contribution rate. With your Guideline 401(k) you may adjust your contribution rate and type at anytime.

Please note that if you change your contribution rate too close to when your employer runs payroll, your new rate will be reflected on the next payroll run. You can also contact your employer or payroll department directly to confirm when your company runs payroll. (1)

(1) If your employer uses a manual payroll or non-integrated payroll provider (as opposed to one of our integrated payroll partners with real-time data sync), there may be a delay in your contribution rate change being applied within payroll. For last-minute changes, you should check with your company's payroll department to confirm that the contribution rate change is reflected in payroll before they process payroll.

Generally, you have until April 15, 2020 to make an IRA contribution for 2019. Prior to making a contribution you will need to decide whether that contribution should be made to a traditional IRA or a Roth IRA.

With a traditional IRA, any earnings would grow tax deferred, but are taxable when distributed. With a Roth IRA, any earnings grow tax-deferred, and are tax free if distributions meet certain requirements. A Roth IRA distribution is tax free, if it occurs at least 5 years after the Roth deposits are first funded; and- if at the time the distribution occurs, the Roth Account owner is at least age 59, disabled or the distribution is used for first-time homebuyer purposes- subject to a lifetime limit of $10,000.

While income taxes are likely a driver for whatever choice you make, there are many factors to consider in making your decision. The following three considerations can be helpful as part of the decision-making process.

Eligible Compensation

You (or in some cases, you or your spouse) must have received eligible compensation in 2019, in order to make a contribution to an IRA for 2019. Eligible compensation generally includes payments that you received for working such as wages, salaries, tips, bonuses, professional fees, and self-employment income.

Contribution Limits

For more information on IRA contribution limits please see our article How much can I contribute to my IRA?

Exceeding contribution limits could result in penalties being owed to the IRS, unless the excess amount is timely and properly corrected. It is important to stay under the limits for this reason.

Modified Adjusted Gross Income (MAGI) Income and Tax Deductions

For more information on IRA income limits and tax deductibility, please see our article What are the income limitations for IRA contributions?

Making the Choice

Even if you cannot take a deduction from your traditional IRA contribution, you may still be able to make non-deductible contributions to your traditional IRA. Amounts attributed to non-deductible (Roth IRA) contributions are nontaxable when distributed from their IRA, but any earnings would be taxable.

In some cases, even if you are not eligible to claim a deduction for traditional IRA contribution, but eligible to make a contribution to a Roth IRA, it may make better tax and financial sense to make a contribution to a Roth IRA. With the Roth IRA, you get the earnings tax free, provided the distribution is qualified. (1)

If you are unsure about which IRA to choose, you may decide to split your contributions between both types of IRAs, if you are eligible to do so.

(1) The information contained in this article is general in nature and based on authorities that are subject to change. This article is not intended to provide investment advice, legal, tax or accounting advice, and readers should always consult an accountant or tax advisors concerning the application of tax laws to their particular situations.

Once you reach age 70, you are subject to mandatory distributions from your Traditional IRA each year. These mandatory distributions are referred to as Required Minimum Distributions (RMDs). Roth IRAs are subject to different rules and there are no RMDs required.

Beginning the year you turn 70, you must take an RMD for every year. For the first year there is a special rule that allows you additional time. If you reach age 70 this year, your first RMD is required for this year. However, you have until April 1st of next year to take your first RMD. In all other cases, RMDs must be distributed from your IRA by December 31st of the year they apply to known as the Required Distribution Date.

The Due Date for Your First RMD:

RMD is an annual distribution you must take from your traditional IRA account after you reach the age of 70 .

You are considered to have reached age 70 six months after the date of your 70th birthday.

For example, if you reach age 70 on January 15th, you are considered to have reached age 70 on July 15th.

Information Needed to Calculate your RMD:

Your RMD must be calculated using a special formula that is provided by the IRS.

It may be possible to aggregate your IRA accounts for RMD purposes.

Your IRA custodian is required to calculate your RMD on your behalf, but they are allowed to exclude or ignore assets held in other IRA accounts from their calculation and other information that may be necessary to ensure accuracy.

Tax Implications & Fees

A $50 distribution fee is incurred to process RMD distributions.

Failure to request an RMD, may be penalized with an excise tax equal to 50% of the difference between the actual amount distributed and the RMD for the relevant tax year. (1)

If there is reasonable cause for missing the deadline, you can ask the IRS to waive the penalty.

(1) This information is for general education purposes only and not intended to be tax advice. We encourage you to consult a qualified tax professional before requesting a distribution.

Are Contributions to my Traditional IRA Deductible?

The IRS gives eligible individuals tax benefits for contributions made to an IRA. One possible benefit is a tax deduction for your traditional IRA contributions. To determine whether you are eligible for a deduction to a Traditional IRA, you first need to confirm whether you receive contributions or benefits under a retirement plan provided by your employer.

IRA Deductibility When You are Not Covered Under an Employer Retirement Plan

If you (or your spouse) do not receive contributions or benefits under an employer retirement plan, then you can claim a tax deduction for 100% of the allowable contributions that you make to a traditional IRA. For the purpose of this deduction, the IRS defines an employer retirement plan to include:

SEP IRA,

SIMPLE IRA,

401(k),

403(b),

Profit sharing, and

Pension plan.

However, the rules are not the same for all of these plans. For example, SEP IRA contributions affect your eligibility to deduct your IRA contributions for the year they are actually credited to your SEP IRA, while pension plans affect the deductibility of your IRA contribution for the year for which the contributions were intended. If youaren'tsure whether you are covered under an employer retirement plan, your employer should indicate on your Form W-2, Wage and Tax Statement, whether you are covered for any given year.

IRA Deductibility When You Are Covered by an Employer Retirement Plan

If you (and/or your spouse if you are married) receive contributions or benefits under an employer plan for the year, your eligibility for deducting your IRA contribution depends on your tax filing status and your modified adjusted gross income (MAGI). Learn more about income limitations and how to calculate your deductibility here.

Other Options for Saving

If you are not eligible to deduct your IRA contribution, you can consider making a contribution to your Roth IRA. Unlike your traditional IRA where earnings grow tax-deferred and are taxable when distributed, earnings in your Roth IRA grow tax-deferred but are tax-free if your distributions meet certain requirements. Learn more about contribution limits for a Roth IRA.

If you are eligible to deduct only a portion of your IRA contribution, you can also choose to contribute the deductible amount to your traditional IRA and the nondeductible amount to your Roth IRA.

The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.

If you had certain IRA or 401(k) transactions during the year, you may need to file IRS forms with your tax return. These forms could help you avoid paying income taxes on amounts that should be tax-free. These forms may include:

IRS Form 1099-R

IRS Form 5329

IRS Form 8606

Filing the right forms with your tax return can help to ensure that the information reported to the IRS iscorrect. Filing of additional paperwork, including forms are not limited to those listedabove. If you are unsure whether you should be filing a specific form, you should reach out to your taxadvisor or accountant.

When you receive a distribution from your IRA or 401(k) Plan, you should receive a report for that distribution from your IRA or 401(k) custodian. This report is provided on IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (Form 1099-R), which should include the distribution amount and should also indicate whether you had income tax withheld from your distribution.

Our custodian will send you your 1099-R in January after the distribution year. They are also required to provide the information reported on your 1099-R to the IRS. You may be required to file this form with your tax return for the year of the distribution.

In the event that you determine that a good faith mistake of fact has occurred, ERISA Section 403(c)(2)(A) provides that you may request a return of the contribution within one year of the error.

With a mistake of fact, you may request that funds be used for future contributions, or may request that the funds be returned to you. You, as the employer,won'treceive a refund of earnings on a mistaken overpayment, and will bear any market losses.

Remember, errors that do not fall within the strict mistake of fact definition can still be corrected, however funds will remain in the plan and may in some cases be applied to future employer contributions.

1. You will first need to add a bank account by visiting your Portfolio page and selecting theModify Contributions option.

2. Monitor your bank account for two small deposits made in the 2 - 4 business days after you provide us your bank account information. They may appear under any of the following labels:

WFMSTRIPE1

ACH ID 3270465600

ACH ID 2270465600

ACH ID 1800948598

ACH ID 431848772

Please note that depending on your bank, these amounts may appear as one combined deposit. If so, you may need to reach out to your bank for the separate amounts.

3. When you have received the deposits, login to your Guideline IRA dashboard and click Start next to the task labeled Verify your bank account.

4. Enter the deposit amounts in the popup that appears and click Verify Bank Account.

5. If the Verify your bank account task does not disappear within your dashboard, please reach out to [email protected] for further assistance.

After your bank connection is setup, you can set up a one-time or monthly contribution, change contribution dates, types and amounts. You should receive an email from [email protected] 2 business days before contributions will be pulled from your selected bank account.

To make updates, you can visit theModify Contributionspage at least 2 business days before your scheduled contribution.

If youd like to request a distribution from your Guideline IRA, you should first confirm which type of distribution you would like as IRS restrictions may limit your options.

If you wish to distribute your IRA to yourself or deposit to another IRA, you can access the IRA distribution form needed for the indirect rollover on your Guideline IRA dashboard in your Resource Library Forms folder. Please note that if youd like to make a transfer of your IRA into another IRA, also known as a direct rollover, you must use the trustee-to-trustee form instead of the distribution form.

You can submit your completed form by uploading it to your Guideline IRA dashboard. Just go to your Resource Library and upload it to the Shared Files folder.

Please send an email to [email protected] once you have uploaded the completed form so that we can begin processing your request.

You can choose whether or not to have income taxes withheld from distributions made from your traditional IRA. If you do not want to have income taxes withheld, you must choose this option on your IRA distribution form found in your Resource Library Forms folder.

If you choose to have income taxes withheld, the withholding amount cannot be less than 10% of the total distribution.

Generally, distributions of pre-tax amounts from your Traditional IRA or 401(k) Plan are subject to income tax, unless the amount is properly rolled over. In some cases, you can choose the level of income taxes withheld from the distribution, while in others tax withholding will be mandatory. Regardless, distributions are reportable to the IRS and which form you use, or receive will depend on what actions you take.

The following is a high-level overview of some of the tax withholding rules that may apply to your distributions and some of the forms you may need to file with the IRS.

Amounts that you withdraw from your IRA (distributions) before you reach age 59 are subject to a 10% early distribution penalty unless you qualify for an exception, including a qualified disability.

You should check the Disability option on your IRA distribution form only if your distribution is made from a traditional IRA while you are under age 59, and you are disabled as defined by the tax code. Disability, for this purpose, is the inability to substantially perform your job due to a medically determined physical or mental impairment that could affect you long-term, indefinitely or cause death. The tax code also provides that:

A short-term illness is not considered to be a disability.

Being disabled for the purpose of some benefits doesnt necessarily make you eligible for the disability exception, for early distribution.

The disability diagnosis must be provided by an acceptable medical source (AMS), including a licensed physician or a licensed or certified psychologist.

In order to request this exception, you should upload this diagnosis documentation to your IRA Dashboard's secure shared files folder in addition to your completed Guideline IRA Distribution form.

If your traditional IRA distribution is taken while you are disabled, Code 3 is input in Box 7 of the Form 1099-R issued to report your distribution due to disability. The IRS may require proof of your disability if your distribution is reported on Form 1099-R as well.

If you had a plan prior to Guideline, you or your prior plan provider should have filed a Form 8955-SSA for each plan year in which there were participants to report. You should reach out to your prior plan provider to confirm that they filed for any applicable plan years prior to switching to Guideline. If not, please see the article What if my prior plan administrator did not file my Form 8955-SSA for me ?

If you have recently left the company that had sponsored your Guideline 401(k), you should receive an email from [email protected] with options that you can take with your 401(k) account.

To create your Guideline IRA account, you must click on the Account Balance Options link provided in that email and follow the simple instructions to setup your account.

Cant find your unique IRA enrollment link? Contact [email protected] and well send you another one.

In any given year, a business can elect to make a profit sharing contribution to its employees.

If your business intends to make a profit sharing contribution for the 2019 plan year, you need to make the request before your business tax filing deadline. Guideline will start accepting profit sharing requests in February 2020 and a link will be visible in your plan sponsor dashboard. Requests will be processed from March through October, based on your filing deadline (extension dates in parentheses).

Partnership, LLC partnership and S-Corporation - March 16th (Sept 15th)

C-corporation & Sole proprietor - April 15th (October 15th)

Tax-exempt organization - May 15th (November 16th)

Depending on your plan needs and situation, there are several types of profit sharing formulas that your company may be a good fit for.

As a default, all Guideline plans are set up with a safe harbor comp-to-comp profit sharing formula. However, you may also choose to allocate your profit sharing as a flat dollar amount to each employee, or new comparability if your plan is a Prime Plan. If you wish to change your profit sharing method (including the vesting schedule applicable to profit sharing contributions), you must amend your plan before December 31, 2019.

The comp-to-comp method (also called pro rata) takes a fixed contribution amount and allocates it to your employees based on their relative salaries. This is the default profit sharing method for Guideline 401(k) plans:

The company profit share is $10,000. The total of all eligible employee compensation is $200,000. Prime plans

The flat dollar amount method gives every employee the same contribution amount:

The company profit share is $10,000. Three employees share it equally $3,333 each.

New comparability profit sharing is available for that offer an existing Safe Harbor employer contribution.

Guideline makes the profit sharing process easy for plans to implement. Contributions are made at a companys discretion each year, regardless of whether or not the company makes a profit. If you plan on making a profit sharing contribution, check that your plan document includes provisions for the type of profit sharing allocation formula you want (comp-to-comp vs. flat dollar).

After year end, you can assess your companys finances and other factors below to make a decision about whether profit sharing will be appropriate for the year.

There is no minimum amount for a profit sharing contribution.

Guideline doesnt charge any extra fees for you to make a profit sharing contribution. (1)

Contributions do not count toward the $19,000 annual deferral limit, but the total profit sharing contribution is limited to 25% of eligible compensation. Additionally, total contributions per participant cannot exceed $56,000 for 2019, or $62,000 if age 50 or over.

Profit sharing contributions are always made as pre-tax contributions to employee 401(k) accounts.

You can also see our detailed guide to 401(k) profit sharing plans to learn more about the benefits of profit sharing.

(1) Profit sharing contributions to participant accounts that previously did not have a balance could increase the amount of monthly maintenance fees charged.

Owners draws are an option for some business owners that earn self-employment income outside of W-2 payroll compensation to make 401(k) contributions.

In general, the following entity types are eligible for owners draws. Owners of these entities often have self-employment income:

Limited Partnerships

Partnerships

LLCs taxed as Partnerships

Single Member LLCs

Sole Proprietorships

Its important to note that this list does not include corporations and LLCs taxed as corporations because owners receive compensation paid through payroll as a W-2 wages. Some owners might receive distributions from an S Corporation or an LLC taxed as an S Corporation, but these distributions received as a shareholder of an S Corporation are also not considered earned income for retirement plan purposes according to the IRS. In general, the following entity types are not eligible for an owners draws and all contributions for owners must come through payroll.

LLCs taxed as S Corporations

LLCs taxed as C Corporations

Any type of Corporations

If you are eligible and would like to make an owners draw, please refer to the article How do I request an Owners Draw?

If you are eligible and would like to make an owners draw contribution, you can use the following instructions to make a contribution via your Guideline Dashboard:

Enter the Roster page of your plan administrator dashboard.

Select the owners name who is making the draw contribution.

Check the box is an owner.

Change wage type from W-2 to Self Employment.

Once you are marked as an owner making self-employment income, youll notice that your personal Guideline account Change Contributions page will be updated to reflect this change. You will now be able to designate your desired contribution amount and well pull those funds from the companys Contribution Default bank account on file.

Contributions must be made by years end. If your plan has a match, we will send you a task notification within the following year to confirm the amount you will be including on your self-employment income tax filing so that we may calculate the match accordingly.

What Are the Limits?

Annual Deferral Limit

Each year, your total 401(k) contributions are subject to an annual maximum limit.These contributions do not include any employer contributions your employer chooses to make into your account. For 2019, the IRS limits 401(k) salary contributions to an $19,000 annual maximum.

Annual Additions Limit

The Annual Additions limit for overall contributions towards your 401(k) account is $56,000 in 2019.

This limit does not include rollover and catch-up contributions, but does include:

Pre-tax and Roth employee contributions

Employer matching and nonelective contributions

Safe harbor employer contributions

Forfeiture contributions

Voluntary after-tax contributions

Catch-Up Contributions

If you are, or will turn, 50 years of age or older this year, you can also make catch-up contributions, up to an additional $6,000 annually.

This additional amount can be contributed regardless of any other limitations on the amount you can contribute to your 401(k).The maximum "catchup contribution" that you can make in 2019 is $6,000.

Annual Adjustments

The annual contribution limits may be adjusted annually by the IRS for costofliving adjustments. Guideline will make sure to notify you every year of the maximum amount you can contribute.

Monitoring Your Guideline Account

Guideline will monitor your total contributions throughout the year and notify you when you are close to reaching the annual contribution limit. By doing so, we hope to help you avoid exceeding your limits.

What Happens if I Exceed the Limits?

Excess Guideline Contributions

If your contributions to your Guideline 401(k) exceed the annual limit, Guideline will notify you. Well first verify that any Pre-Guideline contributions are accurate. Any excess contributions will then be refunded, taking into account any gains or losses. Guideline will issue a 1099-R to you for the tax year in which the excess contributions were made. You will use the 1099-R to report your excess contributions and gains or losses for income tax purposes. Guideline will provide any refunds as soon as possible after an excess contribution is confirmed and issue 1099-R forms as quickly as possible following the end of the year.

Exceeding Contribution Limits in More Than One Plan

If you are contributing to more than one plan, such as other cash or deferred arrangements, taxsheltered 403(b) annuity contracts, simplified employee pensions, or other 401(k) plans, and your total 401(k) holdings exceed the annual limit, you will need to decide which plan youd like to return the excess amount. If you would like your Guideline account to return the excess, you must notify us in writing no later than March 1st of the year after the excess contributions were made.

Highly Compensated Employee Refunds

If you are a highly compensated employee, generally more than 5% owners or individuals receiving wages in excess of certain amounts established by law, then part of your 401(k) contributions may be returned to you if your plan fails to meet certain nondiscrimination requirements.Guideline will notify you if and when a refund is required.

Planto Max Out Your Yearly Contributions

At Guideline, we encourage you to contribute as much as possible to your 401(k) each and every year, up to the annual limit if youre able! We believe in smart retirement saving and want to make sure youre ready for your future. Decide now to make it your goal to reach, but not exceed, your annual contributions limits!

You can change your contribution rate at any time. This can be done by visiting the Portfolio tab in the upper left hand corner on the main page of your Guideline dashboard. Then click the Change Contribution button. There you will be able to select your desired rate before clicking the Save Changes button.

Please note that if you change your contribution rate too close to when your employer runs payroll, your new rate will be reflected on the next payroll run. You can also contact your employer or payroll department directly to confirm when your company runs payroll. (1)

(1) If your employer uses a manual payroll or non-integrated payroll provider (as opposed to one of our integrated payroll partners with real-time data sync), there may be a delay in your contribution rate change being applied within payroll. For last-minute changes, you should check with your company's payroll department to confirm that the contribution rate change is reflected in payroll before they process payroll.

Once you have decided that would like to make a profit sharing contribution you can complete the profit sharing task on your plan sponsor dashboard. After your request is submitted, Guideline will provide you with a confirmation notice to review before the profit sharing contributions are processed.

Remember, you will need to make your profit sharing contribution before your tax deadline.

If your plan year ends on December 31st, your Form 8955-SSA is due by July 31st of the following year or on the last day of the 7th month after the end of the plan year. If necessary, well file an extension until October 15th to complete the filing.

Well file your Form 8955-SSA for the plan year in which your plan started with Guideline. If you had another plan provider before Guideline, check with them to make sure all prior year 8955s were submitted on time.

If you do not have any participants to report for a plan year, we will not file a Form 8955-SSA unless we are reporting participants who should have been reported in a previous year.

To file your Form 8955-SSA, well need the social security number and termination date of each dismissed participant for whom we are required to file. It is important to maintain this information in your records for accurate filings.

We will need to report any employees who still have a vested account balance at the time of filing, who has left the company or the plan in the year prior to the tax filing year. For example, where Jenny is dismissed on April 4, 2016 with a vested account balance of $1,000. Shewon'tbe reported on the 2016 Form 8955-SSA. Jenny maintains her account balance throughout 2017 and up to July 31, 2018 which is the day we submit the plan year 2017 Form 8955-SSA. We must report Jennys vested balance on the 2017 Form 8955-SSA. Jenny then rolls her money out of her account in October 2018. If a remaining vested account balance is distributed after we have filed an 8955 for a participant, we will then report the zero balance for the filing year in which the distribution occurs. In this example, we would include Jenny on the 2018 Form 8955-SSA with a $0 balance.

We do not make Forms 8955-SSA publicly available because they contain personally identifiable information. If you would like to request a copy of the information reported on your 8955-SSA, please contact our plan administrator support team.

The Form 8955-SSA is used to report employees to the Social Security Administration who no longer work for your company but still have an account balance under your plan. These employees are reported once more when they move money out of their account.

Retired employees that still havent moved money out of their account will be notified by the Social Security Administration based on Form 8955-SSA information.

If Forms 8955-SSA were not filed before switching to Guideline, we will report all terminated participants with an account balance as of the date your plan starts with Guideline. This could result in plan penalties for participants who are reported late due to missed filings in prior years. You can learn more about penalties related to the filing of Forms 8955-SSA here.

Onceyou'vesubmitted your loan request,youll receive a confirmation email letting you know that your loan request has been submitted for review. Generally, once Guideline receives your loan application, review takes about 5-7 business days. If your application is approved, you will receive a notification that your promissory note and amortization schedule are available for your review.

Once the promissory note has been signed and uploaded to your shared files folder, it takes about 2-3 business days for the check to be mailed out. A final notification is sent when your check is ready for mailing. Please expect about 7-10 business days for the check through USPS mail.

Rolling over a previous retirement account to Guideline is quick and easy! To begin:

Contact your retirement account provider.

Request a direct rollover in the form of a check for the amount you wish to rollover to Guideline.

Note: Some retirement account providers may request a letter of acceptance. To place this request, please contact us at [email protected] for assistance.

Make the check payable to our custodian Benefit Trust Company (BTC).

Check Payable Details: BTC for GDL [Your Guideline Account Number] FBO [Your Name]

Where to mail the check:

Benefit Trust Company

PO Box 12765

Overland Park KS, 66282

Additional Details

Once the rollover check is received, it takes approximately 5-7 business days to process, attribute and for the funds to appear in your Guideline account.

Rollovers via a wire or ACH transfers are not permitted.

Do not send your check directly to Guidelines business address. Rollover checks should be sent to the custodian to ensure timely processing.

If youd like to request a distribution from your Guideline 401(k), you should first confirm which types of distributions you may qualify for (if any), as your 401(k) summary plan description and IRS restrictions may limit your options before you leave your employer or meet retirement age.

If you are eligible for a distribution, then you will be able to initiate a cash distribution or rollover to a new provider by navigating to the Account Settings tab of your Guideline dashboard.

If you are not yet eligible, the Distribution option will not be viewable in your dashboard.

If there is a pending or unprocessed transaction in your account, you will have to wait until the transaction is complete before the"Distribution" option is made viewable in your dashboard.

Rollovers via a wire or ACH transfers are not permitted. For security purposes, we will mail a distribution check to your address on file.

Curious about the distribution timeline? Please see the following distribution timeline article.

Generally, amounts in your IRA are tax deferred until distributed. However, there is an exception to that rule when a participant is engaged in a prohibited IRA transaction. Such prohibited transactions are transactions involving disqualified persons and your IRA.

A disqualified person includes you, your beneficiary, a fiduciary- such as someone who provides investment advice for your IRA for a fee- and certain members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

A prohibited transaction occurs if this person engages in certain transactions such as:

Borrowing money from the IRA,

Selling property to the IRA,

Using the IRA as security for a loan,

Using the IRA to buy property for personal use, or

Investing in collectibles.

If any of these prohibited transactions occur with your IRA it could be treated as if you withdrew the entire balance, as of January 1 of the year the event occurred. However, if you pledged only a portion of your IRA as security for a loan, then only the pledged amount would be treated as a distribution to you. If you need assistance determining whether a transaction could be prohibited, or, if you think that your IRA might have been involved in a prohibited transaction, please contact your tax advisor.

If a prohibited transaction results in distribution of your funds, it will be reported on IRS Form 1099-R. For prohibited transactions, Code 5 is input in Box 7 of the Form 1099-R that is issued to report distribution from your IRA.

Almost anyone receiving taxable income can contribute to a traditional IRA. Whether or not you can contribute to a Roth IRA will depend on your adjusted gross income. However, any IRA will limit the amount you can contribute annually. The following provides an overview of contribution limits for Traditional and Roth IRAs.

For 2019, you can generally contribute up to $6,000 to your IRA, plus an additional $1,000 if you are over the age of 50. This amount can be contributed to your Traditional IRA, Roth IRA, or split between both types of IRAs. These contributions are subject to income and eligibility requirements, which include the following:

Eligible Compensation Requirement

You must have eligible taxable compensation in order to be eligible to contribute to an IRA. Eligible compensation includes taxable wages, tips, other compensation reported in Box 1 of Form W-2, commissions, and self-employment income. Your IRA contribution for the year cannot exceed the eligible compensation amount that you receive for the year. For example, if your eligible compensation is only $4,000, your contribution is limited to $4,000, regardless of the $6,000 IRS limit.

For both Traditional and Roth IRAs, please see the following article to learn more about your Income Limit on IRA Contributions.

Spousal Income

If you have little or no W-2 income, but you are married and file a joint tax return with your spouse, eligible W-2 compensation received by your spouse can be used to contribute to an IRA on your behalf. Note that your spouses compensation and your compensation must be enough to cover both contributions to your IRA and any contributions made to your spouses IRA. For example, if each of you only had $5,000 in includable W-2 compensation, the limit you could both put into IRAs would be $10,000. However, if you had $4,000 in includable W-2 compensation and your spouse had $10,000. You would have a total of $14,000 that might possibly be deferred. You could each max out your IRA annual contributions of $6,000 and jointly save $12,000 toward retirement (plus an additional $1,000 each if you were both 50 years old by the end of the year). This is of course subject to other contribution limitations.

Age Limit on Traditional IRAs

Contributions cannot be made to your Traditional IRA beginning the year you reach age 70 . If you are age 70 or older this year and want to make an IRA contribution, you may make it to a Roth IRA if you meet additional income requirements.

First contributions

Your first contribution to your 401(k) will appear in your account approximately 5-7 business days after your pay date.

After that, all contributions should be fully attributed to your Guideline account approximately 2-3 business days after your pay date. You can always review contribution history within your Dashboard Activity page. A further breakdown of contribution types and amounts can be found by clicking on the + icon next to the contribution task.

If contributions were deducted from your paycheck and are not appearing in your Guideline account, please reach out to our team for further assistance by email at [email protected], chat or by phone at (888) 344-5188.

1. If you chose to verify your account using micro-deposits, you will be prompted to enter your account information. Enter the electronic routing number provided by your bank, along with your bank account number and account type and click Continue.

2. Monitor your bank account for two small deposits made in the 2 - 4 business days after you provide us your bank account information. They may appear under any of the following labels:

WFMSTRIPE1

ACH ID 3270465600

ACH ID 2270465600

ACH ID 1800948598

ACH ID 431848772

Please note that depending on your bank, these amounts may appear as one combined deposit. If so you may need to reach out to your bank for the separate amounts.

3. When you have received the deposits, login to your Plan Sponsor dashboard and click Start next to the task labeled Verify your bank account.

4. Enter the deposit amounts in the popup that appears and click Verify Bank Account.

5. If the "Verify your bank account" task does not disappear in your dashboard, please reach out to [email protected] for further assistance.

Hardship Withdrawals

You may request a hardship withdrawal from your Guideline 401(k) for qualified hardships. Guideline will review your request, taking into account all relevant facts and circumstances in determining whether your financial need qualifies.

Hardship withdrawals are subject to income taxes, plus an additional 10% tax for early distribution if you are under the age of 59 . Employees who take a hardship distribution cannot repay it back to the plan. As such, a hardship withdrawalwill permanently reduce the value of the benefits you will receive at retirement.

To find out if you might be eligible or to apply for a hardship withdrawal, please contact [email protected].

Qualified Hardships

The following are deemed a Qualified Hardships and may make you eligible to receive a hardship withdrawal:

Expenses for medical care (described in Section 213(d) of the Internal Revenue Code) either previously incurred by you, your spouse or your dependent or necessary for you, your spouse or your dependent to obtain medical care.

Costs directly related to the purchase of your principal residence (excluding mortgage payments).

Tuition, educational fees, and room and board expenses for the next twelve (12) months of postsecondary education for yourself, your spouse or your dependent.

Amounts necessary to prevent your eviction from your principal residence or foreclosure on the mortgage of your principal residence.

Payments for burial or funeral expenses for your deceased parent, spouse, children or other dependents.

Expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under the Internal Revenue Code.

Conditions

If you have any qualified hardship expenses, a hardship distribution can only be made if you confirm that the following conditions have been met:

You have an immediate and heavy financial need.

A financial need may be immediate and heavy even if it was reasonably foreseeable or voluntarily incurred.

You have exhausted all other options and you lack other available resources.

The amount requested is not more than the amount needed to relieve your financial need.

The amount needed should take into account any other resources reasonably available to you.

The amount needed may include any amounts necessary to pay any taxes or penalties reasonably anticipated as a result of your hardship withdrawal.

You will not make any salary deferrals for at least six (6) months after you receive the hardship withdrawal.

Limitations

The following limitations apply to hardship distributions:

The minimum amount you can request as a hardship distribution is $1000

You can receive no more than 2 hardship distributions during a Plan Year.

Generally, you may only withdraw money within your 401(k) account that you invested as salary contributions. Employer contributions and earnings on your investment may not be used for hardship withdrawals.

While setting up your Guideline IRA you will be able to designate your beneficiary(ies). A beneficiary is someone who will inherit your IRA balance if you pass away.

Although a beneficiary designationisn'trequired, it is strongly recommended. Keep on reading to learn more about different types of beneficiaries, including primary and secondary beneficiaries and minor, trust, or non-individual beneficiary designations.

Primary Beneficiary

If youre married

If you are married or become married, state law may require that your spouse be your primary beneficiary. If you want someone else to be named in addition to or as your primary beneficiary, your spouse must provide written consent for the designation to be effective if you reside in a community or marital property state.

Due to the importance of the tax, financial, and legal consequences of your spouses consent to your designation for another beneficiary, they should consult with an attorney regarding giving up their interest in your IRA.

If youre single

You may select anyone as your beneficiary (i.e your parents, siblings, or that favorite niece of yours). However, if you get married later on, and you would like your spouse to be designated as your primary beneficiary, you will need to update your beneficiaries in your Guideline account dashboard.

Secondary Beneficiary

In addition to your primary beneficiary, you can also list a back-up beneficiary a secondary beneficiary who will be next in line to inherit your IRA balance if your primary beneficiary does not survive you. Designating a secondary beneficiary helps you ensure theres always someone in line to inherit your IRA, even if you forget to update your designated beneficiaries over the years.

Multiple Beneficiaries

Guideline enables you to allocate among multiple primary or secondary beneficiaries. For example, if you list your two favorite nieces as your primary beneficiaries, you have the option of allocating 60% to your most favorite niece, and 40% to the other.

No Beneficiary

If youdon'tname a beneficiary, or if none of your beneficiaries survive you, your account will be distributed in the following order:

Surviving spouse

Children, including adopted children (split equally by right of representation)

Surviving parents (split equally)

Your estate

Minors

You can also name a minor as a beneficiary but its not recommended. If the minor beneficiary has not turned 18 by the time they inherit your IRA, a court of law will have to appoint a guardian to receive the money on their behalf.

A better alternative is to name a spouse or other trusted guardian as the beneficiary, with the understanding that theyll use the funds for the minors benefit. If the minor turns 18 in your lifetime, you can update your beneficiary designation accordingly.

Living Trust Beneficiary

You might also want to create a living trust and name the trust as your beneficiary.

A common practice is to set up a trust for the benefit of a minor child directly without the need for lengthy and costly court proceedings.

You should consult an attorney to ensure the trust meets legal requirements. Otherwise, your beneficiaries may face significant tax disadvantages or be disqualified altogether.

Non-individual Beneficiary

You can also designate a non-individual in the form of a charity or a for-profit entity as a beneficiary.

Contact your tax advisor for more information on adding a non-individual as a beneficiary of your IRA account. If you would like to designate a charity or a for-profit entity, contact participant support.

In the event of operational errors resulting in excess employee deferrals or employer contributions being remitted, guidance for correcting such errors is found in, the Employee Plans Compliance Resolution System (EPCRS) (1).

These deposits would instead be treated as "excess allocations," which require that the excess allocated amount adjusted for earnings be removed from the participant's account and forfeited, reallocated or used to reduce employer contributions depending on the situation.

Returning funds to your business account, when there was no actual mistake of fact can jeopardize your plans qualified status. If a plan becomes disqualified, both employer and participant contributions will lose their tax qualified status, causing significant adverse tax consequences including late payment penalties, for both the participants and the employer. Given the very limited instances where refunds to the employer are permissible and the significant consequences for improper reversion, we discourage sponsors from requesting a refund of payments made to the plan. If you are considering a mistake of fact request but are uncertain, you should seek the advice of an ERISA attorney. Please see this article if your contributions do not fall under the mistake of fact classification or this article to make a mistake of fact request.

(1) The content of this website is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances.

Once it has been determined that you would qualify for a mistake of fact request, you can use the Mistake of Fact Refund Request form found in your plan sponsor Resource Library. Please email [email protected] with any additional questions or notify when the form is securely uploaded to the Shared Files folder.

Occasionally, mistakes occur processing payroll and 401(k) contributions, which result in incorrect employee 401(k) deferrals or employer contributions being remitted to the 401(k) plan. A certain type of deposit error, considered to be a mistake of fact, can be corrected by removing the improperly contributed funds from your 401(k) account. Guidelines Mistake of Fact Request form may be used by a plan sponsor to request a refund in these situations.

A Mistake of Fact

The Employee Retirement Income Security Act of 1974 (ERISA) and its regulations, which regulate 401(k) plans, forbid the use of plan assets for anything except the exclusive benefit of plan participants and severely restrict the ability to revert plan assets to an employer. Normally, this prohibits money deposited into a plan account from being returned to a plan sponsor or participant. A mistake of fact error is considered an exception to this rule.

The IRS has determined mistakes of fact to include mathematical and typographical errors occurring during the contribution process. For example, adding an extra zero to the amount remitted to the trust account for a payroll deferral or including a participant multiple times on the same report would potentially be characterized as a mistake of fact.

Conversely, the IRS has found that there is no mistake of fact where an employer or a participant unintentionally contributes an amount that causes the plan to fail annual testing. This would include exceeding IRS contribution limits for

Participant deferrals,

Compensation limits,

Average Deferral Percentage testing failures,

Average Contribution Percentage testing failures,

Top Heavy testing failures,

or Deductibility limits.

Further, the IRS has found no mistake of fact where a participant selects an unintended deferral rate, contributions are made on ineligible compensation or an ineligible employee is allowed to participate. As they will not allow distributions as a form of correction for testing failures, the IRS has created an alternate system to allow correction for these operational errors as outlined here.

When you set up your Guideline 401(k), youll be asked to designate a beneficiary someone who will inherit your 401(k) distributions if you pass away.

Although a beneficiary designationisn'tmandatory, if youre particular about who will inherit your hard-earned money and want to spare them a lot of hassle, you should take the time to designate your beneficiary(ies) today.

Keep on reading to learn more about different types of beneficiaries, including primary and contingent beneficiaries and minor, trust, or non-individual beneficiary designations.

Primary Beneficiary

If youre married

Your spouse is presumed to be your primary beneficiary by default. If you want someone else to be named as the primary beneficiary, your spouse must provide written consent for the designation to be effective.

If youre single

You may select anyone as your beneficiary (e.g. your parents, siblings, or that favorite niece of yours). However, if you get married later on, your spouse takes precedence over your previously designated beneficiary and automatically becomes your primary beneficiary. This means that if you want to keep your original beneficiary, your spouse must provide a written waiver for it to be valid.

Contingent Beneficiary

In addition to your primary beneficiary, you can also list a back-up beneficiary a contingent beneficiary who will be next in line to inherit your 401(k) account if your primary beneficiary doesnt survive you. Designating a contingent beneficiary helps you ensure theres always someone in line to inherit your 401(k), even if you forget to update your designated beneficiaries over the years.

Multiple Beneficiaries

Guideline enables you to allocate among multiple primary or contingent beneficiaries. For example, if you list your two favorite nieces as your primary beneficiaries, you have the option of allocating 60% to yourmostfavorite niece, and 40% to the other.

No Beneficiary

If youdon'tname a beneficiary, or if none of your beneficiaries survive you, your account will be distributed in the following order:

Spouse

Children (split equally)

Parents (split equally)

Your estate

Minors

You can also name a minor as a beneficiarybut its not recommended. If the minor beneficiary has not turned 18 by the time they inherit your 401(k), a court of law will have to appoint a guardian to receive the money on their behalf.

Ifyou'veever been in a court proceeding, youll understand legal processes can be lengthy and costly, which could significantly delay the minors (and other designated beneficiaries) receipt of funds.

A better alternative is to name a spouse or other trusted guardian as the beneficiary, with the understanding that theyll use the funds for the minors benefit. If the minor turns 18 in your lifetime, you can update your beneficiary accordingly.

Living Trust Beneficiary

You might also want to create a living trust and name the trust as your beneficiary.

A common practice is to set up a trust for the benefit of a minor child directly without the need for lengthy and costly court proceedings.

By designating the trust as your 401(k) beneficiary on behalf of your child(ren), the trustee appointed to manage your living trust can control the age at which your child(ren) receives the funds, as well as manage other aspects regarding the inheritance of your 401(k).

You should consult an attorney to ensure the trust meets legal requirements. Otherwise, your beneficiaries may face significant tax disadvantages or be disqualified altogether.

Non-individual Beneficiary

You can also designate a non-individual in the form of a charity or a for-profit entity as a beneficiary. The key difference is that the funds would have to be distributed all at once, rather than a little at a time over a beneficiarys life span, since entities are not individuals and thus have no life expectancy. This could potentially result in adverse tax consequences for non-charitable, for-profit businesses. Charities, on the other hand, receive the benefits as 100% tax free income.

Contact your tax advisor for more information on adding a non-individual as a beneficiary of your 401(k) account. If you would like to designate a charity or a for-profit entity, contact us at [email protected].

So How Do I Add or Change My Beneficiary?

You can add a beneficiary or change a beneficiary designation right from your Guideline dashboard:

Log in to your Guideline Account

Click Account Settings

Look for theBeneficiarysection and clickEdit

If you plan to move funds between two of the same types of Individual Retirement Accounts (Traditional-to-Traditional or Roth-to-Roth IRA), you have two options: a direct IRA rollover or an indirect IRA rollover. Both options will generally produce the desired result of moving your IRA assets, however, one is risky (indirect IRA rollover) and should be avoided, if possible. For additional information, please see this article on the Consequences of Ineligible IRA Rollovers.

The direct IRA rollover option is also referred to as a trustee-to-trustee transfer or direct transfer, and occurs when the IRA assets are paid directly from one IRA custodian to a successor custodian, for the benefit of your IRA. In general this is the better option, for reasons which include:

You can use this method to move your assets between your IRAs as often as you choose.

The direct transfer is not a taxable event. It is reported to the IRS as a direct rollover, and you will receive a 1099 code G in the year following your rollover showing the direct transfer. However, the rollover is not reported to you as income and should not be reported as such, on your tax-return. This means less paperwork to deal with when it is time to file your taxes.

If you are moving assets from another financial institution to us under the direct rollover option, you should ensure that your IRA is opened with Guideline, before the rollover of IRA funds is initiated.

Under the indirect IRA rollover option, you take a distribution from one IRA that is paid to you individually and then you deposit the proceeds to the receiving IRA. This deposit is required to be completed within 60-days of you receiving the funds. We usually do not recommend the rollover option for the following reasons:

Unless you opt out of tax withholdings, 10% may be withheld from your indirect rollover, In this instance, in order to re-deposit the full amount you might have to come up with 10% before rolling over the full amount.

Unlike direct transfers, in which case you are allowed an unlimited number, you are eligible for only one (1) indirect rollover per IRA during a 12-month period. If you perform more than one indirect rollover during the 12-month period for any of your IRAs, only the first rollover satisfies Internal Revenue Services (IRS) rollover rules. The other rollover(s) would be considered ineligible rollovers, which means that amount would no longer be eligible to be held in your IRA and negative tax consequences can be incurred.

If you miss the 60-day deadline, the rollover would be considered an ineligible rollover as well. In order to use the indirect rollover method, you must re-deposit, the same assets that you received in the distribution. For instance, if you receive a distribution of cash, you cannot use that cash to purchase stock or property and then subsequently rollover those assets in kind. Instead, the cash must be rolled over to maintain the tax deferred status of the funds.

Improper reporting of the transactions on your tax return could result in follow-up inquiries from the IRS.

Ineligible rollovers can cause significant negative consequences to your retirement savings. Please consider the following:

Generally, IRA distribution amounts that are indirectly rolled over are nontaxable because they are restored to your IRA account within the 60 day window. However, if for example you miss the 60 day cutoff, the amount will no longer be rollover eligible (ineligible rollover) and could also then be taxable to you.

Ineligible rollovers become taxable income to the account holder, and may be subject to a 10% additional tax if the account owner is below aged 50 .

Ineligible rollovers also then lose the ability to continue to accrue tax-deferred earnings (or tax-free earnings in the case of a Roth IRA) on the amount, which could negatively impact your retirement savings.

If a rollover is ineligible and you fail to remove the ineligible rollover amount from your IRA within a certain timeframe, you could be double-taxed on the amount. In addition, you may owe the IRS a 6% excise tax on the amount for every year it remains in your IRA. These penalties are steep so it is important to understand the operations of your IRA.

Form 5329 is used to report penalties that you may owe on your IRA distributions, or to correct errors made by your custodian. Examples may include the following:

Incorrect reporting of your distribution by your IRA Custodian:

Your IRA custodian reports a Code 1 in Box-7 of your 1099-R, when it should be a different code. Generally, Code 1 would be used for distributions that you take while you are under age 59 which are subject to a 10% early distribution penalty, unless you qualify for an IRS approved exception. If you were eligible for a waiver for the penalty, then Form 5329 must be filed to let the IRS know that the Code 1 on the 1099-R should be disregarded.

You miss your RMD deadline:

In most cases, your required minimum distributions (RMD) must be taken by December 31st of the year for which it is due. If you miss the RMD deadline, you owe the IRS a penalty of 50% of the amount that you did not take. This penalty is reported on IRS Form 5329.

In general, IRS Form 8606 is filed to report activity of nontaxable assets in your IRA. For example, Form 8606 is required, if any of the following occurred during the last year:

If you made a contribution to your traditional IRA and you claimed a tax deduction for all or a portion of it.

You had after-tax amounts in your IRA from IRA contributions for which you did not claim a deduction, or rollovers of after-tax amounts from your 401(k) or 403(b) plan, and you took a distribution from any of your traditional IRA, SEP IRA or SIMPLE IRA.

You converted amounts from your traditional IRA, SEP IRA or SIMPLE IRA, unless the entire amount was recharacterized (reversed), or

You received a distribution from your Roth IRA.

Roth IRA Contributions

Your modified adjusted gross income (MAGI) determines whether you are eligible to make a contribution to a Roth IRA. MAGI limits are subject to adjustment annually by the IRS. The following are the MAGI limits and corresponding allowed contributions for 2019.

IRS publication 590-A

If your MAGI falls into the partial range, a special calculation needs to be done to determine how much you are eligible to contribute. Visit the IRS website for guidance on calculating partial contributions to a Roth IRA.

Traditional IRA Contributions Under an Employer-Sponsored Retirement Plan

If you receive contributions or benefits under a retirement plan offered by your employer, or you are married to someone who does, your eligibility to deduct contributions to your Traditional IRA is determined by your MAGI and your tax filing status. The following are the MAGI that apply to each tax filing status for 2019.

If your MAGI falls into the partial deduction range, a special calculation needs to be done to determine how much you are eligible to deduct. Consult your accountant or tax advisor to determine how much of your traditional IRA contribution is deductible, or see for more information about contributions to traditional IRAs.