Leaderboard

Don't worry; it was a mistake and won't happen again. That employee has been terminated! With extreme prejudice!!!!!

Think long and hard about this before making a repayment. There are many potential factors that could influence whether it is a good/bad decision. Just off the top of my head, some factors might be: (a) whether the maximum allowable benefit is/was reached (or even close), (b) whether the plan's benefit formula has changed since you left, (c) if the plan is not frozen now, what is the likelihood of such occurrence, etc. Other actuaries may contribute additional concerns.

You wouldn't get a deduction on it now, but it would create after-tax basis in the plan. The amount that you repay now would eventually come out tax-free when you take your distribution.

By "plan" I believe you mean source. They are not 2 separate plans, it's one plan. From what you are quoting, "You may make either Regular 401(k) deferrals (pre-tax) or Roth 401(k) deferrals (after-tax)." , it sounds as if you can do one or the other, but not both. I would clarify with the plan sponsor.

Rather shocking. We were asked to clean up a non-compliant plan. Just submitted an uncomplicated VCP filing in mid-October for failure to timely adopt a PPA document. Received IRS Compliance Statement already! Since I'm always quick to bash the IRS for taking too long, I have to give them kudos for doing this one so fast! Never had one turn around in 4 weeks previously.

Whenever a plan terminates, it must be amended pre-termination to reflect all required amendments due to statutory or regulatory changes, as well as amended to reflect its termination. This puts the plan drafter in a bit of a bind because there may be no "required amendments" list and no sample plan document language provided by the IRS (yet), so you would consult with counsel to determine what amendments are needed. It would be helpful if prototype sponsors could provide an amendment for the SECURE Act (and hardship withdrawal changes if implemented) for plans terminating this year. Good luck!

Hire an attorney - do not take advice from people on the internet

Can you even imagine ... Facebook already knows everything you look at on the internet, now they know your retirement account too. You look up a medical procedure on the internet, next thing you know you're getting ads that say click here to take a hardship withdrawal from your 401(k).