RCT

Thanks for the input - definitely not an attorney, just a point of contact for the recordkeeper and trying to make sense of it. This has been the process for as long as they've been a client - going on 7 years, now - but I'm not sure that it was ever discussed, it's just the way it was done. Not a definitive yes or no, but I can't tell you the last time I had a question that was that simple in this business! This gives me some validation and a direction to go which is still very helpful. Thanks, again!

Good Morning! I have a client that sponsors a 401(k) plan with employer stock as an investment option which pays quarterly dividends. The sponsor has elected to give the participants the option to either receive dividends as a cash payment or to reinvest back into the plan. It looks like we're counting these dividend payouts as normal distributions so, for any participants with employer stock in a Hardship eligible source who has elected the cash payout option for dividends, we are reducing the amount available for Hardship for each dividend payout the participant receives. So, my question, is this correct? It seems to me that, since dividends are classified as earnings if they are reinvested, payouts should be considered a distribution of earnings and not principal and shouldn't have an effect on the Hardship calculation. I've not been able to find anything that addresses this specifically, so any thoughts on the matter are appreciated. Thanks!