Electing out of Auto Enrollment

[Guest carolina]

I believe you have 90 days after your initial contribution to opt out of auto emrollment. We have a participant who has made $200 in deferrals. She is now electing to opt of the auto enrollment and requesting a payout. Her account value is now $190. What will her 1009r code for this withdrawal be? Would it be a code 8. Conversely, if her account balance is now at $210, would she have $10 worth of gains and have a differnet distribution code?

Thanks.

[401_4_ever]

The 90 period to opt out of auto enrollment only begins in 2008. The participant would need to some other triggering event to be able to take a distribution at the moment.

I believe you have 90 days after your initial contribution to opt out of auto emrollment. We have a participant who has made $200 in deferrals. She is now electing to opt of the auto enrollment and requesting a payout. Her account value is now $190. What will her 1009r code for this withdrawal be? Would it be a code 8. Conversely, if her account balance is now at $210, would she have $10 worth of gains and have a differnet distribution code?

Thanks.

[Guest carolina]

Thanks. This was just an example. Lets assume this request was made in 2008, would you know what the tax code would be?

[masteff]

would you know what the tax code would be?

Not until they publish guidance. Based on when they've gotten info out about new codes in the past, I wouldn't expect them to be in a rush and therefore wouldn't look for this before they actually issue the 2008 1099-R form and instructions. And if before then, I wouldn't think earlier than late November or December.

Personally, I'd put money on them creating a new code.

[JanetM]

From a summary done by Groom Law Group.

The returned amounts are includible income in the year in which such amounts are returned, but the 10 percent early withdrawal penalty and the otherwise applicable withdrawal restrictions would

not apply. If matching contributions are made, such contributions shall generally be forfeited.

In general, the returned amount must not exceed the amounts that were automatically contributed prior to the effective date of the participant’s election to return such amounts.

I am guessing the Service will add a new code for 1099. If they don't I would guess code 7 would be the one used.

[masteff]

From a summary done by Groom Law Group.

The returned amounts are includible income in the year in which such amounts are returned, but the 10 percent early withdrawal penalty and the otherwise applicable withdrawal restrictions would not apply. If matching contributions are made, such contributions shall generally be forfeited. In general, the returned amount must not exceed the amounts that were automatically contributed prior to the effective date of the participant’s election to return such amounts.

After reading PPA section 902, only nuiance I'd add is:

"In general, the returned amount must not exceed the amounts (plus earnings) that were automatically contributed prior to the effective date of the participant’s election to return such amounts."

[JanetM]

Thanks for adding that masteff.

[Guest carolina]

Thanks to everyone for your help