Get Quick Answers to Your Most Immediate Questions

The following frequently asked questions can help you make informed decisions about your retirement account.

What is a participant?

“Participant” is short for “retirement plan participant”. A participant is anyone who has an account balance in an employer-sponsored retirement plan or IRA. Even if you no longer work for the employer, you are still a participant if the employer has not been able to remove your account from their plan. You remain a plan participant until your benefits are paid directly to you or transferred to another plan or to an account established for your benefit.

What is a qualified plan?
A type of retirement plan that meets the requirements of Internal Revenue Code Section 401(a). Qualified plans provide an effective tool for growing retirement accounts tax-free . If you participate in a qualified retirement plan, money goes into your account pre-tax. Investment and interest earnings are not taxed as they grow. Funds in the account are not taxed until you begin receiving distributions. Since most people don’t make withdrawals until retirement age, withdrawn funds are often taxed at a lower rate. Qualified plans are highly regulated by federal law, and working with an experienced advisor can help Plan Sponsors provide their employees with a more effective retirement plan.
What types of retirement plans and accounts does PenChecks Trust® provide services for?
We provide services for many types of qualified accounts, including:

  • Traditional Individual Retirement Account (IRA) – A retirement savings account that allows individuals to contribute pre-tax money to the account. The money is not taxed until it is withdrawn from the account.
  • Automatic Rollover IRA – A special type of IRA used by employers in on-going plans when they are unable to locate former employees. The employer is allowed to “roll over” the former employee’s retirement account into an IRA in order to remove it from the company-sponsored plan.
  • Missing Participant IRA – Similar to the Automatic Rollover IRA, this type of IRA is used by employers when they are terminating the company’s retirement plan and can’t locate a former employee. The employer is allowed to roll over the “missing participant’s” retirement account into a Missing Participant IRA in order to terminate the plan according to Department of Labor Safe Harbor regulations.
  • 401(k) – An employer-sponsored plan that allows employees to defer a percentage of their compensation to a 401(k) account under the plan. The amount deferred is usually not taxable to the employee until it is withdrawn or distributed from the plan.
  • 403(b) – A tax-advantaged, defined contribution plan available only to public school, university, hospital and other non-profit employees and certain members of the clergy.
  • SIMPLE (Savings Incentive Match Plan for Employees) IRA – Provides small employers with a simplified method for contributing to employees’ retirement savings. When employees make plan contributions, the employer is required to make matching or non-elective contributions.
  • SEP (Simplified Employee Pension) IRA – Allows employers to contribute to traditional IRAs set up for employees. A business of any size, even self-employed, can establish a SEP.
What is a 1099-R tax form?
A 1099-R is a tax form used for reporting distributions from IRAs, 401k’s, pension plans and other types of retirement plan accounts. The IRS requires anyone who receives a retirement account distribution greater than $10 to include this form with their annual tax returns. If you received a 1099-R form from PenChecks Trust, a distribution was processed on your behalf in the tax year indicated on the form. If you don’t recall receiving a distribution, please call us at 800-541-3938 for assistance.
What is a 5498 tax form?

A 5498 is an IRS form used to report contributions on IRAs (Roth and non-Roth) as well as Savings Incentive Match Plan for Employees (SIMPLE) and Simplified Employee Pension (SEP) plans. The custodian of your account is required to send this form to you if you have an account balance at the end of the calendar year. However, unlike 1099-R forms, you are not required to file 5498 forms with your annual tax returns. It is for informational purposes only.

Who is PenChecks Trust?

PenChecks Trust is the largest and most trusted independent provider of fully compliant retirement plan distribution services in the country. The experts in Automatic Rollover and Missing Participant IRAs, we can help Plan Sponsors, Advisors, Institutions, and Third-Party Administrators (TPAs) reduce risk, lower administrative costs and increase efficiency. We also specialize in reuniting current and former employees with their retirement funds so they can make smart decisions to continue investing for their retirement.

How did I end up with an account at PenChecks Trust?
In most cases we were selected to custody your retirement account by your employer or former employer, who has either terminated their plan or moved your account to a specialized firm like PenChecks Trust after you terminated employment as permitted by IRS and Department of Labor (DOL) regulations. Often, employers will move participants’ accounts to us because they can’t locate former employees and become unable to process their account distributions as required by IRS and Department of Labor (DOL) regulations. Other times, large financial institutions will transfer certain types of accounts, such as traditional IRAs or 403(b) retirement accounts to us, because they no longer wish to serve that market.
Is it to my advantage to take a lump-sum distribution?

Assuming you have not reached normal retirement age (age 65 to 67 depending on what year you were born) and that you do not have an urgent need for the money, it is usually not considered to be to your advantage to take a lump-sum distribution. Keeping your money in some type of retirement account offers several important benefits; it provides a simple tool for continuing to save for your retirement, it preserves the tax-advantaged status of the funds in the account, and it avoids a potentially large tax payment to the IRS that is required with a lump-sum payment.We can assist you in rolling over your account into the retirement savings vehicle of your choice.

What if someone else tries to claim my account?

We take the security of your account very seriously. For recipients of a pending distribution, all respondents are required to authenticate their identity with secure access codes that are provided and other personal information. All individuals claiming Automatic Rollover or Missing Participant IRA accounts are required to pass USA PATRIOT Act identity verification and provide additional forms of identification to prevent fraudulent claims and ensure all funds are distributed to the correct participant.

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