As a Plan Sponsor or Plan Administrator, you are responsible for reviewing and approving participant loan and distribution requests, including Required Minimum Distributions (RMDs), and ensuring vesting data records are accurate. This guide walks you through how to manage these requests, what actions you may need to take, and how to support your employees through special circumstances like disability.
Who This Applies To
This information is for 401(k) Plan Sponsors and Plan Administrators responsible for managing employee distributions requests and RMD approvals within the Ubiquity Retirement + Savings platform.
Distribution Request Review Process
Participant loan and distribution requests require Plan Administrator review and approval.
What to Expect
- You’ll receive an email notification when a new request needs your attention. The email includes a link to the review page.
- Outstanding requests will appear under Action Items on your Employer Dashboard.
How to Review and Approve or Deny
- Go to your Employer Dashboard.
- Select Loans & Withdrawals from the left navigation menu.
- Click on the participant’s name to view request details, including:
- Current account balance
- Vested percentages by source
- Loan details (if applicable)
- Review and, if necessary, update the participant’s vesting percentage in any employer contribution source.
- Note: Updating vesting here overrides the system's auto-calculated vesting and will require manual maintenance going forward.
- Click Approve or Deny to complete the review.
- If denying a request, we recommend communicating your reasoning directly to the employee.
Maintaining Accurate Vesting Information
Why Accurate Vesting Matters
The amount available to employees for withdrawal is subject to your plan’s vesting requirements.
- If your plan uses a vesting schedule that is not immediate, employees will not have full ownership of employer contributions until they have satisfied the service requirements outlined in your plan document.
- Accurate vesting records ensure participants have access only to their vested balance, protecting both the plan’s compliance and the employee’s long-term benefit.
Important: Employee deferrals (the money employees contribute from their own paychecks) are always 100% vested and immediately available. Only employer contributions may be subject to a vesting schedule.
Example: If your plan requires 3 years of service to be 100% vested, and an employee requests a withdrawal after 2 years, they may only have access to a portion of the employer contributions plus all of their own contributions.
Maintaining correct vesting data is critical when reviewing and approving loan or distribution requests to ensure compliance and prevent errors.
Required Minimum Distributions (RMDs)
RMDs are mandatory for eligible participants and must be processed by December 31st each year.
When Is an RMD Required?
Participants must begin taking RMDs:
- At age 73 (previously 72), or
- Upon retirement, whichever comes later.
RMD Exemptions
- Exempt: If the participant is still employed and does not own 5% or more of the business.
- Not Exempt:
- Participant owns 5% or more of the business (even if still employed).
- Participant is no longer employed by your company.
Sponsor's Role
- You may receive a notification when an employee is due for an RMD.
- Timely approval may be required to ensure compliance and avoid IRS penalties.
Distributions Due to Total and Permanent Disability
If your plan allows for disability distributions, participants may take a distribution if they meet the criteria for total and permanent disability.
Definition of Disability
A participant is considered totally and permanently disabled if:
- They are unable to engage in substantial gainful activity due to a medically determinable physical or mental impairment that:
- Is expected to result in death, or
- Has lasted or is expected to last for at least 12 months.
The IRS also defines disability under IRC §72(m)(7) using similar criteria.
Proving Disability
Documentation must include either:
- A certificate from a licensed physician, OR
- A Social Security Administration determination confirming total and permanent disability.
Vesting Due to Disability
- If the participant becomes disabled before terminating employment, they are 100% vested in their account.
- If they become disabled after termination, vesting is not affected.
Need Help?
If you need assistance, please contact us.