Cure Periods for Plan Loans
The IRS recently provided guidance on curing missed plan loan installment payments. Using two examples, the guidance illustrates how a participant may cure prior defaults — and avoid a deemed distribution — by making late payments or refinancing within the plan’s cure period. Under IRS regulations, a cure period, if allowed, may not extend past the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.
Average 401(k) Balances
A recent report from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project indicates that the average 401 (k) balance tends to increase with the age of the participant and the length of time served with a current employer. For example, at the end of 2015, plan participants in their 40s with more than five to 10 years of tenure had an average 401 (k) account balance of
$64,515, as compared to an average of $280,976 for participants in their 60s with more than 30 years of tenure.
Effect of Automatic Plan Features
According to a study by the Defined Contribution Institutional Investment Association, middle-income workers in 401 (k) plans with both automatic enrollment and automatic escalation are projected to accumulate more for retirement than middle-income workers in plans without these auto features. According to the study, participants who are eligible to participate in a plan between the ages of 25 and 29 and who have continuous access to a plan with these auto features will eventually accumulate 6.66 times their final earnings by retirement — as compared to 5.02 for comparable participants without such access.
The general information provided in this publication is not intended to be nor should it be treated as tax, legal, investment, accounting, or other professional advice. Before making any decision or taking any action, you should consult a qualified professional advisor who has been provided with all pertinent facts relevant to your particular situation.
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