401k Plan Distributions

The TAG 401(k) is separate from the Defined Benefit and Individual Account Pension plans.  It is available to TAG members who have worked for at least 90 days at a signatory studio.  It is a no-match plan where members can contribute 2% to 40% per paycheck, up to $18,000 tax diferred per year.

A “distribution” is a permanent removal of funds from the 401k Plan.  A 401k Plan loan is not considered a permanent distribution.

Loans

You may borrow money from your account by taking a plan loan.  The maximum loan balance may not exceed the lesser of: one half your account balance or $50,000.

The interest rate will be determined when you apply for your loan.  You pay back both the principal and interest to your account. You also pay a loan origination fee.

The loan must be repaid within 5 year period beginning the month following initiation of the loan.  If you do not pay back your loan or stay current with your payment schedule, your loan will go into default.  If any scheduled payment remains unpaid for more than 90 days, the entire outstanding loan balance will be reported to the IRS as a taxable distribution.

Distributions

There are two types of permanent distributions from the TAG 401k plan. Inactive participants are eligible to take a regular distribution of all or part of their account in the form of a cash distribution or a direct rollover to another account.

Active participants (members who have been working and eligible to contribute to the TAG 401k Plan anytime in the previous 90 days) may qualify for an in-service withdrawal in the form of cash.

To be eligible to remove some or all of your 401(k) Plan funds, you must:
1. Become an inactive participant

Inactive participants qualify to remove money from the account under the following conditions:

  • Retirement (age 65)
  • Death
  • Disability
  • 90 Days After Termination of Employment

If you take a regular distribution before age 55 and do not roll your money to another qualified plan or IRA, you will pay a 10% IRS Early Withdrawal Charge and a 2.5% California penalty tax.

2. Be an active participant who qualifies for a “hardship in-service withdrawal” under the IRS’s regulations.

Financial Hardship

You may withdraw all or part of your salary deferral contributions (excluding interest) if you prove financial hardship.

The IRS defines hardship as an “immediate and severe financial need”, as described in the U.S. Department of the Treasury Regulations Section 1.401(k)-1(d).
401k In Service Distributions

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Financial hardship withdrawals are taxable income.  If you make a hardship withdrawal before age 59, you will also pay a 10% IRS Early Withdrawal Charge and a 2.5% California penalty tax (withdrawals for medical expenses may not be subject to this change).  Salary deferred contributions will be suspended for 6 months.