You
are here: TSM SmartClient Menu Options > Transactions > Distributions > Terminations
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Terminations
The Terminations screen is used when a participant is no longer employed at their employer and wants to remove his/her entire account balance from his/her account, or if still employed but you are processing a contract exchange to another provider. If less than 100% of the account balance is being requested, then you should use the Withdrawals screen.
How to Access the Terminations Screen
On the Transactions menu, point to Distributions and then select Terminations. The Terminations window displays.
How to Use the Terminations Screen
Use this process after it has been determined that the distribution/documentation is in good order.
1. Use Transaction Inquiry to look for all pending transactions (ex. Contributions, dividends, etc.) for that person.
a) Click Inquiry, Transaction Inquiry, select the Plan (at top), click the ellipsis (…) to search for and select the participant, change From Date and To Date to the past one month (this is an estimate as it should encompass anything pending that may apply), click Run Query.
b) If there are any pending transactions, stop here to investigate if it will affect the withdrawal. If no pending transactions, continue to the next step.
2. Click Transactions, Distributions, Termination. The Terminations screen appears.
3. Search for the Plan, participant, and product.
4. Enter a Termination Date, which should be the current date if no date was already populated.
5. Click the drop down next to Termination Type and select Cash.
6. Click the drop down for Cash Tax Code and choose the appropriate tax reporting reason.
7. Confirm the Cash Amount is the participant’s total account balance.
8. Click the Override Federal Tax if the participant wants more Federal taxes (typically more than 20%) withheld for the rollover eligible distribution. You must then enter the new federal amount percentage in the Alternate Federal Tax field.
9. Click the Override State Tax if the participant wants state taxes withheld for a non-mandatory state. This box only appears if the participant lives in a state where taxes are not required to be withheld for state taxes. You must then enter additional state taxes in the Alternate State Tax field.
10. Click the Override Mandatory State Tax if the participant wants state taxes withheld for a mandatory state. This box only appears if the participant resides in a state where state taxes are required to be withheld. You must then enter additional state taxes in the Alternate State Tax field, which must be more than the mandatory state tax amount.
11. Click the Fee button if a fee for the transaction needs to be input. You must then enter the Fee Option, fee Amount, then click Apply.
12. Click Payees and enter institution information if the participant wants the check made payable to an institution or wired to a bank or institution.
13. Click Process NOW. Confirm there are no errors or reminders (for example, if you want to default outstanding loans).
Follow the remaining preliminary processes for trading the Termination distribution, which will include the following:
1. Click Trading, Batch Trading Process. The Batch Trading Process screen appears.
2. Choose the Plan from the Plan ID drop down, and change the From and To dates to today’s date (or whatever date the distribution was entered into the system).
3. Click Process Selection. The distribution appears in the box below, and is listed per investment, per transaction type. Ensure the Total$ equals the amount of the distribution(s).
4. Select each distribution entry in the Report column.
5. Click Create/Update Batch.
6. Click Process/Report Batch. A message appears indicating there is a report in the Job Queue.
7. Go to the Job Queue to view the report and ensure there is a batch number.
8. Click Trading, Batch Trading Export. This should show all plans batch reporting for that day. Confirm the distribution’s batch report number is listed here.
9. Follow all other procedures for trading transactions at the end of the day, as well as all internal procedures to deliver the distribution proceeds to the participant.
Explanation
of Fields
Note: If a field is
not mentioned below, it is not currently used on the Withdrawals screen.
|
Field Name |
Field Description |
Required/Optional |
|
Plan, Participant and Product |
These fields are all chosen based on the participant you are submitting the distribution. |
Required |
|
Effective (Payout) Date |
The date the distribution proceeds will be traded. This defaults to current day. |
Required |
|
Termination Date |
The date the participant was terminated. If no date carried over from participant data, then enter the current business day. A date should only be entered when a transaction certificate accompanies the paper distribution. |
Required |
|
Termination Type |
The Cash option should default and/or be chosen here. At this time Forfeiture and Rollover are not used. |
Required |
|
Withhold State Tax |
Select this box to withhold state taxes, which will use the state tax table (Setup>System>Tax). |
Optional |
|
Cash Tax Code |
Select the tax code that is applicable to the distribution. The tax code selected determines how the distribution is reported to the IRS. |
Required |
|
Overrides |
Choose one of the options from the drop down, if applicable, and if the participant has a balance in any non-vested employer money types in his/her account. Choosing one of those options will override the participants vesting to make it 100%, if not already. If no non-vested employer money types are present, this field is not applicable. |
Optional |
|
Total Distribution (1099 Tax Flag) |
This box should automatically be checked. |
Required |
|
Override Federal Tax / Alternate Federal Tax |
The Override Federal Tax box should be checked if the participant wants more than the mandatory federal amount withheld for a rollover eligible distribution that is not being rolled over. Anything less than the mandatory amount is not an option for a rollover eligible distribution. Checking this box activates the Alternate Federal Tax field, where you must enter percentage of federal taxes to be withheld |
Optional |
|
Override State Tax / Alternate State Tax |
The Override State Tax box should only be checked if the participant wants a different amount withheld than the prescribed state tax withholding on a rollover eligible distribution that is not being rolled over. Once checked, you must then enter the new percentage in the Alternate State Tax field. These fields only appear if the participant lives in a state where state tax withholding is not required. |
Optional |
|
Override Mandatory State Tax / Alternate Mandatory State Tax |
The Override Mandatory State Tax box should only be checked if the participant wants more withheld than the minimum mandatory state tax on a rollover eligible distribution that is not being rolled over. Anything less than the mandatory state withholding is not an option for rollover eligible distribution. Once checked, you must then enter the new percentage to be withheld in the Alternate Mandatory State Tax field. These fields are only available if the participant’s state is a mandatory state as indicated on the tax table (Setup>System>Tax). |
Optional |
|
Fee |
Click the Fee button if a fee should be charged for this transaction. Standard transaction fees may have already been setup for the Plan (Setup>Transaction Rules>Transaction Fees), so only use this button if not already setup for the Plan and a fee needs to be assessed for the transaction. When using the Fee button, select the Fee Option, enter the Amount or Percentage, then click Apply. |
Optional |
|
Payees |
The Payees button is used to enter the destination of the distribution proceeds, including overnight delivery, wire, etc details. You can also enter/confirm the delivery address for the 1099. If there are no special instructions, and the check is being mailed to the participant’s address on file, you do not need to click this button. After you click the Payees button, enter the payee destination information then click Save. |
Optional |
|
Default Loan(s) |
This button appears only if the participant has an outstanding loan. If the Plan does not allow loan payments after the participant has terminated, then when processing the distribution, the loan must either be paid off in full by the participant or defaulted. To default the loan(s), click the Default Loan(s) button, click the Default Loan checkbox next to the loan to default, then click Process Now. |
Optional |
|
Process NOW |
You must click this button to create the distribution transaction so that the distribution can be traded at the next business day’s prices. |
Required |
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