In last week’s QOTW, you provided some tools we could use to identify which participants were affected by our decision to close one of our locations, and to calculate our actual turnover rate for purposes of determining whether a partial plan termination has occurred.
We’ve performed the review, and our minimum turnover rate will exceed 20%. Depending on which employees accept our relocation offer, we may have even more folks who terminate during this time frame.
Last week, we asked whether the turnover we are expecting as a result of closing a facility would have any impact on our 401(k) plan, and you mentioned a partial plan termination. We have some follow-up questions. As a quick recap, we are in the process of closing one of our manufacturing facilities. Some of those working at that location have turned down our relocation offer and will lose their jobs as a result. From last week’s QOTW, I know there is potential for a partial plan termination and that I will need to perform a review to make a final determination.
Our company designs and manufactures boats. Due to some advancements in technology, we will be closing one of our older facilities. While we offered those workers the option to relocate to one of our other facilities, many have elected not to do so and will be terminating employment. That group comprises roughly 20% of our total workforce.
I set up a cash balance plan two years ago and have put in the minimum required contribution each year. Now, in my third year, I would like to make the maximum deductible contribution, which is double the amount of the minimum.
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I am fed up with sponsoring my current retirement plan. My wife and I contribute the maximum amount we can in deferrals each year. Due to low participation by our employees, we fail ADP testing every year and have to take refunds.
We set up our company 401(k) plan soon after we started our business. At the time, we were a small tech company with only a couple of employees. Over the years the company has grown exponentially, and business has been good to us…really good.
Because of this, the demographics of our company have changed completely. We have too many of our people who are highly compensated employee (HCEs), and it is causing havoc with our nondiscrimination testing. Last year, some employees had to take corrective distributions of their deferrals due to failing the ADP test for the first time.
We set up our company 401(k) plan soon after we started the business. At the time, being able to afford to make a match or profit sharing contribution seemed so distant as to not be worth thinking about. We were so focused on the only contributions being employee deferrals that we set the vesting schedule at 100% across the board.
The company is now doing really well, and we want to reward our employees by making a generous profit sharing contribution. The trick is that we would like to apply a lengthy vesting schedule to it as an incentive for our employees to stick around.
You probably know that establishing a qualified retirement plan requires the formal adoption of a written, legal plan document. And, if you’ve had a plan in place for any amount of time, you’ve most likely also been required to adopt a handful of mandatory amendments along the way.
Our company sponsors a 401(k) plan. One of our participants lives in the Florida panhandle and lost her home in Hurricane Michael. She is under age 59 ½ and is not eligible to take in-service withdrawal, and a loan would only impose a greater burden. I’ve not seen any direct guidance that permits hardships distributions for those affected by Hurricane Michael the way I have for previous federally declared natural disasters. She really needs the cash to rebuild her home, but I do not want to approve a hardship that isn’t allowed.
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