I recently got a promotion at work, and one of my new job responsibilities is to help manage our company’s retirement plan. It is a safe harbor 401(k) plan. A number of our employees are about to become eligible for the plan, and they are asking me questions about the company matching contribution. From what I can tell, we make a contribution for everyone who is eligible even if they are not contributing for themselves.
Our company has sponsored a 401(k) plan for a while and although it’s not new to us that certain situations - from beneficiary designations to annual nondiscrimination testing - might require us to provide information about spousal relationships, we are seeing that different types of relationships, and statuses, are becoming more commonplace.
While not quite as ominous as a battle with the Night King, dealing with participant loans in retirement plans can be a daunting challenge for plan sponsors. Because of Congress’ concerns about protecting plan assets from improper use by participants and plan sponsors alike, the loan rules are strict and unforgiving.
When we set up our new 401(k) plan last year, we decided not to add a safe harbor provision because we were not in a position to commit to the required contribution. Then we heard our TPA say something about our deferral deposits fitting within the safe harbor deadline. Now I’m just confused.
-A breakdown of breaking news from DWC's Managing Partner, Keith Clark
If you are reading the mainstream press, the SECURE Act being signed into law is just around the corner. While the overwhelming bi-partisan approval in the House of Representatives is an important (and increasingly rare) development, there are still a number of steps that must occur before it becomes law:
When we set up our 401(k) plan, our partnership operated on a fiscal year that ran from July 1st to June 30th. We set the 401(k) plan year to line up with our company’s fiscal year. We recently changed our company’s fiscal year to follow the calendar year and didn’t think to notify our TPA to discuss the impact to the Plan. Now, they are asking for annual census information (including compensation) in order to prepare the profit sharing allocation and complete the required testing.
Our company sponsors a 401(k) plan. One of our newer employees, Jane Smith, met the eligibility requirements and should have joined the plan on January 1st. Due to an oversight, we forgot to enroll Jane in the plan until she asked about it a couple months later. We assume that we need to make some sort of correction, and we’ve done some online research to figure out next steps. We’ve seen references to missed deferral opportunities and late deferral deposits, but to be honest, it’s all a little confusing.
As a plan sponsor, I do my best to review the annual compliance reports my TPA sends to me, but to be honest, it might as well be written in a foreign language. For example, several of our participants were recently required to receive corrective refunds due to contributing too much for 2018. I thought it was because our plan was top heavy last year, but then my TPA mentioned something called an ADP test.
We just received our year end testing and it mentioned that we have several terminated participants with small balances that we are required to distribute from the plan. I remember seeing something in one of our documents that mentioned distributions for account balances below $5,000, but I’m not entirely sure what that means or how I’m supposed to accomplish it.
The IRS did its part to make Friday, April 19th a really good Friday for those who sponsor qualified retirement plans. After not making many friends when it jacked up the user fees for the Voluntary Correction Program (VCP) a year or so ago, the IRS has responded to industry requests (that DWC representatives helped draft) by now allowing plan sponsors to self-correct a number of more common missteps without the need to submit anything to the IRS at all.
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