When the Department of Labor’s new multiple employer plan regulations take effect later this year, we will have three types of MEPs:

Facts

We recently had one of the participants in our 401(k) plan ask if it is possible to convert her balance from pre-tax to Roth.  She has been a participant in our plan for many years and has both her own deferrals as well as company contributions (both match and profit sharing). Based on her current financial situation, she believes it would be more advantageous to convert to Roth so that she can receive distributions tax-free when she retires.

Facts

Our company sponsors a safe harbor 401(k) plan.  Each participant receives a safe harbor nonelective contribution equal to 3% of his or her annual pay.  Our TPA calculates the safe harbor contribution for us after the close of each year, and we deposit it sometime before we file our company tax return for that year.  Each year, we have a couple of participants who terminated employment before year end, and we end up making contributions for them even though they are long gone by the time we make the deposit.

Yesterday morning while we were all sipping our first cup of Monday morning coffee, the Department of Labor published its much-anticipated final regulations expanding the availability of multiple employer plans to associations, PEOs, and self-employed individuals.

Facts

One of the participants in our 401(k) plan is going through a divorce, and we just received a court order directing us to provide a portion of his account to his ex-spouse.  I thought that retirement plan accounts had special protection against legal judgments.

Facts

We’ve sponsored a SIMPLE IRA for our employees for years and while it’s served its purpose, we are beginning to feel the limitations inherent in the plan.  As we begin to grow, we’d love to be able to add provisions for eligibility and to be able to reward our key performers.  I’m hesitant about making a change from this “known” commodity to a 401(k) plan but feel like we’ve outgrown our current plan.

One of the drawbacks that is often cited about multiple employer plans is the so-called “one bad apple rule.”  It provides that if a single participating employer in a MEP allows its part of the plan to operate in a non-compliant manner, it puts the entire plan and all of the other participating employers at risk.  Although there have been numerous proposals in Congress to eliminate the one bad apple rule, none have made it across the finish line.

Facts

As a self-employed individual, I run a successful business and have set up a retirement plan to provide for tax-sheltered savings.  When its time to determine the contribution amount each year, it feels more complicated than running the business.  My CPA seems to be waiting on our TPA, and the TPA waiting on the CPA – and amidst it all, I’m just waiting on my numbers!

Facts

My architectural firm sponsors a 401(k) plan.  We have 38 architects and 2 administrative assistants.  We currently provide a matching contribution to participants and, some years, a profit sharing contribution too.  I’m reluctant to utilize a safe harbor design, because I really value the vesting schedule on our employer contributions to help retain my best talent, but the plan frequently fails ADP and ACP testing.

Facts

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.