Facts

We just rehired an employee that used to work for us but who terminated almost 4 years ago.  She was eligible for our 401(k) plan during her previous tenure but took a distribution of her account shortly after she left.

Facts

Our company operates on a calendar tax year, but our 401(k) plan runs on a fiscal year ending each June 30^th.  It is a real hassle to manage two different year-ends, so we asked our TPA about aligning the two.  They said we could amend the plan to make that happen, but there is also something about it creating a short year which would require us to go through year-end compliance testing twice during the transition.

The IRS has released the 2020 contribution limits! Since not everyone was awaiting them quite as eagerly as we were, here is a quick summary.

Facts

My company recently acquired another firm.  As we work to combine all of our operations, we’ve discovered a few differences in our employee benefits, specifically our retirement plans.  While we’ve sponsored a 401(k) plan for several years, the company we bought has a SIMPLE IRA.  I’ve done a little research and found that when a company offers a SIMPLE, it cannot also sponsor any other types of plans.

Facts

We allow new employees to join our 401(k) plan on the first of the month after they are hired.  They become eligible to make deferrals and also receive the company safe harbor contribution at that time.  We don’t have high turnover, but employees who leave often do so within the first year of joining us.  We don’t mind allowing new hires to contribute to the plan out of their own paychecks, but since safe harbor contributions must be immediately vested, it feels like we are wasting company money by giving a contribution to someone who might leave in a relatively short timeframe.

It’s been a while, but we finally have them! Late last month, the IRS published the final hardship distribution regulations, nearly two years after Congress passed the Bipartisan Budget Act and the Tax Cuts and Jobs Act. The good news is that this final version follows the proposed version very closely. So closely in fact, that the IRS outright states in the final version that any plan that followed the proposed regulations will satisfy the final regulations.

Facts

My company sponsors a safe harbor 401(k) plan so that all of the highly compensated employees can maximize their deferrals without worrying about failing the ADP test each year.  Although we fully intend to make the same level of contribution for the HCEs that we do for the non-HCEs, we would prefer to not to be required to do so in order to maintain flexibility with our cash flow.

Facts

My company sponsors a 401(k) plan, and we fail the annual ADP test pretty consistently.  We really want to increase participation; not only to help our test results, but also to encourage our employees to save for retirement.  Automatic enrollment would help with participation, but we would have to set the default rate too high in order for it to solve our testing problem.

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We are thinking of adding automatic enrollment to our 401(k) plan.  One of our concerns, however, is that we might end up with a bunch of tiny account balances for participants who forget to opt out until they see their first paycheck with automatic deferrals taken out.

Facts

Our company has about 200 employees, and we launched a new 401(k) plan on October of last year.  We were eager for all of our existing employees to get excited about this new benefit, so we waived the waiting period to join so that everyone would be eligible on day one.  The good news is that it worked, and we had a lot of our employees sign up for the plan.  The bad news is that no one warned us ahead of time (and that our current TPA just told us) that we must have the plan audited for that three-month period because we have more than 100 employees eligible when we launched the plan.  Adding insult to injury, we have to rush to get it done in time to file our first Form 5500 by October 15^th!  Yikes!