While it might not seem like that big of a deal if 401(k) deposits are made a couple days or weeks late, the Department of Labor (DOL) considers those payroll withholdings to be plan money on the deposit deadlines regardless of where the money is physically located. To the extent those monies are still in the plan sponsor’s control, the delayed deposit is treated as a prohibited loan of plan assets to the plan sponsor, which is a very big deal (not in a good way). If that wasn’t motivation enough to fix the delinquency, the fact that late deposits must be reported on the Form 5500 each year until fully corrected (which is like waving a red flag in front of a bull, only the bull here is the DOL) certainly should be motivation to fix it. Pronto!
Topic Archive: 401(k)
We interrupt your regularly scheduled programming to highlight the IRS’ not-so-ground-breaking entrance into the world of student loan benefits in 401(k) plans.
Feeling out of the loop on industry happenings this summer? DWC stays on top of what's trending, and our self-proclaimed pension geeks often offer their insights in industry publications. Get caught up with this month's round-up:
People in the retirement plan business sure do like their acronyms. All these letters get thrown around, and I do not know what half of them mean.
Corporate mergers and acquisitions can be stressful. When employees hear that their company is part of such a deal, they instinctively worry about their jobs. Even with reassurances that there's no need to worry about layoffs any time soon, employees should expect changes in their benefit plans, particularly their 401(k)s or other retirement savings plans. DWC Managing Partner Keith Clark highlights these changes in this article published by Kiplinger.
ABC Company maintains a 401(k) plan that includes the following provisions:
- It operates on a calendar year.
- Compensation is defined as W2 wages with pre-tax deferrals added back and no exclusions.
- Eligible participants can defer up to the IRS limit $18,500 + $6,000 for those age 50 or older (2018 limits, indexed for inflation)
- The company provides a match equal to 100% of the first 5% deferred by each participant, calculated using compensation and deferrals for the full year.
In addition to regular compensation, ABC pays performance-based bonuses at the end of each calendar quarter.
While compiling the year-end census, it was noted that the overall deferral percentages did not appear quite right for certain employees based on their elections. On closer review, it was determined that employees who received quarterly bonuses did not have any 401(k) deferrals withheld from those amounts. With no deferrals withheld, ABC also did not make the corresponding matching contributions.
Our company’s workload fluctuates throughout the year with big spikes during the summer. As a result, we often hire seasonal workers who help us out during the busy times, but do not work during the regular workload months.
A participant in our 401(k) plan took out a loan a couple years ago. She could only afford to make the bare minimum payments at the time, but is now in a financial position to pay down the loan more quickly.
Our business is considering setting up a 401(k) plan for our employees. We know that it can include both employee contributions and company contributions, but we keep hearing about all sorts of other contributions. There are profit-sharing contributions, matching contributions, qualified nonelective contributions, and Roth contributions.
When we first established our 401(k) plan, the company didn’t have a lot of discretionary income, so we went with a low-cost provider and set it up so the plan would pay for its own fees. We have since been told that paying fees out of the plan isn’t that straightforward.