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Can We Suspend our Safe Harbor Contribution Mid-Plan Year?

DWC 03/24/20
Facts Given the current uncertainty in the world economy and the unknown ongoing affects of coronavirus, I’m looking at all financial obligations for our company, and for opportunities to reduce risk.  We currently sponsor a 401(k) plan for our employees and provide a safe harbor contribution equal to 3% of employee compensation.
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Am I Now Required to Include Part-Time Employees in my 401(k) Plan?

DWC 01/28/20
Facts As the owner of a beachside hotel, I sponsor a calendar year 401(k) plan for my employees.  In the summer we hire many part-time employees to assist with the uptick in guests and activities.  Our plan has always required employees to reach age 21 and complete a year of service before becoming eligible.  Traditionally, this has meant that ...
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Are We Required to Make Safe Harbor Contributions for HCEs?

DWC 10/22/19
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 ...
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How Do We Identify Highly Compensated Employees for the First Year Our Company Exists?

DWC 08/27/19
Facts We established our company on February 1st of this year, and now we are planning to launch our 401(k) plan.  We know there are number of tests and determinations that require us to look at company history, but as a new company, we don’t really have much of a history to look at.
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Your Safe Harbor Actually Isn't? We've Got a Fix for That!

DWC 08/22/19
We’ve been through a few Corrections of the Quarter together now, and we appreciate you being along for the ride.  We feel this is pretty good stuff but, at the heart of it all, we’re pension geeks (no point in hiding it).  And while the rules and regulations get us going, we have a geeky passion for the opportunity to find creative solutions.
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How Can We Improve ADP/ACP Test Results Without Offering Safe Harbor?

DWC 06/18/19
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 ...
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What Does Safe Harbor Mean, Exactly?

DWC 05/28/19
Facts 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.
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Top Heavy vs. ADP: What's the Difference?

DWC 05/7/19
Facts 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 ...
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We Failed the ADP Test! What Did We Do Wrong and How Do We Fix It?

DWC 02/26/19
Facts Our TPA just sent us our annual compliance report, and it says we failed testing! This is the first year we’ve failed anything, and now we’re being told that we need to take money out of the plan in order to remedy the failure. I don’t understand why this is happening.
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How Can We Pass Nondiscrimination Testing with Low Non-HCE Participation?

DWC 01/22/19
Facts 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.
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The views expressed in this blog are those of the authors and do not necessarily represent the views of any other person or organization. All content is provided for informational purposes only and is not intended to be tax or legal advice.