Topic Archive: Plan Compliance

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 maintain flexibility with our cash flow.

Read More

Can Automatically Enrolled Participants Who Forgot to Opt Out Withdraw Their Deferrals?

DWC | 10/8/19

Facts

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.

Read More

Is It Possible to Avoid an Audit for the First (Short) Year of Our Plan?

DWC | 10/1/19

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 15th!  Yikes!

Read More

What is a Successor Plan and Does It Prevent Me from Starting a New 401(k) Plan?

DWC | 09/10/19

Facts

My company used to sponsor a 401(k) plan for my employees.  Due to an unforeseen financial hardship, we terminated the plan two years ago.  Now that we are back on solid footing, I would like to start up another 401(k) plan.  I checked with the TPA we were working with, and they said something about a possible successor plan issue.  I’m not really sure what that means.

Read More

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.

Read More

How Does a Participant's Divorce Affect our 401(k) Plan?

DWC | 07/23/19

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.

Read More

Which Comes First: The Contribution or the K-1?

DWC | 06/25/19

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!

Read More

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 help retain my best talent, but the plan frequently fails ADP and ACP testing.

Read More

Spouse or Not a Spouse? That is the Question...of the Week

DWC | 06/4/19

Facts

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.

Read More

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.

Read More
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.