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Can We Offer Higher Profit Sharing Contributions to Employees Based on Performance?

DWC 07/28/20
Facts We’ve had a 401(k) plan for years, but we are now looking at ways to make it a more strategic part of our overall compensation package. In one of your previous Questions of the Week, you mentioned that we cannot really give employees the choice between higher pay or a profit sharing contribution, but we would like to explore ways to use ...
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Can We Increase Profit Sharing Contributions and Decrease Salaries to Improve Testing and Save Money?

DWC 07/21/20
Facts We want to make job offers to some new employees and are looking strategically at our overall compensation package. Some of these candidates are seeking upwards of $130,000 which will make them highly compensated employees (HCEs) in 2021. We are thinking about negotiating a lower salary of $100,000 with a promise of $30,000 in profit sharing ...
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Do We Have to Consider Pay Before a Participant is Eligible When Calculating Matching Contributions?

DWC 06/9/20
Facts Each year, after our last payroll in December, I submit my census information to the TPA for our 401(k) plan.  Even though I’ve looked at each participant’s total deferrals for the year to determine the matching contributions, the TPA almost always has true-up contributions for me to make.  Taking a closer look, it seems like these true-ups ...
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How Much Fidelity Bond Coverage Are We Required to Have?

DWC 05/12/20
Facts We are in the process of reviewing all our various business insurance policies to determine which ones we need to keep, update, or eliminate.  One the coverages on our review list is the fidelity bond for our 401(k) plan.  Although our plan does invest some in regular mutual funds (about $200,000), the plan also holds some non-traditional ...
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What Retirement Plan Filings and Records Must We Keep?

DWC 05/5/20
Facts We’ve sponsored a 401(k) plan since 2002 and the amount of paperwork and related records we’ve accumulated is incredible.  Cleaning up these records has always been on my to-do list for a while, but it’s not the most exciting task.  As much as I would like to I know I can’t just throw it all away, but it seems like the mountains of old ...
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Can We Pay Plan-Related Expenses Out of Plan Assets?

DWC 04/28/20
Facts Like many businesses, we’ve been watching our cash flow carefully over the past several weeks.  We’re making adjustments where necessary so that we can stay on top of the invoices we receive from our service providers.  Among those invoices are a few related to expenses for our 401(k) plan.  I think I’ve heard that I can pay those invoices ...
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Short Plan Years... Lookback Years... What (and When) Are They and Why Do I Care?

DWC 02/11/20
Facts My company started a brand new 401(k) plan last year.  We didn’t start the plan until July 1, and since we operate on the calendar year, our first “year” of the plan will only be the six-month period from the start date through December 31, 2019.  Now, our TPA is asking us for the compensation we paid to each of our employees during the ...
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Do the Rules About Related Companies Apply to Non-Profits with No Owners?

DWC 12/17/19
Facts I work for a non-profit organization that is thinking of setting up a retirement plan.  One of the service providers who we’ve spoken to about this said something about determining whether we are related to any other businesses through over-lapping ownership.
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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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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.
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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.