Topic Archive: Question of the Week

What Are 401(k) Plan Forfeitures and How Can They Be Used?

DWC | 10/17/17

Facts

We have a 401(k) plan that includes several different types of contributions—employee deferrals, a company-provided safe harbor match, and a profit sharing contribution. The plan has a 6-year graded vesting schedule.

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When Can We Change Our ADP/ACP Testing Method?

DWC | 10/10/17

Facts

We have a 401(k) plan that allows for both employee deferrals and a company match. Our annual testing each year is based on the amounts contributed in the previous year. That has allowed us to notify our highly compensated employees of the maximum they can contribute each year to ensure we pass testing.

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Who Must Receive Retirement Plan Blackout Notices?

DWC | 10/3/17

Facts

We have selected a new recordkeeper for our 401(k) plan. We are told that there will be a period of eight business days when our participants are not able to log in and manage their accounts. We know that we have to provide notice at least 30 days ahead of time to everyone who is affected.

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Retirement Plan Termination: Are There Special Rules for Paying Out Account Balances?

DWC | 09/26/17

Facts

The owner of our company is retiring next year, and the business will close as a result. We sponsor a 401(k) plan that we know we need to terminate, and we want to get started right away so that we have plenty of time to wrap things up before the company is dissolved next year. There are several former employees who still have balances in the plan, but most of the plan accounts are for employees who will continue working for the company right until the very end.

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Is There a Specific Format or Required Content for a Beneficiary Designation Form?

DWC | 09/19/17

Facts

A participant in our retirement plan just passed away. When we were reviewing our files, we were glad to see that he had completed a beneficiary designation form. On closer review, however, we noticed that the form does not have the name of the plan listed. It has his name, details about his intended beneficiaries and even a stamp showing the date we received it from him, but the plan name is missing.

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Should We Deny a 401(k) Loan Based on an Expectation of an Employee’s Termination?

DWC | 09/12/17

Facts

One of the participants in our 401(k) plan just applied for a loan for $25,000. He has enough in his account to support the loan, but there is a bit of a wrinkle. We are planning to reorganize the department he works in, and his position is scheduled to be eliminated in about a month.

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Can a Company Owner Withdraw More Than the Required Minimum Distribution After Age 70 1/2?

DWC | 09/5/17

Facts

One of the owners of our company is 73 years old. She remains actively employed by the company and does not show any signs of cutting back or quitting any time soon. She has accumulated a significant account balance in the 401(k) plan and has been taking her required minimum distributions (RMDs) each year since she reached age 70 ½.

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Do 401(k) Plan Eligibility Rules Apply to Part-Time Employees?

DWC | 08/29/17

Facts

Our 401(k) plan requires employees to work for us for six months before they become eligible to join. Pretty much all of our employees have been full time and have worked continuous, nine-to-five-type schedules.

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Does Adding an Automatic Escalation Option Require a Plan Document Amendment?

DWC | 08/22/17

Facts

We have considered automatic enrollment for our 401(k) plan but have, thus far, decided not to implement it. However, for our employees that do sign up to defer, we would like to offer them a way to elect automatic deferral increases at set intervals throughout the year.

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Do We Need an IRS Favorable Determination Letter for Former Employees to Roll Over Their Balances?

DWC | 08/15/17

Facts

We recently processed a rollover from our 401(k) plan for a former employee who wants to roll her balance into her new employer’s plan. Shortly after the payment was processed, the former employee emailed us requesting either a copy of our plan’s IRS favorable determination letter or a signed acknowledgment that we have such a letter.

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