Topic Archive: Question of the Week

What Is a True-Up Matching Contribution?

DWC | 09/18/18

Facts

Our 401(k) plan provides for a matching contribution of 50% of the first 6% deferred by each participant (for a maximum match of 3% of pay per year).  We deposit the matching contributions to the plan each pay period at the same time we deposit employee deferrals.  After year-end for the last couple of years, our TPA has informed us that we have to make “true-up” matching contributions, sometimes for employees who are no longer with us.

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Decoding the Alphabet Soup: What's With All the Acronyms? | Part 3

DWC | 09/11/18

Facts

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.

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No Beneficiary Form: Now What?

DWC | 08/28/18

Facts

A participant in our 401(k) plan recently passed away.  His daughter is the executor of his estate and has asked about the process for getting his plan account paid out.  We’ve gone through all our files and cannot locate a beneficiary designation form for the deceased participant.

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How Are Corrective Refunds Determined for a Failed ADP Test?

DWC | 08/21/18

Facts

Our 401(k) plan failed the ADP test for the first time this year.  We decided to correct the failure by making refunds to the highly compensated employees instead of making additional contributions for the other participants.  However, when we got the actual refund amounts from our TPA, we were surprised to see that those HCEs with the highest deferral percentages are to receive smaller refund amounts.

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Decoding the Alphabet Soup: What's With All the Acronyms? | Part 2

DWC | 08/14/18

Facts

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.

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What Do We Do With Mutual Fund Settlement Proceeds?

DWC | 08/7/18

Facts

Our company sponsors a 401(k) plan, and we moved to a new recordkeeper about two years ago.  Last week we received a letter and a check from our previous recordkeeper indicating that the check represented our portion of the proceeds from a legal settlement involving one of the mutual funds that used to be part of our plan investment menu.

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How Do We Correct Missed Deferrals for New Hires?

DWC | 07/31/18

Facts

Our 401(k) plan allows new employees to make contributions on the first day of the quarter after they work for us for a year.  All of our full-time employees have been with us for a long time.  Most of our new hires are for short-term projects, so they almost always terminate employment in less than a year and never become eligible for our 401(k) plan.  Recently, however, we had two new hires that did stay with us for a year and should have become eligible for the plan.  One of them heard about the plan from a co-worker and submitted a deferral election form, but since we are not used to new hires sticking around that long, we overlooked implementing the election.  The other never knew about the plan at all.

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Decoding the Alphabet Soup: What's With All the Acronyms? | Part 1

DWC | 07/24/18

Facts

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.

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An Employee Joined the Plan Too Soon:  No Harm, No Foul or Failure In Need of a Fix?

DWC | 07/17/18

Facts

In order to be eligible for our company’s 401(k) plan, employees must have worked for us for at least a year and be a minimum of 21 years old.  They can join the plan on the next January 1st or July 1st following the date they meet those requirements.  Recently, we discovered that we allowed an employee to start contributing to the plan before he met those requirements.  He also received company matching contributions.

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Can A Departing Employee Make 401(k) Contributions From Severance Pay?

DWC | 07/10/18

Facts

When certain employees terminate employment with our company, we agree to continue severance payments for a period of time after they leave.  Some of these employees have asked us to continue withholding 401(k) contributions from their severance pay.

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