Topic Archive: Question of the Week

Can Higher Than Normal Turnover Affect my 401(k) Plan? | Part 3 of 3: The Results

DWC | 02/19/19

Facts

In last week’s QOTW, you provided some tools we could use to identify which participants were affected by our decision to close one of our locations, and to calculate our actual turnover rate for purposes of  determining whether a partial plan termination has occurred.

We’ve performed the review, and our minimum turnover rate will exceed 20%. Depending on which employees accept our relocation offer, we may have even more folks who terminate during this time frame.

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Can Higher Than Normal Turnover Affect my 401(k) Plan? | Part 2 of 3: Doing the Math

DWC | 02/12/19

Facts

Last week, we asked whether the turnover we are expecting as a result of closing a facility would have any impact on our 401(k) plan, and you mentioned a partial plan termination.  We have some follow-up questions.  As a quick recap, we are in the process of closing one of our manufacturing facilities.  Some of those working at that location have turned down our relocation offer and will lose their jobs as a result.  From last week’s QOTW, I know there is potential for a partial plan termination and that I will need to perform a review to make a final determination.

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Can Higher Than Normal Turnover Affect my 401(k) Plan? | Part 1 of 3: Overview

DWC | 02/5/19

Facts

Our company designs and manufactures boats.  Due to some advancements in technology, we will be closing one of our older facilities.  While we offered those workers the option to relocate to one of our other facilities, many have elected not to do so and will be terminating employment.  That group comprises roughly 20% of our total workforce.

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Are There Risks to Contributing More Than the Minimum to a Cash Balance Plan?

DWC | 01/29/19

Facts

I set up a cash balance plan two years ago and have put in the minimum required contribution each year. Now, in my third year, I would like to make the maximum deductible contribution, which is double the amount of the minimum.

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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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Can We Reduce the Number of HCEs in our Plan?

DWC | 01/15/19

Facts

We set up our company 401(k) plan soon after we started our business.  At the time, we were a small tech company with only a couple of employees.  Over the years the company has grown exponentially, and business has been good to us…really good.

Because of this, the demographics of our company have changed completely.  We have too many of our people who are highly compensated employee (HCEs), and it is causing havoc with our nondiscrimination testing.  Last year, some employees had to take corrective distributions of their deferrals due to failing the ADP test for the first time.

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Can We Change our Plan's Vesting Schedule?

DWC | 01/8/19

Facts

We set up our company 401(k) plan soon after we started the business.  At the time, being able to afford to make a match or profit sharing contribution seemed so distant as to not be worth thinking about.  We were so focused on the only contributions being employee deferrals that we set the vesting schedule at 100% across the board.

The company is now doing really well, and we want to reward our employees by making a generous profit sharing contribution.  The trick is that we would like to apply a lengthy vesting schedule to it as an incentive for our employees to stick around.

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Hardships & Hurricanes: What are the Hardship Rules Following a Natural Disaster?

DWC | 12/18/18

Facts

Our company sponsors a 401(k) plan.  One of our participants lives in the Florida panhandle and lost her home in Hurricane Michael.  She is under age 59 ½ and is not eligible to take in-service withdrawal, and a loan would only impose a greater burden.  I’ve not seen any direct guidance that permits hardships distributions for those affected by Hurricane Michael the way I have for previous federally declared natural disasters.  She really needs the cash to rebuild her home, but I do not want to approve a hardship that isn’t allowed.

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Are We Still Required to Suspend Deferrals Following a Hardship Distribution?

DWC | 12/11/18

Facts

I sponsor a 401(k) Plan for myself and my staff. I recently processed a hardship distribution for the purchase of my primary residence in October 2018.  I know the rules require me to suspend my deferral elections for six months following a hardship distribution, but I recently came across an article that said I don’t have to impose the suspension anymore.  I’d really like the opportunity to continue deferring if I am allowed.

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What is the Deadline to Deposit our Safe Harbor Matching Contribution?

DWC | 12/4/18

Facts

Our company sponsors a safe harbor 401(k) plan that provides a matching contribution equal to 100% of the first 4% each participant defers.  I had always thought that the deadline for us to deposit the match is the due date of our company tax return (with extensions), but my TPA mentioned something about a quarterly deposit requirement.

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