Question of the Week (QOTW)

Extra! Extra! Stay up to date on the latest news about the DWC team.

The retirement plan landscape is ever evolving. We distill the details so you don’t have to!

We’ve corralled the best news from inside the beltway – not only regulations, but also new legislation from Congress as well as relevant guidance from the IRS and Department of Labor. In true DWC fashion, we don’t just repackage a recitation of the rules, we provide our thoughts and commentary about what those rules mean to you.

We know cash balance rules can be intimidating! Settle into the Cash Balance Corner and let us break it down for you.

Have 401(k) questions? We have 401(k) answers! We bring you answers to many of the common questions we receive.

A behind-the-scenes look not at how the sausage is made, but why we make it the way we do. (Hint: It’s all about the best interests of the client.)

We’re all about learning from other people’s (alleged) mistakes. We might not be attorneys, but we still follow benefits-related cases and summarize lessons and key take-aways. No hourly fee needed for these insights!

A deeper dive into retirement plan topics doesn’t have to be headache-inducing. Our Pension Primer articles provide depth of information without depth of jargon!

DWC |

When Is the Best Time to Set Up a Safe Harbor 401(K) Plan?

Facts We have been thinking about setting a safe harbor 401(k) plan and have heard that there are some pretty stringent timing requirements depending on some of the provisions we select.
Read More
DWC |

Will Moving My Company Ownership Into a Trust Impact Our 401(K) Plan?

Facts I’ve been working with my personal attorney and financial advisor on some estate planning. and one item I’m considering is placing some of my assets, including my company ownership, in a trust. ...
Read More
DWC |

Interesting Compliance Scenarios - 2021 Edition

Read More
DWC |

Can I Convert a Coronavirus-Related Distribution to a Roth IRA?

Facts We added Coronavirus-Related Distributions (CRDs) to our 401(k) plan in 2020, and a number of our participants availed themselves of the new feature. I know they have the option to pay any ...
Read More
DWC |

Why Does My Year-End Census Require Ownership and Family Information?

Facts We’ve compiled our year end census information, and we are now turning out attention to the accompanying questionnaire. I’m being asked for additional information such as ownership percentages, ...
Read More
DWC |

Which Financial Details Do I Have to Include on my Year-End Census?

Facts Last week, you explained some the demographic data points that get reported on the annual census. Now, I’ve got some questions on the financial information I’ve been asked to provide to my TPA. ...
Read More
DWC |

Which Employees Do I Have to Report on my Year-End Census Report?

Facts As for so many companies, the end of one year and the start of the next are especially busy times. And, without fail, we’ve already received the request for our annual census data from our ...
Read More
DWC |

DWC's "How Do You Holiday?" Survey

Facts We're getting in the holiday spirit here at DWC, but we've noticed that there are a lot of differing opinions on how to holiday around here. We've settled some important debates with past ...
Read More
DWC |

CARES Act Relief for Retirement Plan Loan Payments is Ending, Now What?

Facts Earlier this year, we implemented the coronavirus relief provisions that allowed our participants to suspend loan payments for the remainder of 2020. As a result of reduced hours and other ...
Read More
DWC |

Overtime Is Up and Bonuses Are Down: Will This Year's Irregular Compensation Impact our Retirement Plan?

Facts We sponsor a 401(k) plan for our employees and provide a company matching contribution to those who defer. Our plan specifies that in calculating that match, we only consider employee base pay ...
Read More
DWC |

DWC's Thanksgiving Dinner Prep Playlist

Facts All year long we've been leaving little rock 'n' roll Easter eggs in our Cash Balance Corner feed. ICYMI: Each post title incorporates one of our favorite songs. And for our 20th century rock ...
Read More
DWC |

How Do Furloughed Employees Impact Our Plan at Year-End?

Facts Like many businesses, we had to furlough some employees earlier this year in response to the coronavirus shutdowns. We’ve been fortunate enough to bring back a few of these employees, but a ...
Read More
DWC |

Are There Plan Design Options We Should Consider as Part of the Mandatory Cycle 3 Plan Document Restatement?

Facts We’ve been following your recent posts about how making even small changes to certain plan provisions can make managing the plan easier without sacrificing our objectives. Making life easier, ...
Read More
DWC |

Does Counting Hours of Service for Plan Eligibility Have to be a Nightmare?

Facts We’ve been following along with the last few Questions of the Week and think we’re pretty comfortable with how we want to set up eligibility for our 401(k) plan. We’re definitely looking to ...
Read More
DWC |

What's the Simplest Way to Set Up a One Year Eligibility Waiting Period for our 401(k)?

Facts We are looking to set up a 401(k) plan for our company. Our workforce includes both hourly and salaried employees as well as full-time, part-time, and seasonal workers. For now, we really want ...
Read More
DWC |

How Can We Tweak Our Plan's Eligibility Requirements to Make Administration Easier?

Facts We’ve sponsored our 401(k) plan for several years now, and it’s been very well-received by our employees. Believe it or not, though, one of the biggest challenges we have had is around when ...
Read More
DWC |

How Can We Add More Flexibility to our Standard Profit Sharing Contributions?

Facts We have made profit sharing contributions each year, and we plan to continue to do so every year that our financial situation allows. Historically, we have contributed the same percentage of ...
Read More
DWC |

Can We Tweak our 401(k) to Allow Additional Savings for Reasons More Immediate than Retirement?

Facts Our company takes a holistic approach to the benefits we offer. We want our employees to have access to benefits that assist them with their overall financial security. We offer several health ...
Read More
DWC |

Are Discretionary Matching Contributions Becoming a Little Less...Discretionary?

Facts My company has sponsored a 401(k) plan for many years, and it provides for a discretionary matching contribution. I’ve always sought to build in as much flexibility as possible, so having ...
Read More
DWC |

Can We Add a Safe Harbor Provision While Maintaining Flexibility in Contribution Costs?

Facts We currently sponsor a 401(k) plan and have been debating adding a safe harbor provision for 2021. While the idea of buying our way out of the ADP/ACP tests is appealing, we’re nervous about ...
Read More
DWC |

Can a Former Employee Roll a Coronavirus-Related Distribution Back into our Plan?

Facts Earlier this year, we decided to make the CARES Act coronavirus-related distributions (CRDs) available to participant in our 401(k) plan. We know that it is possible for participants to repay ...
Read More
DWC |

Is There an "Easy Button" for Setting Up a New Retirement Plan?

Facts As a small business owner, I’m constantly looking for cost-effective ways to improve the benefits I offer my employees. My industry is a competitive one, and it’s important to me to have a ...
Read More
DWC |

How Can I Minimize my Risk When Reviewing and Approving Hardship Withdrawals?

Facts As a plan sponsor, I want my employees to have access to their retirement accounts in the event of a financial emergency. I know that offering hardship withdrawals could satisfy that goal, but ...
Read More
DWC |

Which Common Plan Fees Can (and Should) We Pay from Plan Assets?

Facts We are reviewing our company expense budget to identify any that we can eliminate or reduce. We’ve read that it is possible to pay expenses related to maintaining company retirement plans out ...
Read More
DWC |

What Are My Options (and Deadlines) for Implementing a Retirement Plan This Year?

Facts We’ve been debating implementing a 401(k) plan for 2020. After much back and forth, we’ve decided its “a go!” for this year. Since we are still in a more relaxed summer vacation mode, we’d like ...
Read More
DWC |

Can We Offer Additional Matching Contributions Without Losing our Safe Harbor Status?

Facts We currently sponsor a 401(k) plan for our company. While we certainly want to be able to provide meaningful benefits to the owners, our goal is to encourage all our employees to save more for ...
Read More
DWC |

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

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 ...
Read More
DWC |

Can We Increase Profit Sharing Contributions and Decrease Salaries to Improve Testing and Save Money?

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 ...
Read More
DWC |

Must I Complete the Upcoming Mandatory Plan Document Restatement Before Terminating My Plan?

Facts I currently sponsor a 401(k) plan for my employees. As I start to consider retirement myself and eventual dissolution of the business, I’m compiling a list of all the things I need to do to ...
Read More
DWC |

401(k) vs 403(b): Which Is the Best Choice for My Non-Profit?

Facts As the director of a not-for-profit organization, I’m looking at retirement plan options for our employees. The fiscal year ends June 30th and I’d love to implement something to benefit our ...
Read More
DWC |

Do We Have to Provide New Paperwork When a Participant Requests a Second Distribution?

Facts When a participant requests a distribution from our plan, I provide them with a with a package that includes an election form and a bunch of other information. A participant who terminated and ...
Read More
DWC |

Do We Have to Consider Pay Before a Participant is Eligible When Calculating Matching Contributions?

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 ...
Read More
DWC |

Who Signs Our Form 5500?

Facts The person in our office who handles many of our administrative functions, including those related to our 401(k) plan, will be retiring soon, so we’re reviewing many of our internal processes ...
Read More
DWC |

Should We Make Up for Earnings Lost as a Result of a Delayed Distribution?

Facts Over the past several months, our turnaround times for normal business processes have lagged somewhat as we have adjusted operations in response to the various stay-at-home orders. When ...
Read More
DWC |

How Much Fidelity Bond Coverage Are We Required to Have?

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 ...
Read More
DWC |

What Retirement Plan Filings and Records Must We Keep?

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, ...
Read More
DWC |

Can We Pay Plan-Related Expenses Out of Plan Assets?

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 ...
Read More
DWC |

Should We Include Government-Mandated Coronavirus PTO When Calculating Company Contributions?

Facts We have several employees who have had to take time off from work either because of a loss of childcare or to care for affected family members due to the coronavirus. As a result of recent ...
Read More
DWC |

Is There Any Coronavirus Relief for Participants Who Want to Postpone Plan Loan Payments?

Facts Several participants in our 401(k) plan currently have outstanding plan loans, and many others are looking to initiate them. However, given the current pandemic, many participants are concerned ...
Read More
DWC |

How Does the CARES Act Expand the Availability of Retirement Plan Loans?

Facts Our 401(k) plan allows participants access to their accounts via hardship distributions and, for those at least age 59 ½, via in-service withdrawals. But with the economic uncertainty of the ...
Read More
DWC |

Can We Allow a Distribution for a Coronavirus-Related Hardship?

Facts Some of our employees are dealing with financial challenges due to the coronavirus situation, and they are asking whether they can access their 401(k) accounts. Our plan allows for loans and ...
Read More
DWC |

How Do We Stop Our Discretionary Matching Contribution?

Facts My company sponsors a 401(k) plan that provides for a discretionary matching contribution, which we deposit each pay period along with employee deferrals. Given the economic uncertainty, I’m ...
Read More
DWC |

Can We Suspend our Safe Harbor Contribution Mid-Plan Year?

Facts Given the current uncertainty in the world economy and the unknown ongoing affects of coronavirus, I’m looking at all financial obligations for our company, and for opportunities to reduce ...
Read More
DWC |

How Can We Create More Flexibility in our Cash Balance Plan Contributions?

Facts We are considering adopting a new cash balance plan. We really like the higher contribution amounts, but we keep hearing that the contributions are fairly rigid and inflexible.
Read More
DWC |

We Can't Find our Signed Plan Document, Now What?

Facts We have a new TPA for our 401(k) plan and they’ve asked for our current plan document that was effective January 1, 2017. We know the document was signed back when it was prepared, but we can’t ...
Read More
DWC |

Have the Rules for Safe Harbor 401(k) Notices Changed?

Facts My company sponsors a safe harbor 401(k) plan and every year my TPA sends me a reminder to distribute a notice to participants. It’s not the biggest hassle but I’ve wondered if it’s really ...
Read More
DWC |

Do We Still Need to Suspend Deferrals Following a Hardship Distribution?

Facts Larry and Kent are both participants in our company’s 401(k) plan. Both recently went back to school on a part-time basis to pursue graduate degrees and will continue working for us. Each of ...
Read More
DWC |

Do We Need to Continue Paying RMDs for a Deceased Participant?

Facts The CEO (and 5% owner) of our company passed away earlier this year at the age of 73. He started taking his required minimum distributions right on time after reaching age 70 ½. At the time of ...
Read More
DWC |

Short Plan Years... Lookback Years... What (and When) Are They and Why Do I Care?

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 ...
Read More
DWC |

What New Tax Credits are Available for Adding an Automatic Enrollment Feature to our Plan?

Facts Our business currently has a retirement plan and we are considering adding automatic enrollment. We have heard that there are new tax credits available to employers who include automatic ...
Read More
DWC |

Am I Now Required to Include Part-Time Employees in my 401(k) Plan?

Facts As the owner of a beachside hotel, I sponsor a calendar year 401(k) plan for my employees. In the summer we hire many part-time employees to assist with the uptick in guests and activities. Our ...
Read More
DWC |

Is It Too Late to Set Up a Retirement Plan to Get a Tax Deduction for Last Year?

Facts Although my New Year’s resolutions include less procrastination it’s likely that by the time Valentine’s Day gets here that good intention will long be in my rear view. As I draft these 2020 ...
Read More
DWC |

What Tax Credits are Available for Setting Up a New Retirement Plan?

Facts Our business is thinking of setting up a retirement plan. We’ve heard that there are new tax credits offered under the SECURE Act available to employers who set up new plans.
Read More
DWC |

What is the Simplest Way to Add Automatic Enrollment to our Plan?

Facts We are considering adding automatic enrollment to our 401(k) plan. We’ve read some of the other posts on your website about EACAs and QACAs, but that all seems like a lot of extra complexity ...
Read More
DWC |

Do the Rules About Related Companies Apply to Non-Profits with No Owners?

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 ...
Read More
DWC |

Do 401(k) Loans Impact a Participant's Credit Score?

Facts Our 401(k) plan allows participants to take loans from their accounts. We have a written policy that describes how the loans work and spells out the requirements that the plan and participants ...
Read More
DWC |

What is a Suspense Account and Can We Use Our Forfeiture Account Instead?

Facts The annual compliance report that our TPA provided to us indicates that we over-funded matching contributions for certain employees and instructs us to transfer the excess amounts out of the ...
Read More
DWC |

Tradition vs. Taste: What Classic Thanksgiving Dish Do You Secretly Dislike?

Facts Every year we gather with family and friends to stuff ourselves silly in honor of the first harvest here in the New World. Since that time, families have perfected and passed down Turkey Day ...
Read More
DWC |

Are Rehires Immediately Eligible for our 401(k) Plan?

Facts We just rehired an employee that used to work for us but who terminated almost 4 years ago. She was eligible for our 401(k) plan during her previous tenure but took a distribution of her ...
Read More
DWC |

What is a Short Plan Year and What Does It Mean for My Deferrals?

Facts Our company operates on a calendar tax year, but our 401(k) plan runs on a fiscal year ending each June 30th. It is a real hassle to manage two different year-ends, so we asked our TPA about ...
Read More
DWC |

What Do You Do with the SIMPLE IRA Sponsored by the Company You Just Acquired?

Facts My company recently acquired another firm. As we work to combine all of our operations, we’ve discovered a few differences in our employee benefits, specifically our retirement plans. While ...
Read More
DWC |

Is It Possible to Split Eligibility to Allow for Deferrals but to Postpone Safe Harbor Contributions?

Facts We allow new employees to join our 401(k) plan on the first of the month after they are hired. They become eligible to make deferrals and also receive the company safe harbor contribution at ...
Read More
DWC |

Are We Required to Make Safe Harbor Contributions for HCEs?

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 ...
Read More
DWC |

Is There a Plan Design that Combines the Benefits of Automatic Enrollment and Safe Harbor?

Facts My company sponsors a 401(k) plan, and we fail the annual ADP test pretty consistently. We really want to increase participation; not only to help our test results, but also to encourage our ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

How Do I Calculate How Much Money is Available for a 401(k) Loan?

Facts The participants in my company’s 401(k) plan are regularly inquiring about how much money they have available for a loan. When I report back the amount available to them, it’s not unusual for ...
Read More
DWC |

What is Automatic Enrollment and How Does it Work?

Facts Our company sponsors a 401(k) plan, but very few of our participants are contributing. We started the plan as an added benefit to help attract and retain employees, but we also truly want to ...
Read More
DWC |

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

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 ...
Read More
DWC |

How Do We Identify Highly Compensated Employees for the First Year Our Company Exists?

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 ...
Read More
DWC |

Who Are All the Providers Servicing My Plan & What Do They Do?

Facts I sponsor a small 401(k) plan for my employees. Sometimes, I get confused about which service provider to go to for different plan-related questions. Time and efficiency are important to me ...
Read More
DWC |

What is the Deadline to Implement a Retirement Plan for the Current Year?

UPDATE | This QOTW has been updated to reflect changes included in the SECURE Act, signed into law on December 20, 2019. The updated article is available here. Facts Returning from sunny days at the ...
Read More
DWC |

Is It Possible to Convert a Pre-Tax 401(k) Account to a Roth Account?

Facts We recently had one of the participants in our 401(k) plan ask if it is possible to convert her balance from pre-tax to Roth. She has been a participant in our plan for many years and has both ...
Read More
DWC |

Can We Require Employees to be Employed at Year-End to Receive a Safe Harbor Contribution?

Facts Our company sponsors a safe harbor 401(k) plan. Each participant receives a safe harbor nonelective contribution equal to 3% of his or her annual pay. Our TPA calculates the safe harbor ...
Read More
DWC |

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

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 ...
Read More
DWC |

What Do We Need to Consider When Switching from a SIMPLE IRA to a 401(k)?

Facts We’ve sponsored a SIMPLE IRA for our employees for years and while it’s served its purpose, we are beginning to feel the limitations inherent in the plan. As we begin to grow, we’d love to be ...
Read More
DWC |

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

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, ...
Read More
DWC |

How Can We Improve ADP/ACP Test Results Without Offering Safe Harbor?

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 ...
Read More
DWC |

Safe Harbor 401(k) Match vs. Nonelective: Two Words for the Same Thing or Two Different Options

Facts I recently got a promotion at work, and one of my new job responsibilities is to help manage our company’s retirement plan. It is a safe harbor 401(k) plan. A number of our employees are about ...
Read More
DWC |

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

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 ...
Read More
DWC |

What Does Safe Harbor Mean, Exactly?

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 ...
Read More
DWC |

Which Compensation Do You Use When Your Company Fiscal Year is Different Than Your Plan Year?

Facts When we set up our 401(k) plan, our partnership operated on a fiscal year that ran from July 1st to June 30th. We set the 401(k) plan year to line up with our company’s fiscal year. We recently ...
Read More
DWC |

Are Missed Deferrals and Late Deferral Deposits the Same Thing?

Facts Our company sponsors a 401(k) plan. One of our newer employees, Jane Smith, met the eligibility requirements and should have joined the plan on January 1st. Due to an oversight, we forgot to ...
Read More
DWC |

Top Heavy vs. ADP: What's the Difference?

Facts As a plan sponsor, I do my best to review the annual compliance reports my TPA sends to me, but to be honest, it might as well be written in a foreign language. For example, several of our ...
Read More
DWC |

Are We Required to Force Former Employees to Take Their Money Out of Our Plan?

Facts We just received our year end testing and it mentioned that we have several terminated participants with small balances that we are required to distribute from the plan. I remember seeing ...
Read More
DWC |

Who are Leased Employees & Are They Eligible for my 401(k) Plan?

Facts I own a small manufacturing company that specializes in office supplies, and I sponsor a 401(k) plan for my employees. One of my former employees, Tim Halpert, worked full-time with me for the ...
Read More
DWC |

What is the PBGC & Does it Cover our Cash Balance Plan?

Facts Our company is thinking of setting up a cash balance plan. In our research about what that entails, we keep running into information about the PBGC and paying premiums.
Read More
DWC |

What is the Form 8955-SSA and What Does It Do?

Facts Our company has been very fortunate to have low turnover over the years. Those that have left either were not eligible for our 401(k) plan, or they had very small balances and had their ...
Read More
DWC |

How (and for How Long) Can I Extend the Deadline to File our Form 5500?

Facts We’ve had our retirement plan for a couple of years now and feel that we are finally getting the hang of the various deadlines for our plan. There is just one deadline that I always have ...
Read More
DWC |

What Common Compliance Issues Should We Be Watching For?

Facts Our company sponsors a 401(k) plan, and we want to make sure we do everything correctly. We have a great staff and have put processes in place to help ensure we operate the plan in a compliant ...
Read More
DWC |

Can Employees from a Former Subsidiary Take a Distribution from our 401k Plan?

Facts Our company has several wholly-owned subsidiaries, and each of them has signed onto our 401(k) plan as participating employers. We sold 100% of the stock of one of those subsidiaries – Glen’s ...
Read More
DWC |

Plan Loans & Past Participants: What Happens to a Participant's Loan Balance When They Terminate Employment?

Facts We have a participant who took a loan from his 401(k) account at the beginning of the year. Yesterday, he gave us notice of his resignation, effective in two weeks, but he still has an ...
Read More
DWC |

We Failed the ADP Test! What Did We Do Wrong and How Do We Fix It?

Facts Our TPA just sent us our annual compliance report, and it says we failed testing! This is the first year we’ve failed anything, and now we’re being told that we need to take money out of the ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

How Can We Pass Nondiscrimination Testing with Low Non-HCE Participation?

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 ...
Read More
DWC |

Can We Reduce the Number of HCEs in our Plan?

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 ...
Read More
DWC |

Can We Change our Plan's Vesting Schedule?

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

Are RMDs Required for a Retiree Turned Independent Contractor?

This QOTW has been updated to reflect changes made by the SECURE Act, which was signed into law on December 20, 2019. Participants who were born on or before July 1, 1949, are required to start ...
Read More
DWC |

Drama or Comedy: What's Your Holiday Film Favorite?

Facts Here at DWC we're getting into the holiday spirit. We've done our grocery shopping, prepped the pies and pulled out our eating pants. There's just one thing missing.
Read More
DWC |

Can We Suspend RMDs for a Rehire?

This QOTW has been updated to reflect changes made by the SECURE Act, which was signed into law on December 20, 2019. Participants who were born on or before July 1, 1949, are required to start ...
Read More
DWC |

Can a Participant Get a Jump on RMDs & Start Taking Them a Few Months Early?

This QOTW has been updated to reflect changes made by the SECURE Act, which was signed into law on December 20, 2019. Participants who were born on or before July 1, 1949, are required to start ...
Read More
DWC |

What Costs can be Covered Under a Hardship Distribution for Purchase of a Primary Residence?

Facts One of the participants in our 401(k) plan submitted a request for a hardship distribution for the purchase of a primary residence. On review of the supporting documentation, we discovered that ...
Read More
DWC |

Can In-Service Distributions be Taken Prior to Age 59 1/2?

Facts One of the participants in our 401(k) plan heard from a friend that it is possible to take money out of a plan while still employed. I’ve always heard that age 59 ½ is the rule of thumb as to ...
Read More
DWC |

Can Participants Invest Their 401(k) Accounts in Real Estate?

Facts I am the 100% owner of my company, and we have a 401(k) plan that allows all our employees to direct the investment of their own accounts from a menu of mutual fund options via our ...
Read More
DWC |

Can We Change our 401(k) Plan Eligibility Requirements to Exclude Employees Who Have Already Joined?

Facts Our company has quite a few employees who only work a few hours each week. When we setup the 401(k) plan, we wanted to allow all our employees to save, so we set the eligibility requirement at ...
Read More
DWC |

Why Does Your TPA Need Personal & Ownership Details from Company Owners?

Facts Our company sponsors a 401(k) plan for our employees. The owners of the company have always been somewhat secretive in terms of sharing detailed information about themselves and their families. ...
Read More
DWC |

Can a Charitable Organization be Named as a Plan Beneficiary?

Facts Our company sponsors both a 401(k) plan and a cash balance plan. One of our employees is a strong supporter of a local charity. She does not have a spouse or children, so she would like to name ...
Read More
DWC |

What Is a True-Up Matching Contribution?

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 ...
Read More
DWC |

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

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.
Read More
DWC |

No Beneficiary Form: Now What?

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 ...
Read More
DWC |

How Are Corrective Refunds Determined for a Failed ADP Test?

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 ...
Read More
DWC |

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

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.
Read More
DWC |

What Do We Do With Mutual Fund Settlement Proceeds?

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 ...
Read More
DWC |

How Do We Correct Missed Deferrals for New Hires?

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. ...
Read More
DWC |

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

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.
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

What Compensation Should We Use to Calculate Company Contributions to our 401(k) Plan?

Facts Our company has a safe harbor 401(k) plan. In addition to employees making deferrals, we make a company contribution equal to 3% of each person’s compensation. We deposit both types of ...
Read More
DWC |

Is Bitcoin a Realistic 401(k) Investment Option?

Facts Someone would have to be living under a rock for the last year or so not to have noticed all the talk about Bitcoin and other cryptocurrency. The values have fluctuated quite a bit, but all the ...
Read More
DWC |

Can You Make Extra Payments on a 401(k) Loan to Pay It off Faster?

Facts A participant in our 401(k) plan took out a loan a couple years ago. She could only afford to make the bare minimum payments at the time, but is now in a financial position to pay down the loan ...
Read More
DWC |

Can a Company Freeze a 401(K) Account if an Employee Is Suspected of Stealing From the Company?

Facts We just discovered that one of our employees has been stealing money from the company for quite some time. We fired him as soon as we discovered the theft, and we are working with the police ...
Read More
DWC |

401(k) Notice Distribution: Hard Copy vs. Electronic Delivery

Facts It seems like 401(k) plans require a lot of different notices and disclosures be provided to participants each year. We have safe harbor and default investment notices at the end of the year, ...
Read More
DWC |

401(k) Distribution Rules: After Taking a Hardship Distribution, How Quickly Must a Participant Stop 401(k) Contributions?

Facts A participant in our 401(k) plan recently took a hardship distribution. We know we are supposed to suspend his deferrals for six months following the distribution, but we are not entirely clear ...
Read More
DWC |

Is it Possible for a 401(k) Beneficiary to Waive Benefits?

Facts One of our employees who was a participant in our 401(k) plan recently passed away. He never submitted a beneficiary designation form; however, since he was married, we understand that his ...
Read More
DWC |

What Is the Deadline to Correct a Failed ADP/ACP Test?

Facts Every couple of years, our 401(k) plan fails the ADP/ACP test by a small margin. Since we don’t always fail the test, gathering our year-end census information to send to our TPA sometimes ...
Read More
DWC |

How Do You Correct An Excess Deferral?

Facts Due to a glitch in our payroll system, one of the participants in our 401(k) plan contributed more than the IRS limit last year. It came to light while she was preparing her individual income ...
Read More
DWC |

What Is The Difference Between Fiduciary Liability Insurance and a Fidelity Bond?

Facts My company sponsors a 401(k) plan. With everything that has been in the news about retirement plan fiduciaries and some of the lawsuits against them, we are trying to decide whether or not we ...
Read More
DWC |

When Must Participants Get Their Spouses To Sign-off On Changing 401(k) Elections?

Facts One of our employees recently asked about changing his primary beneficiary on his 401(k) account. The beneficiary form says the participant must obtain the consent of his spouse in order to ...
Read More
DWC |

What Are The Different Types of 401(k) Contributions And How Do They Work?

Facts Our business is considering setting up a 401(k) plan for our employees. We know that it can include both employee contributions and company contributions, but we keep hearing about all sorts of ...
Read More
DWC |

Which 401(k) Plan Fees Can Be Paid Out of Plan Assets?

Facts When we first established our 401(k) plan, the company didn’t have a lot of discretionary income, so we went with a low-cost provider and set it up so the plan would pay for its own fees. We ...
Read More
DWC |

Can Bonuses Be Excluded From Retirement Plan Compensation?

Facts Our company pays a number of different types of bonuses—signing bonuses, spot bonuses, holiday bonuses, production bonuses, etc. You get the idea. We know that bonuses paid once the employee ...
Read More
DWC |

The Better Retirement Plan for Small Business: SEP or 401(k)?

Facts I am self-employed, and my company does not have any employees. Occasionally, my spouse will help out with various projects but does not work for the company full time. It is likely that I will ...
Read More
DWC |

Can We Exclude Seasonal Employees From Our 401(k) Plan?

Facts Our company has a retail store that sells items like patio furniture, swimming pool supplies, and equipment. We also have a department that cleans and services swimming pools. The service ...
Read More
DWC |

How Should We Handle It If We Accidentally Overfund Our 401(k) Match?

Facts Our company sponsors a safe harbor 401(k) plan with a match, and we also make a profit sharing contribution each year. Our payroll company calculates match and profit sharing contributions ...
Read More
DWC |

Starting A New 401(k) Plan? Make Sure You Start On Time

Facts We are planning to establish a new 401(k) plan for our employees. Between getting set up with a recordkeeper, selecting the investment menu, working with our TPA to prepare the plan documents ...
Read More
DWC |

Should We Split Our 401(k) Plan to Avoid the Annual Audit?

Facts Our company has been growing over the last couple of years, which is a good thing. However, after seeing your last two Questions of the Week (here and here), I am concerned about the need to ...
Read More
DWC |

How Do You Select a CPA for Your Annual 401(k) Audit?

Facts With over 100 participants in our 401(k) plan in 2017, we have learned that our plan will now require an audit each plan year from an Independent Qualified Public Accountant (IQPA). This will ...
Read More
DWC |

When Does My Plan Need An Outside Audit?

Facts We are a small business that has been growing quite a bit in the last couple of years and are now up to about 100 employees. Our company has a 401(k) plan and most of the employees who are ...
Read More
DWC |

How Should a Plan Sponsor Handle Required Minimum Distributions For Missing or Nonresponsive Participants?

Facts One of our employees retired on July 31, 2017 at age 73. During her tenure with the company she was an active participant in the 401(k) plan, accumulating a balance while having never taken a ...
Read More
DWC |

Can I Keep My Retirement Plan After I Sell My Business?

Facts I recently sold my business, and all of my employees went to work for the buyer. My goal is to continue working for a period of time, but I do not expect to hire any more employees.
Read More
DWC |

How Do I Set Up an Individual 401(k) Plan?

Facts I am self-employed, and my business is doing well. As a result, I would like to setup a retirement plan so that I can not only set aside some income for retirement but also to help with my ...
Read More
DWC |

Is Your 401(k) Required to Have a QDIA?

Facts Like many 401(k) plans, ours allows employees to decide where to invest their accounts among a menu of approximately 20 different mutual funds. For employees who do not make an investment ...
Read More
DWC |

Do 401(k) Testing Requirement Apply to Owner-Only Plans?

Facts I and my three business partners each own 25% of our company. We do not have any employees other than the four of us. We would like to set up a retirement plan, but we know there are ...
Read More
DWC |

How Do We Report a Plan Merger on Form 5500?

Facts Our company sponsors two separate 401(k) plans, each of which covers a different group of our employees. Due to some internal changes, we now want to merge those plans so that we only have a ...
Read More
DWC |

What's the Difference Between 401(k) Transfers and Rollovers?

Facts Our company sponsors two separate 401(k) plans. One covers salaried employees, and the other one covers hourly-paid employees. From time to time, employees change from hourly to salaried and ...
Read More
DWC |

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

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 ...
Read More
DWC |

When Can We Change Our ADP/ACP Testing Method?

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 ...
Read More
DWC |

Who Must Receive Retirement Plan Blackout Notices?

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. ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

This QOTW has been updated to reflect changes made by the SECURE Act, which was signed into law on December 20, 2019. Participants who were born on or before July 1, 1949, are required to start ...
Read More
DWC |

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

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, ...
Read More
DWC |

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

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 ...
Read More
DWC |

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

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 ...
Read More
DWC |

Can We Split QDRO Fees Between Participant and Ex-Spouse?

Facts We have a participant who is going through a divorce and told us that he will be submitting a Qualified Domestic Relations Order to assign a portion of his 401(k) account to his ex-spouse. It ...
Read More
DWC |

Can I Pre-Fund a Matching Contribution for a Participant Who Terminated Employment?

Facts Our company sponsors a safe harbor 401(k) plan that provides for a dollar-for-dollar match up to 4% of pay. At the end of each year, we calculate the total matching contribution, and we usually ...
Read More
DWC |

Can I Add a Personal SEP IRA to My Company's 401(k) Plan?

Facts Our firm sponsors a 401(k) plan that includes a 3% of pay safe harbor contribution. The plan also includes a profit sharing provision, but the only company contribution we usually make is the ...
Read More

Subscribe to our newsletter