Topic Archive: Retirement Plan Design

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

DWC | 01/21/20

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 resolutions, my CPA reminds me once again of all the tax benefits, personal and corporate, that a qualified retirement plan can offer.  Finding incentive for my 2020 resolutions, I’m reminded that my inaction in 2019 has limited my options for tax savings tools as the 2019 returns are prepared.

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

DWC | 01/14/20

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.

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

DWC | 01/7/20

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 that we don’t really need.  We’re really just looking for the basics; we want employees who don’t take any action to be automatically in rather than automatically out.  That’s it.

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

DWC | 11/19/19

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 account shortly after she left.

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

DWC | 11/12/19

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 aligning the two.  They said we could amend the plan to make that happen, but there is also something about it creating a short year which would require us to go through year-end compliance testing twice during the transition.

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

DWC | 10/29/19

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 that time.  We don’t have high turnover, but employees who leave often do so within the first year of joining us.  We don’t mind allowing new hires to contribute to the plan out of their own paychecks, but since safe harbor contributions must be immediately vested, it feels like we are wasting company money by giving a contribution to someone who might leave in a relatively short timeframe.

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

DWC | 10/15/19

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 employees to save for retirement.  Automatic enrollment would help with participation, but we would have to set the default rate too high in order for it to solve our testing problem.

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What is Automatic Enrollment and How Does it Work?

DWC | 09/17/19

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 encourage our employees to save for retirement.  I’ve heard a lot about something called automatic enrollment and how it can be a great tool to get people to save, but I really don’t know much more about it.

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

DWC | 08/13/19

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 beach, I’ve begun discussing my company’s year-end financial projections with my accountant.  Those conversations have been about as fun as a sunburn; it looks like my company and I are looking at a hefty tax bill.  My accountant has suggested on more than one occasion that I consider implementing a retirement plan to help minimize my tax burden, but I’ve just never gotten around to it.  Now, I’m kicking myself.

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

DWC | 08/6/19

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 her own deferrals as well as company contributions (both match and profit sharing). Based on her current financial situation, she believes it would be more advantageous to convert to Roth so that she can receive distributions tax-free when she retires.

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