Topic Archive: Retirement Plan Design

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

DWC | 08/13/19

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

DWC | 07/30/19

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 contribution for us after the close of each year, and we deposit it sometime before we file our company tax return for that year.  Each year, we have a couple of participants who terminated employment before year end, and we end up making contributions for them even though they are long gone by the time we make the deposit.

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

DWC | 07/9/19

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 able to add provisions for eligibility and to be able to reward our key performers.  I’m hesitant about making a change from this “known” commodity to a 401(k) plan but feel like we’ve outgrown our current plan.

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

DWC | 06/11/19

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 to become eligible for the plan, and they are asking me questions about the company matching contribution.  From what I can tell, we make a contribution for everyone who is eligible even if they are not contributing for themselves.

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

DWC | 10/9/18

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 the first day of the month following an employee’s hire date.  Unfortunately, hardly any of our part-timers are contributing, and it has become burdensome and expensive to keep up with all the notices we have to provide each year to people who don’t even have accounts in the plan.

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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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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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