Topic Archive: Retirement Plan Design

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

DWC | 06/26/18

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 contributions each pay period, so in theory at least, we should be all set by the end of each year.  However, it seems that each year, our TPA comes back to us with adjustments that need to made.  They tell us that it has something to do with how we determine compensation.

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After-Tax vs. Roth Contributions: What's the Difference?

DWC | 06/19/18

Facts

Our company has a 401(k) plan that provides a matching contribution equal to 100% of the first 4% that each employee contributes.  We set it up that way to ensure that our highly compensated employees (HCEs) can maximize their salary deferrals at the limit (for 2018 the limit is $18,500 for those under age 50 and $24,500 for those age 50 or older).  The HCEs are always looking for ways to contribute as much as they can.  I’ve seen a few articles suggesting that “after tax” contributions allow that.  We already permit Roth contributions to be made, but I thought they were subject to the same limit as pre-tax deferrals.

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

DWC | 03/27/18

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 other contributions. There are profit-sharing contributions, matching contributions, qualified nonelective contributions, and Roth contributions.

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Can Bonuses Be Excluded From Retirement Plan Compensation?

DWC | 03/13/18

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 has worked for us for a while count for purposes of the retirement plan, but we would like to carve out signing bonuses.

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

DWC | 03/6/18

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 add an employee later this year or next year.

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