Topic Archive: Safe harbor 401(k) plan

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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DWC News Update | Two Years in the Making: The Final IRS Hardship Distribution Regulations Are Here

DWC | 10/24/19

It’s been a while, but we finally have them! Late last month, the IRS published the final hardship distribution regulations, nearly two years after Congress passed the Bipartisan Budget Act and the Tax Cuts and Jobs Act. The good news is that this final version follows the proposed version very closely. So closely in fact, that the IRS outright states in the final version that any plan that followed the proposed regulations will satisfy the final regulations.

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Are We Required to Make Safe Harbor Contributions for HCEs?

DWC | 10/22/19

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 fully intend to make the same level of contribution for the HCEs that we do for the non-HCEs, we would prefer to not to be required to do so in order to maintain flexibility with our cash flow.

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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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Your Safe Harbor Actually Isn't? We've Got a Fix for That!

DWC | 08/22/19

We’ve been through a few Corrections of the Quarter together now, and we appreciate you being along for the ride.  We feel this is pretty good stuff but, at the heart of it all, we’re pension geeks (no point in hiding it).  And while the rules and regulations get us going, we have a geeky passion for the opportunity to find creative solutions.

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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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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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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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What Does Safe Harbor Mean, Exactly?

DWC | 05/28/19

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 something about our deferral deposits fitting within the safe harbor deadline.  Now I’m just confused.

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