@401kBasics Plan Sponsor Quick Tips: Test Results

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

Nondiscrimination testing is performed on qualified plans to ensure that all participants benefit fairly. In this article we will explain the top-heavy Test, corrective measures and it’s deadlines:

  • Plans that primarily benefit key employees are considered top-heavy.
  • Top-heavy plans are subject to minimum contribution requirements.

Correction of the ADP or ACP tests includes allocating a Qualified Non Elective Contribution (QNEC) and making corrective distributions to the Highly Compensated Employees (HCEs). Both tests are due on March 15th of the year following the plans’ year-end to avoid a 10% excise tax. When in doubt, please ask your service provider to explain all questions you may have on these tests.

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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@401kBasics Plan Sponsor Quick Tips: Test Results #Fiduciary

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

Nondiscrimination testing is performed on qualified plans to ensure that all participants benefit fairly. In this article we will explain the Actual Deferral Percentage (ADP) Test, Actual Contribution Percentage (ACP) Test, corrective measures and their deadlines:

  • ADP – Test done to indicate that elective deferrals are non discriminatory.
  • ACP – Test done to indicate that employer matching and after-tax contributions are nondiscriminatory.

Correction of the ADP or ACP tests includes allocating a Qualified Non Elective Contribution (QNEC) and making corrective distributions to the Highly Compensated Employees (HCEs). Both tests are due on March 15th of the year following the plans’ year-end to avoid a 10% excise tax. When in doubt, please ask your service provider to explain all questions you may have on these tests

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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Plan Sponsor Quick Tips: COLA Increases for 2012

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

On October 20, 2011 the IRS announced the cost of living adjustments for the tax year 2012. The adjustments are comprised of dollar limitations on benefits and contributions under qualified plans. Some limitations for 2012 changed while others remained the same:

  •  Annual Compensation – This figure increased from $245000.00 to $250000.00
  • Elective Deferrals – These increased from $16500.00 to $17000.00
  • Catch-up Contributions – The contribution limit for anyone over the age of 50 remains at $5500.00

These COLA increases will allow participants in a retirement plan to defer more than they have in the past. A complete list of dollar limitations in prior years can be found by clicking here. As always, when in doubt, please reach out to your service providers for further clarification on these matters!

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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Plan Sponsor Quick Tips: 5500 Wrap-Up!

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

October 17th is upon us and many of you have completed filing your 2010 form 5500s. If you have not done so already, get to it ASAP to avoid penalties. The sigh of relief that comes with receipt of the FILING RECEIVED status from the DOL can be quiet a good feeling. Your fiduciary role however does not end there. Below are a few steps that you can take as part of your due diligence:

  • 5500 Records – Make sure that your have kept signed copies of your 5500 and the Summary Annual Report.  They are handy in audit situations.
  • User IDs and Passwords – Find a secure location to keep these for use with your service provider and EFAST websites.
  • Employer Identification Number (EIN) – Keeping a record of this nine digit number in a known location will assist you in accessing your 5500 records on the EFAST website with ease.

These are a few tips that you could start using today and breeze through the 5500 process in future years. Whenever in doubt make sure you reach out to your service provider for more information on the topic!

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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Keep The Course: Commonly Asked Questions-Is My 401(k) Plan Allowed To Take Fees?

Each Wednesday 401kBasics posts a new article in a weekly series called “Keep the Course”. This series is designed to give the average consumer information on how to keep their 401k plan on track! Your feedback or suggestions on future articles is welcome.

Over the next few weeks, 401kBasics will feature some of the most commonly asked questions.

“My retirement plan deducts fees directly from my account each month, is this allowed?

All 401(k) plans have fees, however not all of them are treated equally. Some plans have the majority of the fees paid by the plan sponsor, whereas others have fees deducted from participant accounts directly, and even other plans have indirect fees taken from the investment earnings. The fee structure is something that your plan sponsor agreed upon when establishing the plan.

In the past, these fees have been difficult to determine, however the DOL is cracking down on this area of retirement plans and is insisting that the fee structure for plans is more transparent. So, sadly, the answer is “yes”, you can have fees taken from your account.

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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Plan Sponsor Quick Tips: Employer Deductibility

Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.

As September 15th approaches, plan sponsors may be approaching a tax-filing deadline. In regards to 401(k) plans, those with minimum funding requirements are expected to make their deposits before the extended tax deadline. Employer deductions for defined contribution plans are limited to 25 percent of participants’ eligible compensation. Contributions required by employers in excess of the deduction limit may still be allocated to the participant’s account, but may not be deducted by the employer on their company tax return in the current year. There are a few factors to consider, including:

  • Deferrals are included in compensation when determining 25 percent of compensation amount.
  • Only eligible employees’ compensation and contributions are part of the deduction limit.
  • Any group of employees excluded from participating on the plan does not have their compensation included in 25 percent calculation

As a plan administrator, it is your duty to make sure that all required employer contributions are deposited into the plan by the due date of the plan sponsors’ tax return. This is the only way a qualified plan can take advantage of a tax deduction. If you are still not sure what to do, make sure you contact your service provider for a thorough explanation!

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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Plan Sponsor Quick Tips: Form 5500 Follow Up!

Yesterday was August 1st, which was the deadline for filing your 5500 without an extension. October 15th should be the next date to be on the lookout for if you have not filed your form 5500 yet and did file for an extension. Regardless of whether you filed your form 5500, below are the next steps that you can act upon today:

  • Form 5500 filed – Make sure you have a signed copy of the form 5500 in your plan records and have a set process to distribute the Summary Annual Report (SAR) to plan participants. This is also a good time to review that all your form 5500 records from prior years are in order.
  • Form 5500 not filed – It is important that you file the form and retain a copy of your form 5558 that was sent to the IRS to avoid penalties.

Your service provider may have already provided you with form 5500 filing instructions using their software but if they have not then you can find instructions on how to file the form through the EFAST2 website. Calling the DOL directly using the numbers provided on their site can also prove to be helpful.

Bookmarking the EFAST2 website will also help you locate it with ease in the future. Make sure that your EFAST user ID and passwords are kept in a secure location. If your plan is off calendar then please review your filing dates. Your service provider is a great resource for you to utilize if you are uncertain on what your next steps may be!

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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