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When to Set Sail with Safe Harbor

…a plan measures up. Here they are in a nutshell: The ADP test – which stands for “Actual Deferral Percentage” looks at how the deferral rate for highly compensated employees compares to that of non-highly compensated employees. Typically, the deferral percent for highly compensated employees…

Employer Connect: When to Set Sail with Safe Harbor

employees. This includes those employees who don’t defer. A quick note: Safe Harbor contributions must always be 100% vested. That means that employees can count these contributions in their balances without forfeiture upon termination of employment. Adopting a Safe Harbor provision can help your plan…

Partial Plan Termination and the Applicable Period Case Study

…mind that employee turnover is not the only reason for a partial termination. A partial termination can also happen if a sponsor adopts amendments that adversely affect the rights of employees to vest in benefits under the plan, excludes a group of employees that previously…

Emergency Savings Accounts May Change Mindset and Retirement Outcomes

…may take their emergency savings accounts as cash or roll them to their designated Roth accounts or Individual Retirement Accounts (IRAs) No penalty for highly compensated employees A non-HCE who is enrolled in an ESA and later becomes a highly compensated employee (HCE) may not…

When Does a 401(k) Deferral Become a Catch-Up Contribution?

…participant’s compensation up to $66,000 for 2023). An example of a plan-imposed limit would be if the plan document were to specify that employee salary deferrals are limited to 10 percent of a participant’s annual compensation. Finally, a plan’s ADP limit on employee salary deferrals…

March 1st and Excess Salary Deferrals

…salary deferrals (pre-tax and designated Roth) an individual makes to all of the following plan types: 401(k), 403(b), Savings Incentive Match Plans for Employees (SIMPLE) plans [both SIMPLE IRAs and SIMPLE 401(k) plans[1]] and Salary Reduction Simplified Employee Pension (SARSEP) plans.[2] (Note: A person who…

A SIMPLE Switch

…maintained by the employer Must file a Form 5500 annually Voluntary employee deferrals Mandatory employer contributions (generally, 3% match or 2% nonelective) Immediate vesting for contribution types Additional information at IRS SIMPLE 401k facts Safe Harbor 401(k) No limit on number of employees Voluntary employee

Plan Audits

…of the year count. That’s important because it can include former employees if they still have an account balance. This reality, plus the annual plan cost of carrying former employees, encourages many plan sponsors to force out former employees with small balances. The Department of…