Leaderboard

Tell them to read their plan doc before posing a question. ;)

When it comes to age discrimination, people who are over age 40 cannot be discriminated against, but there's no reverse discrimination law. So from an ADEA (Age Discrimination in Employment Act) perspective, there is no violation. That said, your plan will have to do a test, called the ACP (Average Contribution Percentage) test that compares the average match rate for HCEs (Highly Compensated Employees) to NHCEs (Non-HCEs). As you point out, the older employees are likely to be higher paid, so this match structure could create a problem for the test. BTW, an HCE is someone who makes more than $120,000 in a year. If the plan fails the ACP test, however, the usual result is a distribution or forfeiture of match to the HCE. Typically the HCE may lose the tax benefit of the match, but not necessarily the money. There is also another test, of benefits, rights and features, or BRF testing. Here you have to show that the availability of the match isn't discriminatory in favor of HCEs. I presume your plan's TPA does this calculation and that it passes. In short, while it doesn't seem fair, it also isn't necessarily illegal.

Or just don't let them invest in stuff that will become an issue

Seems to me that it would be helpful for a newly registered user of the message boards to be given an email that welcomes him or her to the community and that provides certain information that would be especially helpful in getting started. Maybe a Q&A format. Does this sound good? What information would you have enjoyed having? Dave

Well, the underside of the roof is panels of Renaissance Italian Fresco paintings by Michaelangelo, while the tiles have been handcrafted by Buddhist monks from an inaccessible Tibetan monastery, and "pre-trodden" by beautiful virgins with feet that have been pedicured daily in sacred lavender water and precious oils. All kidding aside, I would say that if it is a major improvement including things NOT DAMAGED by the "event" causing the damage, rather than "reasonable" repairs, that it isn't allowable. Some repairs are necessarily upgrades, but at some unknown point it crosses over from reasonable/necessary to no longer allowed. I'm not sure just where that line is...

If the document allows for immediate distribution on termination it would seem a regular distribution for separation of service. The loan offset would be added to the cash portion to determine the 20% federal withholding. If the plan does not allow immediate distribution as RBG notes but allows hardship to terminated employees then you would process the hardship as normal and the loan would presumably go into default under the terms setup in the participant loan program unless he keeps loan payments current (an unlikely scenario given the above facts).

Wish I knew the answer from a plan design standpoint but it seems like it might also lead to unintentional disparate impact in hiring if it keeps the university from hiring someone over 35 based on the cost of the match and the age different match, such that hiring someone younger would be less expensive overall.

You now have to define "extraordinarily rare" because I see it several times a year. Usually, it's a lack of planning on the part of the participant who has an SDBA that invests in things that may be illiquid (limited partnerships being a favorite, real estate crops up often) and the "law firm" they work for doesn't actually place any restrictions on what can be held in the plan.... Beside, rare or not, it stretches the mind to have these discussions. Mental atrophy does, in fact, set in in our dynamic profession....