401kAllTheWay

The Plan defines W-2 compensation to exclude reimbursements and fringe benefits, which is fairly straightforward. However, do some plans treat a taxable pay advance issued under a signed agreement and repaid over multiple payrolls, as eligible Plan compensation? While it technically aligns with the definition of eligible compensation, complications may arise if an employee reduces their contribution election after deferring into the Plan using the advance. Additionally, if a team member leaves early, the company may initiate a clawback, withholding the remaining balance from their final paycheck but possibly no reduction of 401(k) contributions. Does that mean we have to remove the previous 401(k) contribution from the Plan? It sounds to me the easiest way to move forward is this pay advance not be considered eligible compensation due to the downstream impacts and operational headache of the clawback or advance payment. Thanks.

I have searched various websites without much help. The form 5500 site only goes back to 2010. If a Plan was supposed to terminate in the early 2000’s but assets were never brought to $0.00, how do you find this Plan?

Who is the rightful beneficiary in a death benefit transfer when the surviving spouse was the beneficiary? Employee passes and surviving spouse is the rightful beneficiary as no waiver was signed. Employee account was in early stages of transfer. Surviving spouse passes away before funds were transferred or beneficiary selected. thank you.

Reviewing the current fee setup during our audit and see there are fees being paid for out of the Plan for investment advisory (participants). The issue is this is our own internal wealth management group. They are under a LLC while the company is an LLP. Another challenge is the wealth management team was very outspoken to not use specific record keeper services (managed accounts) as it could conflict/overlap with our internal wealth company. Those that would use our internal advisors are mostly HCE where I do believe the managed services by the recordkeeper benefits all. The NHCE employees do have the option to use our internal advisors. This seems to be walking a very gray line and wanted outside thoughts. I don’t understand how the internal wealth management group is helping making fiduciary decisions, specific around investments but then can get paid for advisor fees from the Plan for those clients of their.

This could be applicable to only our Plan at this time. We were told if it was determined we were not following our Plan Compensation, we would have to rerun the ADP testing as it relates to NHCE and HCE. I know you mentioned ACP but giving you what we were told. We also have some of excise taxes because we were past the deadline for correction.

This has been very helpful. I appreciate all of your responses as we navigated through some tougher questions.

Working on the dark here but trying to find a resolution. When a partner from a firm retires, I am assuming they receive some sort of retirement benefits from the firm. from what I understand, these payments are similar to 409(a) payments but not 409(a) payments. if a retired partner returns to work as an employee but still receiving retirement benefits under a retired partner, what is their eligibility for 401(k). Employees and partners are eligible to participate in 401(k) though both have a different ways to contribute and being auto enrolled. The plan document has no specific mention of being excluding if retired partner is rehired as an employee. It’s the retirement benefits they may be receiving is what is throwing this off. thank you.

Not the most ideal situation but trying to create a solution to help support some operational failures. our base plan document allows us to add on an administrative policy around the order in which deductions are withheld from payroll to avoid under deferring or over deferring. We also have plans that are missed as sometimes there is not enough of a person's pay to allow for their mandatory and voluntary deductions. This does not appear to be a big item in plans documents or that a lot of plans have this. The thought is to adopt a policy in case the deductions are more than their pay, but I do not see any official ERISA guidance. Our plan compensation and to make our plan work, we need to have employees making deferrals. any thoughts or challenges? Anyone see where if not enough funds, 401k loans are withheld before their elective contributions? thank you

Thank you all. We asked about mistake of fact but this was met with the record keepers process. I appreciate all of your thoughts in a chaotic situation we were put into. Hoping things go more smoothly for the next one.

Thank you for your reply. The employee is terminated and had been terminated for quite some time. The employee was not entitled to the compensation given to them. The company is requesting the erroneous paycheck back and the terminated employee is sending back to the company. My understanding from the mishap is since this is in the Plan now, we must remove any of the funds associated to the contribution which includes gains. Our record keeper would calculate and send a 1099-R to offset the W-2 issued. I was told a check would be issued but now thinking about this, none of the funds should go to the participant since this was an incorrect payment. Feel like I am causing wheels to spin on a complicated mishap. Edited to Add - I am thinking a check would only be issued if there are earnings on the contribution.

I am sure this has been asked many times but I do not see anything similar to my challenge. Unfortunately, terminated employee was paid and had 401k withheld. Employee is returning the entire paycheck but due to system processes, our team was advised that we cannot choose which deductions to return - the whole check will be voided to look like it didn’t happen. Enter having to correct with our record keeper - we have advised the compliance way to correct - send over to record keeper for self correction, they will calculate the earrings, and issue 1099-R to offset W-2. If we do not have our record keeper complete there could be an employee loss to make whole or if there are gains, we still have ineligible funds in the Plan. I was basically told to just figure it out make it work. My make itwork way would be to follow our record keepers advice but getting pushback on the business because of their system limitations. how would you go about correcting? How would we be able to calculate earnings or losses on a contribution that has been in the Plan for months? thank you.

Not sure if it is dependent upon the record keeper but it was always a different source for the QNECs I have seen in our plan. The missed deferral was calculated first then the earnings. I am not 100% certain on the match so don’t want to provide incorrect guidances

My apologies on the wording. I did not mean to cause confusion. It was requested to the record keeper but not on behalf of the Plan Sponsor or authorized singer of the Plan. This rogue advisor made the request which from my understanding, changing the default investment fund for specific participants would have benefited our HCEs and would not follow our QDIA. Just wanted to make sure that I understood because of the wording used with QDIA. Just trying to learn where and how to interpret the rulings.

Just to confirm - because they are asking Plan related questions to our record keeper, they are now part of our fiduciary? They have no sort of decision making and we would like to keep it that way. This is why I thought them going rogue would cause some sort of disqualification in the Plan if our record keeper listened to them.

I can confirm they are not the Plan Fiduciary or anywhere listed in the AA, Amendments, Service Agreements to make decisions for the Plan. They are not an authorized signer of the Plan either. I personally believe they are on a power trip knowing that they hold a lot of knowledge around advising clients on their retirement. What they do not know is our record keeper comes to us about everything they are doing behind the scenes and how much trouble they are causing. They only know the advising clients who have a 401(k) account side vs. administering the Plan.

Thank you for replying. This is very helpful detail as I was trying to sort through where the fiduciary liability could be. The Plan has self directed brokerage accounts in which some team members have specific investment elections for each source in the Plan. It was requested to bypass whatever investment election option was defaulted or elected by participants and to just move directly to their SDB but only for specific participants. Almost like, can you do one thing for this population and another for your other population of participants. I should add this was not requested by the Plan Sponsor or anyone who can actually make decisions for the Plan. Said individual actually did not go to the Plan Sponsor and went to the record keeper themselves to ask for this to happen. They are affiliated with the Plan due to the advisor/investment relationship but have no decision making when it comes to the over 401(k) Plan.

Where or what details can be provided by ERISA guidance that say allocations must be deposited into the investment election that the participant chose or was defaulted too? I know this is a Plan Failure but does it disqualify the Plan? example - company provides small catch up profit sharing contribution. It was requested for these funds to be deposited into specific accounts that do not follow the QIDA.

Sorry if this was answered but thought I would chime in. Fidelity is notorious for providing incorrect information so I would thoroughly inspect what they send you: our team had to get pretty stern on a few things and they finally came though - just with the wrong data points.

I would first confirm if this is an hours requirement vs elapsed time method for service and vesting and is your vesting schedule cliff or graded? If said participant worked 1000+ hours in the Plan year for 2014, 2017, that is for sure 2 years of service. Depending on other items, did the participant take a distribution? This will likely impact if they have a match or profit sharing contributions. They might have forfeited funds and if are fully vested, might not be showing depending on the Plan setup.

Thank you all for your responses. Sounds like the EOB is best! Like many of you, I had no idea what a split 401(k) was and google was no help! I have learned so much in the past few months. We have two Plans for our employees and there is an identifier of which Plan they are under.

Hoping someone could assist. I help oversee a 401(k) Split Plan. There is several complexities to the Plan which is why is makes me harder to administer. Trying to determine which book is best to purchase. The options I believe I have is the ERISA Outline Book or the 401(k) Answer Book by Empower. Both are super expensive so weighing options. thank you for your thoughts.

I tried looking for answers on this and haven’t found one that gives the plan sponsor view of what it is like to change recordkeepers. We are knee deep in converting our plan and the hurdles keep coming to us. We seems to take one step forward but then 15 steps backward each day. Any advise or previous experience in converting? This is a massive change in a very condensed timeframe and very small team.

7.5% is very generous and typically that is the number I have heard. the other complicated way if you are worried about testing, you could setup a “split plan design” to maximize your CB contributions. For the sake of your own sanity, fight as hard as you can for 7.5%.

Was hoping anyone has experienced this before and any thoughts. Am trying to think through all possibilities and with compliance testing for the HCE and NCHE employees also rehired participants. The thought is to merge plans so not one is terminated. Vesting Schedule Plan A - For hires on/after 1/1/2017, 25% after 2 years; 50% after 3 years; 75% after 4 years; 100% for 5 or more years, 100% vested if employed on 12/31/2016 Plan B - 3-year cliff; 6-year graded vesting for pre amendment of 12/31/2016 Possible Vesting but what happens to rehired participants and compliance testing? are all of these possibilities? Apply the legacy vesting schedules to amounts accrued through 12/31/23 and a new schedule to amounts accrued on/after 1/1/2024. Vest all participants immediately Vest 25% after 1 year, 50% after 2 years, 100% after 3 years Changing everyone to 100% after 2 years Vest everyone 25% after 2 years, 100% after 3 years.

Newbie here but nonetheless, determined there were a handful of missed profit sharing contributions from our annual profit-sharing calculations for the past two years. Do we calculate any missed earnings on these contributions and how is that done? Do we handle the earnings similar to missed salary deferrals through QNECs or is there another formula that would need to be calculated? Thank you.