BellaBee41

Thank you! Ok we will be removing the excess and it will go towards our forfeiture account.

Hello, We had a salaried employee who resigned recently, but HR was not notified in advance, which caused the employee to receive a full paycheck in error. We are working on recovering the overpayment, but this employee also had Roth deferrals that has already been funded to his retirement account. Our record keeper suggested we remove the excess contribution from the participants account, which we plan to do.? I haven’t heard back as to how to employee is going to repay us (employer) back, but I’m assuming it is via a check. My question- is this something we should correct via payroll as well since we are reversing the contributions from his retirement account?

Thank you both so much! This was very helpful. We will be self-correcting and will manually correct payroll so that it flows through their w-2 since it is a pretty recent error that was caught early. Thank you!

Hello. We have a new hire that elected Roth, but the contributions were mistakenly set to pre-tax. This only occurred on his third paycheck. I’ll be working with our 401k provider to move the funds to the Roth account, but What else do we need to do to correct this? Is a qnec necessary?

Hello. We have some layoffs happening at the end of the month, which employees have already been made aware of. If benefits also end on the last day of the month, are we able to provide the COBRA notices early (now for example) and will they be able to elect COBRA prior to their termination date on 6/30? Or is there a law that states they cannot elect COBRA until the qualifying event occurs (6/30 term date)?

Thank you @Brian Gilmore. What about if an employee leaves the company at the beginning of the month? If their health benefits are covered through the end of the month and we take two benefit deductions to cover the entire month, should we do the same for HSA EE contributions?

Hi All, For employers that offer an HSA and HSA Employer Contribution, what is the best practice for when employees leave the company? Medical benefits are scheduled to term on last day of month (in the example below, it would end on 2/28). When should the employer stop their EE & ER contributions? For example, pay period is from 2/17/2025 - 3/2/2025 and pay date is 3/7/2025. If an employee terminates on 2/24, should they receive the full employer contribution even if the pay date falls in March? What about their EE contributions? Should employers still deduct the EE contributions from their March check, even if benefits ended on 2/28?

Thanks @EBECatty! This is a great idea if we can exclude them and what I propose we do.

Thank you @Peter Gulia. I do plan to discuss with legal as well.

@CuseFan Thank you! This was very helpful.

Hi @Bill Presson. Thank you. Yes, that is also what I was told by our NQDC rep also. He did say that it doesn’t happen often, but employees can sometimes be eligible for the 401(k) one year and no longer be eligible the following year and vice versa based on compensation preceding the new plan year.

Thank you both! Service requirement is 90 days and entry day is the first of the month after service requirement is met.

Hello. We have a nonqualified deferred compensation plan for our HCEs. I’m a bit confused as to how we determine eligibility as I feel that it somewhat conflicts with eligibility for our regular 401(k) plan that HCEs are not eligible for. Our qualified 401(k) plan excludes HCEs based on the IRS’ definition of an HCE (not a 5% owner and did not earn greater than 150k in 2023 (for the 2024 plan year)). Our adoption agreement clearly states that HCEs are excluded from the plan. My question- How does this work for new VPs or executives that we hire in 2024? Are they eligible for the regular 401(k) plan since they do not meet the HCE definition yet? Or are they eligible for the nonqualified plan? The eligibility for the nonqual plan is for ‘a select group of management or HCE as defined by the employer.’ Our 401(k) administrator is telling me that these new hire VPs and execs should be eligible for the regular 401(k) and should be given the opportunity to elect since they do not yet meet the definition of an HCE. I do agree with this statement since the only employees excluded from the regular 401(k) plan are HCEs in our plan document. We did not elect the top paid group election for our non discrimination testing either. So where I’m confused is that our administrator for the nonqualified plan on the other hand is telling me that new hires who come in and are in the top 20% of employees current compensation would be eligible for the nonqual plan. But he also says that eligibility is ultimately determined by the company. I understand that these VPs may be eligible in their first year, but may no longer be the following year if we are basing it off of their income in the previous year or ownership and they are determined to be an HCE. I don’t want to be out of compliance in regards to our regular 401(k) and want to make sure we are offering the plan to non-excluded team members even if they are VPs and above. So based on the info I provided, would they be eligible for the traditional 401(k) plan (until it is determined they are an HCE) or the non-qual plan? I’m getting two different responses, from both administrators so any input would be appreciated!

Hi All, We recently came across a situation at work regarding HCEs. Since I started working at this company last year, New Hire executives and above that are “considered” a highly compensated employee is excluded from participating in the plan, meaning those we hire with a salary over $155K for 2024. Per the IRS definition, determination depends on if the employee was a 5% owner in the current testing period or the 12 months preferring the testing period OR if they earned greater than $155K in 2024. Im our plan documents state that HCEs are excluded from the plan. My question is, should they be eligible to participate in the 401k plan as a new hire (assuming they meet the eligibility requirements for the plan)? And then in the following year for 2025, determine their eligibility based on their actual gross compensation for 2024? Just confused if we should be allowing them to enter the plan at all in their first year.

Thanks Paul! The reason was because they had their paychecks voided/reversed after the funds were already deposited into their 401(k) accounts.