401(k)athryn

We have a plan sponsor that implemented a 401(k) Plan in 2016. This is a safe harbor match plan with an additional fixed match and a discretionary match, i.e. uses the triple-stacked match plan design. The fixed match formula is 86.79% on deferrals up to 6% of pay. This was written into the plan, as it is the formula that maximizes the owners for 2016, when we are using a discretionary match of 66.6667% on 6% of deferrals (equals the 4% ACP safe harbor match). I realize that we should have considered drafting this differently because now we will be in a situation where the owners are not maximizing for 2017 under this formula (due to COLA increases). I am curious to know what other administrators are doing: 1) Amending the plan document in advance of each year to increase the fixed formula based upon the COLA increases OR 2) Drafting the original plan documents in such a way that amendments each year will not be necessary and owners will still maximize contributions. This could be something like including a 100% fixed match on deferrals up to 6% and then determining the discretionary match (ACP safe harbor) to maximize. The problem here is that the plan sponsor would be committing to a higher fixed match than would be necessary.

Thanks for the input! You are right that it is not really a big deal to let this plan continue into 2017, but I did not factor in a 2017 filing and continued communications in my termination fees. In addition, the company is shutting down following the asset sale, so I want to wrap it up while the Trustee is still readily available. Either way, I do see going into 2017 as an option if I take the most conservative approach here. I would still prefer to use an estimate of earned income, which the CPA has offered to provide. Thanks!

I have a 3% nonelective safe harbor 401(k) Plan that is terminating effective 10/31/2016. The safe harbor is to be calculated based upon compensation from January - October. This is due to a business acquisition, so safe harbor status is maintained. There is one owner who receives Schedule C income. Safe Harbor has been deposited for the 3 non-owner employees throughout the year. The owner has taken $10,000 distributions periodically and the bookkeeper has made 3% safe harbor deposits based upon these amounts to the owner's account. The owner's actual earned income for the year will not be determined until sometime in the first quarter of 2017, but we would like to have all assets paid by 12/31/2016 to prevent another plan year. So...how do I calculate the owner's safe harbor contribution from 1/1/2016 through 10/31/2016? 1) Treat him as having earned $0. This would be a problem because, not only did he have safe harbor deposits, but he also deferred during the year. 2) Have the CPA estimate his earned income from 1/1/2016 through 10/31/2016 and calculate the safe harbor for the owner based upon this estimate. Any other options? Has anyone dealt with this conundrum? Thank you!

Thank you everyone for your feedback. We have the QDRO fees come from the account of the Participant. This is stated in the fee addendum of the SPD, but not stated in the plan document itself. The participant fee disclosures state that the hourly fee will be deducted from the account, but do not get more specific. The timing of the fee deduction (before or after distribution is processed/calculated) and the QDRO language could determine whether the Payee is sharing in the cost at all. For example, if the QDRO is to be 50% of the vested balance at the time of distribution, one company may withhold this fee and then split the account to pay the Payee, which would be a sharing of the fee. Another might split the account and then withhold from the Payee's distribution before processing. A third might split the account and then deduct from the remaining balance. It sounds like all are acceptable. ESOP Guy - If we just had the sponsor pay and let it get worked out separately, then the Participant would not have the option to pay from his plan account, which can be helpful, since these fees are often a few hundred dollars. GMK - Interesting that you let the Participant and Payee decide who pays. One more thing to bicker about. It would make life less complicated if there was a set rule, but it seems as though that is not the case. QDROphile - You are dismayed by my question, but then go on to confirm that there are many ways of handling the fee. I was hoping to get feedback on how others handle, which is what I got, so I stand by my question. Thanks for your thorough answer! Also, I would not have a QDRO fee shared amongst all plan participants as a general expense, even if this is allowable. Just doesn't seem right. Most of our plans are individually directed, but even with a pooled account, I would apply to the participant's balance. Thanks again everyone!

We have an hourly fee for the processing of a QDRO distribution. Is there any guidance on who is responsible for paying the fee - the Participant or the Alternate Payee? Does anyone out there have the Participant and the Payee split the QDRO fee?