Mandatory (required) Employee Contribution

[Guest tjt169]

Is it possible to add mandatory (required) employee contributions to a 401(k) plan?

I know some straight Profit Sharing plans add this but wasn't sure if this could be added for 401(k) plan.

[ETA Consulting LLC]

Not to the 401(k) source. Contributions to this account must be at the election of the participant. This is why they are, typically, referred to as elective deferrals.

Good Luck!

[rcline46]

My turn to be persnickity - there ain't no such thing as a 401(k) plan, and we all know it. There is a profit sharing plan with a cash or deferred arrangement attached to it under IRC 401(k).

So, for tjt169, if you are asking if you can add a mandatory contribution feature to a plan that has a 401(k), then yes. However, you cannot make the ability to do 401(k) (pre-tax or ROTH) dependent on making mandatory contributions (which are after tax). You can make receipt of the profit sharing component of the the plan dependent on mandatory contributions.

For non-union plans, mandatory contributions have pretty much disappeared.

[david rigby]

Yep, and there is non-discrimination testing also.

Before including after-tax contributions (mandatory or not) in a DC plan, it probably makes sense to consider plan provisions to provide for automatic pre-tax contributions.

[jpod]

Good grief, who talked the employer into doing this (mandatory contributions, that is)?

[Guest tjt169]

Thanks everyone.

Does anyone have the specific regulation? I am working with an employer who wants to make the mandatory EE contribution a condition of participation in the 401(k) source but can’t find a regulation that specifically prohibits it.

[masteff]

What's the employer really trying to accomplish? Why not set the minimum 401(k) elective deferral at some percentage, such as 3%? So you either don't defer or you defer at least, say 3%?

http://benefitslink.com/boards/index.php?/topic/45344-minimum-deferral/

[jpod]

Please explain how the mandatory contribution could be a "condition" to 401k participation if it's MANDATORY?

[GMK]

Looks like they're trying to say that you're in an ineligible class for the 401(k) if you don't defer. That probably helps with the totals in the denominators for testing, if you could do it.

[Guest tjt169]

Thanks everyone for you insight. We actually found the information we were looking for in the 401(k) regulations.