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A Defined Contribution plan is a retirement plan in which employees contribute a fixed amount or percentage of their compensation to an individual account under the plan. Contributions are invested on the employee’s behalf and they will ultimately receive the balance in their accounts upon retirement. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans. For-profit companies can offer a 401(k) plan to help their employees save for their future by giving them the opportunity to defer pre-tax or after-tax dollars via payroll deduction into their account and select from a diversified investment menu. 403(b) plans provide retirement benefits for employees of public school districts, hospital groups, or 501(c)(3) organizations in these non-profit business sectors. An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company; this interest takes the form of shares of stock. Profit-sharing plans are a way for a company to share profits with its workers and align the financial well-being of workers with the company’s success. 457 plans cover retirement benefits for state and local government employees and some non-profit businesses. There are benefits to Employers for sponsoring retirement plans; research applicable defined contribution articles on the Watkins Ross blog. Our Watkins Ross retirement team has the experience and knowledge to help you design a plan to meet your business goals; connect with us here to learn more.
A common operational failure for retirement plans is when plan sponsors fail to apply the correct definition of compensation for retirement plan testing and benefit allocation purposes. Using an incorrect compensation total can impact the average deferral percentage...
What Are Controlled Groups and Controlled Group Rules?Controlled group rules exist to prevent business owners from subdividing their company into two separate companies - one employing highly compensated employees (HCEs) with a retirement plan and the other employing...
Code section 402(g) limits the amount an individual can defer to a 401(k) plan during a calendar year, and it applies at an individual level, not at a plan level. An individual’s elective deferrals are the sum of all pretax and Roth deferrals to a 401(k) plan plus any...
In a defined benefit plan, to receive in-service lump sum distributions at age 59 ½, the distribution must satisfy certain thresholds. Most lump sum in-service distributions for Highly Compensated Employees are contingent on the value of the plan
Understanding Your Retirement Plan's Force-out ProvisionsAre you aware of your plan's force-out provisions? If not, now would be an excellent time to find out. What force-out limit does your plan contain? When you find out, send out the appropriate paperwork to...
Getting 401(k) Participants Back in the Game in a Post Pandemic WorldThere is no doubt the coronavirus pandemic has impacted financial decisions many workers made during 2020. As the primary means of saving for retirement, 401(k) post pandemic balances were adversely...
SECURE Act: Plan Amendment Options The SECURE Act was signed into law on December 20, 2019. Your plan will require an amendment prior to the end of your 2022 plan year. Below are provisions that you will be able to elect in the plan amendment: Qualified Birth or...
The SECURE Act and Part-Time Employees If your plan requires employees to work 1,000 hours in a 12-month period to become eligible, you’ll soon need to start watching hours more closely. Having this 1,000-hour rule generally excludes those employees who work...
401(k) Retirement Plan Audit Why does my 401(k) retirement plan need an audit? The 401(k) plan audit is mandated by the Employee Retirement Income Security Act (ERISA) and is intended to make sure a plan is being run correctly. The audit seeks to; (1) review 401(k)...
It's Time Again to Rewrite Your Defined Contribution PlanIRS has recently announced that employers with pre-approved defined contribution plans (401(k), profit sharing and money purchase) will need to have their plan documents rewritten within the next two years. The...
CARES Act - Suspension of Loan Payment Provision If adopted by the plan, this applies to all qualified employees still working as well as qualified furloughed employees and those on a temporary leave of absence. Loan payments due between March 27, 2020 and December...
Internal Revenue Service Provides Temporary Relief and Other Guidance on Mid-Year Reductions of Safe Harbor Contributions to 401(k) Plans due to COVID-19On June 29, 2020, the Internal Revenue Service (the “IRS”) issued Notice 2020-52 that provides temporarily relief...
New Guidance for Definition of a Qualified IndividualIf your plan elected any of the CARES Act provisions to allow for coronavirus-related distributions or the expanded loan provisions, there has been a change to who may be considered a “qualified individual”....
The IRS released the 2020 Cost-Of-Living adjustments.
2019 IRS Operational Compliance ListAttention qualified retirement plan sponsors: The IRS has posted the 2019 IRS Operational Compliance List. The intent is to assist plan sponsors in being aware of compliance changes effective in the upcoming year with regard to...
April 1 is quickly approaching, so now is the time to verify if you or any of your employees must receive an initial RMD on April 1, 2019.
Corrective distributions must be processed by March 15 for a failed ADP/ACP test for a calendar plan year. Take these steps to prepare.
A beneficiary form determines who is entitled to the defined contribution retirement plan benefits upon the death of a participant. Is your form current?
A qualified retirement plan must meet various requirements throughout the year, check out our defined contribution compliance calendar today!
Many of these changes will become effective the first day of the plan year that begins in 2019.