FAQs
Below is a list of some of the most frequently asked questions. If you have questions, please don’t hesitate to contact us.
Frequently Asked Questions
What is a Traditional 401(k) plan?
A Traditional 401(k) plan is a retirement savings plan offered by employers in which employees can contribute a portion of their pre-tax income into a tax-deferred investment account. Contributions are invested in a variety of investment options and grow tax-free until withdrawal during retirement. At withdrawal, the funds are taxed as ordinary income.
What is 401(k) plan testing?
401(k) plan testing refers to the annual evaluation of a company’s 401(k) plan to ensure it complies with the IRS regulations and doesn’t unfairly benefit highly compensated employees (HCEs). The two main types of tests are the ADP (Actual Deferral Percentage) test and the ACP (Actual Contribution Percentage) test, which assess the amount of contributions made by HCEs and non-HCEs. If the plan fails the tests, corrective actions may need to be taken, such as returning excess contributions or providing additional benefits to non-HCEs.
What is ADP/ACP testing?
ADP (Actual Deferral Percentage) and ACP (Actual Contribution Percentage) testing are two compliance tests that 401(k) plans must undergo each year to ensure they meet the requirements set by the Internal Revenue Service (IRS). The ADP test measures the average contribution percentage of highly compensated employees (HCEs) compared to non-highly compensated employees (NHCEs), while the ACP test measures the average matching or non-elective contribution percentage made by the employer to the same groups. If the ADP or ACP test fails, the plan may be required to take corrective action to avoid violating IRS nondiscrimination rules.
What is Top Heavy testing?
Top Heavy testing is a compliance test that applies to 401(k) retirement plans to ensure that they do not favor highly compensated employees (HCEs) over non-highly compensated employees (NHCEs). A plan is considered “top-heavy” if the accounts of key employees exceed 60% of the total plan assets. If a plan is top-heavy, it must satisfy certain contribution and vesting requirements for NHCEs in order to avoid violating IRS rules. The purpose of the Top Heavy testing is to ensure that all employees, not just HCEs, have the opportunity to benefit from the plan’s retirement benefits.
What is a Safe Harbor 401(k) plan?
A Safe Harbor 401(k) plan is a type of retirement savings plan that allows employers to avoid certain compliance tests required for traditional 401(k) plans. Safe Harbor plans require employers to make annual contributions to employees’ retirement accounts that are immediately vested and fully funded. The contributions must either be a specified percentage of employee compensation or a dollar-for-dollar match of employee contributions up to a certain limit.
What is a Safe Harbor Match?
A Safe Harbor Match is a type of employer contribution made to a 401(k) retirement plan that satisfies the Safe Harbor requirements set by the Internal Revenue Service (IRS). To meet Safe Harbor requirements, employers must make contributions that are immediately vested and fully funded, and that either match employee contributions up to a certain limit or are a specified percentage of employee compensation.
What is a 3% Safe Harbor Profit Share?
A 3% Safe Harbor Profit Share is a type of employer contribution made to a 401(k) retirement plan that satisfies the Safe Harbor requirements set by the Internal Revenue Service (IRS). To meet Safe Harbor requirements, employers must make contributions that are immediately vested and fully funded, and that either match employee contributions up to a certain limit or are a specified percentage of employee compensation.
What is a Cash Balance plan?
A Cash Balance plan is a type of retirement plan in which an employer guarantees a predetermined benefit to employees based on a fixed formula expressed as a hypothetical account balance. It is a hybrid of defined benefit and defined contribution plans.
What is a Defined Benefit plan?
A Defined Benefit plan is a type of retirement plan in which an employer promises to pay a specific benefit amount to employees based on a fixed formula that considers factors such as salary, years of service, and age at retirement.
What is it like to setup a plan?
Setting up a retirement plan can be a complex process that involves several steps and considerations. Luckily, our team makes the process simple and streamlined. Reach out to our team to get some more information!
How do I claim the $5,000 Tax Credit?
To claim the Retirement Savings Contributions Credit, also known as the Saver’s Credit, you need to determine if you are eligible based on income limits and make eligible contributions to a qualified retirement plan. You can claim the credit by completing Form 8880 and attaching it to your tax return.
How do I setup an EIN?
To obtain an EIN, you need to be eligible and have a valid Taxpayer Identification Number (TIN). You can apply online, by mail, fax, or phone by filling out Form SS-4 and providing the necessary information about your business.
What is it like to transition a plan?
Transitioning a retirement plan from one provider to another is a complex process that involves careful planning and execution. It typically involves choosing a new provider, reviewing the plan documents, communicating with employees, coordinating the transfer of assets, and ensuring that the plan remains compliant with IRS and Department of Labor regulations throughout the transition.
How can I search the form 5500 database?
To search the Form 5500 database, visit the EFAST2 website and select the “Search Form 5500/5500-SF Data” option. From there, you can enter your search criteria, including plan name, sponsor name, and EIN, and view the results. You can also download the data in various formats.
How do I file a DFVPC?
To file under the Delinquent Filer Voluntary Compliance Program (DFVCP), you need to determine your eligibility based on your delinquent filings and the time frame for corrections. You can then complete Form 5500 or 5500-EZ and submit it to the IRS, along with any required payment. If your submission is accepted, you will receive a reduced penalty for late filings.
How can I contact Premier Plan Consultants?
To contact Premier Plan Consultants, you can navigate to our contact page to fill out a form with your name, email address, phone number, and a brief message. A team member will review your message and respond to you as soon as possible. Feel free to also call or email us if that is more convenient.
