Employer FAQ
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| Employer FAQ
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Q: Who is a highly compensated employee?
A:
- An employee that owns (directly of indirectly) more than 5% of the employer at any time during the current plan year or the twelve months proceeding the plan year (look back year)
- An employee is a HCE (for 2011) if his compensation for the look back year (2010) Was more than $110,000.00.
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Q: Who is a non-highly compensated employee?
A: Any employee not meeting the highly compensated employee definition. |
Q: What is the due date for depositing employee deferral contributions to a 401(k) plan?
A: Employee deferral contributions should be deposited as soon as possible after being withheld from the employee’s check. This should be within a few days following each payroll. |
Q: How are distributions processed from the retirement plan?
A: Distributions are a result of a qualifying event such as employment terminations, financial hardship distributions, reaching the plans normal retirement age, death or disability. Your plan adoption agreement addresses each allowable distribution and the timing of these distributions, whether it’s ASAP or following the end of the plan year in which a participant terminates, you should consult Miles & Associates, Inc. to determine the timing of such distributions. Then Miles & Associates will prepare all the necessary paperwork and review all compliance issues. |
Q: Who should I call when questions arise from participants under our plan? Or questions I should have?
A: At Miles Retirement Services, we have several qualified plan administrators that are familiar with your plan. The plan administrator and team manager that completed your last annual report should be your first point of contact. |
Q: What is the due date for distributing excess contributions to our highly compensated employee’s when our traditional 401(k) plan fails to satisfy the 401(k) non-discrimination testing?
A: *The due date is 2 ½ months following the plan year end.
*If your plan year-end is on a calendar year the due date is March 15th.
*If distributed by the due date the excess contribution is taxable to the participant in the plan year the excess contribution is distributed. |
Q: When is the excess contribution taxed to the participant if distributed after the due date?
A: *The excess amount plus allocable earnings is taxed in the year received. |
Q: Are Roth 401(k) plan deferrals subject to the same distribution events as are “regular” pre-tax 401(k) plan deferrals? What is the difference between a “ qualified distribution” and any other Roth 401(k) distribution?
A: Yes. A Roth deferral is still an elective deferral, and is subject to the same distribution restrictions as any other deferral (age 591/2, death, disability, severance of employment, plan termination, hardship, corrective distributions). However, if a participant wishes to avoid taxation on Roth deferral earnings, the taxpayer must wait until 591/2, death, or disability and must satisfy a 5-year “nonexclusion period” rule. (Quoted from Monthly Current Developments,April 2005 Vol Ten, SunGard Corbel) |
Q: If a discretionary profit sharing plan provides that the plan will use forfeitures to reduce Employer contributions, how should the plan treat forfeitures for a plan year in which the Employer decides not to make a profit sharing contribution?
A: The plan must allocate the forfeitures. With limited exceptions (e.g., eliminating certain excess annual additions), a plan may not hold over an employer contribution from one plan year to the next in an unallocated suspense account. It is not necessary for a discretionary profit sharing plan to include a provision to offset forfeitures against employer contributions, since the discretionary profit sharing plan always permits an employer to take forfeitures into account in determining the employer’s contribution for the plan year. In any case the employer does not retain discretion to withhold allocation of the forfeiture. (Quoted from Monthly Current Developments, April 2005 Vol Ten, SunGarCOrbel). |
