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Reminder to Apply Defined Contribution Plan?ÇÖs Forfeitures

Employers are reminded to ensure their defined contribution plan forfeitures are used or allocated in the plan year in which they arise and in a manner specified by the plan?ÇÖs terms. Plans may permit the use of forfeitures to reduce employer contributions or to pay reasonable plan administrative expenses. Some employers find it administratively difficult to use forfeitures to offset periodic employer contributions because it may involve a manual override to the automatic contribution feed to the plan?ÇÖs third-party administrator. In addition, some systems don?ÇÖt have a process in place to permit only a partial offset of company contributions for a particular period in some circumstances. The IRS reminded employers about this requirement a few years ago (see here) and made the following suggestions: No forfeitures in a suspense account should remain unallocated beyond the end of the plan year in which they occurred. No forfeitures should be carried into… Continue Reading

IRS Permits Mid-Year Changes to Safe Harbor 401(k) Plans

In Notice 2016-16, the IRS announced that certain mid-year changes to a safe harbor retirement plan or to its safe harbor notice will not violate applicable safe harbor rules so long as new participant notice and election-change conditions are satisfied and the mid-year change is not one of several changes specifically prohibited in the Notice. Generally, safe harbor retirement plans must be effective for an entire 12-month plan year unless a specific exception applies, such as for a short initial or final plan year, among others. The Notice now permits safe harbor retirement plans to make certain mid-year plan design changes. If the change involves an item that is required to be included in the plan?ÇÖs annual safe harbor notice, an updated safe harbor notice that describes the change must be provided to plan participants either (i) within a reasonable period of time prior to the effective date of the… Continue Reading

February 2016
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