FAQ of the Moment
What is the 401(k)/403(b)
deferral limit? What is the Social Security Taxable Wage Base?
Any individual is permitted to contribute up to $18,000
to an Employer sponsored 401(k) or 403(b) Plan in 2015. There are four
exceptions to this limit.
1) If an individual works for more than one Employer, the
total combined amount that can be contributed to multiple
401(k) or 403(b) plans (or any combination of the two) is $18,000.
2) If an individual reaches the age of 50 by the end of a
calendar year, they are eligible for a “Catch Up” contribution
of up to $6,000 in addition to the $18,000 401(k) or 403(b) contribution.
This “Catch Up” contribution is not included in the required
IRS non-discrimination testing.
3) If an individual does not earn at least $18,000, their
401(k) or 403(b) contribution is limited to 100% of their earned income
4) An employee might be limited if they are highly compensated
as defined by the IRS. Please contact the Plan Administrator
for any questions.
For 2015, the Social Security Taxable Wage Base is $118,500.
Do Highly Compensated Employees (HCEs) have to wait for non-discrimination testing results to file their individual tax returns?
No. Starting for plan years beginning on or after January 1, 2008, all refunds for failed testing are taxable in the year they are received, even if the plan processes the refunds before March 15.
What is Automatic Enrollment?
Automatic enrollment gives the plan sponsor the ability to enroll every participant at a set deferral percentage as determined in the plan document. An employee who wishes to opt out must do so in writing before 90 days after the entry date. Please call your account executive for more details.
Are Roth 401(k) contributions allowed?
Starting in 2006, plans had the option of allowing Roth 401(k) contributions. Click on the links below for more information.
How does the Pension Protection Act of 2006 affect my 401(k) Plan?
In August of 2006, President Bush signed the Pension Protection Act into law. This Act made numerous changes to the laws governing retirement plans. These are some of the points that may affect you.
- Vesting for all employer contributions must be at least as good as a 6 year graded schedule or a 3 year cliff;
- Non-spousal beneficiaries can now roll death distributions over to IRAs;
- EGTRRA provisions, previously set to sunset in 2010, are now permanent This includes the higher deferral limits, as well as the Saver's Credit;
- The threshold for filing a 5500-EZ is raised from $100,000 to $250,000;
- Starting in 2008, employers electing automatic enrollment may have lower Safe Harbor contributions.
If you need any more information, please contact your Account Executive.
What is a Safe Harbor Plan?
A Safe Harbor Plan is a plan that uses a Safe Harbor contribution in order to automatically pass 401(k) testing. There are two basic types of Safe Harbor contributions: Safe Harbor Profit Sharing (SH PS) and Safe Harbor Matching (SH Match). All Safe Harbor contributions are automatically 100% vested to the participants upon deposit.
A SH PS plan uses a contribution of at least 3% of salary across the board to every employee who was eligible to defer during the plan year.
A SH Match plan normally employs a contribution of 100% of compensation on the first 3% of deferrals plus 50% of compensation on the next 2% of deferrals.
Both types of contributions can be increased, within limits.
In order to adopt a Safe Harbor plan, notices must be distributed to participants between 30 and 90 days before the beginning of the plan year.