Retirement Plan Year-end Compliance Worksheet
Every year, defined
contribution plan sponsors must make sure that their plans meet certain
compliance requirements. This worksheet briefly summarizes these compliance
requirements for documentation for the 2017 plan year.
IRS limits compensation to $270,000 when determining contributions, allocating
plan forfeitures, and performing most of the 2017 plan year discrimination
testing (ADP and ACP tests)
Contribution Limitation – Employer:
Sharing / 401(k) Plans – The deduction limit is 25% of eligible
participant’s gross compensation.
Money Purchase Pension
Plan – The deduction limit is 25% of eligible compensation.
are no longer taken into account for purposes of calculating this limit.
Additions Limit - Employee:
contributions, employee contributions and reallocated plan forfeitures
(annual additions) are limited to $54,000.
plan is top heavy if more than 60% of the plan’s benefits belong
to Key Employees. A Key Employee is a more than 5% owner, or a more than 1% owner
who received more than $150,000, or an officer of the company
who received more than $170,000 in compensation (in 2016).
If you maintain a
top-heavy plan, you may be required to make a minimum contribution to
the plan and the plan’s vesting schedule cannot exceed a 6-year
graded or 3-year cliff schedule.
must pass the Ratio Percentage Test as of the last day of the plan year.
Generally the percentage of Non-Highly Compensated Employees benefiting
the plan must be at least 70% of the percentage of Highly Compensated
Employees who benefit under the plan in order to pass this test. If the
plan fails this test, it must pass the more complex Average Benefits Test.
If your plan is on
a Standardized Prototype Adoption Agreement, you automatically pass.
If your plan is on
a Nonstandardized Prototype Adoption Agreement or is individually designed
(Age-weighted, New Comparability, ESOP), you must run this test at the
end of the plan year.
If you maintain
a 401(k) Plan:
the 2017 calendar year, a participant’s pre-tax contributions cannot
Note: an employee
age 50 or older may be eligible for an additional contribution of $6,000
if your plan adopts the “catch-up” rules introduced by “EGTRRA”.
Testing (401(k) Plans):
Actual Deferral Percentage (ADP) Test must be performed on the plan as of the last day
of the plan year, to prove that
Highly Compensated Employees (HCEs) do not contribute disproportionately
more to the plan than the
Non-Highly Compensated Employees (NHCEs).
If the company contributes
a match, or if the plan allows for employee after-tax contributions,
an Actual Contribution Percentage (ACP) Test must be performed as of the last
day of the plan year.
Note: If your plan
uses a “safe harbor” plan design, you may not have to perform
the ADP and/or ACP tests. If your plan is a “safe harbor”
plan, specific participant notice requirements must be met.
Highly Compensated Employee (HCE):
is considered a Highly Compensated Employee if either of the following two
conditions is met:
1. The employee owned more than
5% of company stock, either directly or indirectly through family attribution,
at any time during the testing year or the prior plan year.
2. The employee received
compensation in excess of $120,000 during 2016.
year the plan must file Form 5500 with the Department of Labor. This report
is due by the last day of the seventh month after the end of the plan
year. You may request an extension of two and ½ months beyond your
filing deadline. Extensions are automatically approved.
must maintain and update the plan for law changes.
plan year-end, you will receive a census data request for the plan year.
The data requested is generally employee dates of birth, dates of hire,
hours worked in the plan year, wages during the plan year, and new hires
and termination dates. The census request is used for annual compliance
testing and contribution calculations. You are also provided with a “supplemental
information sheet” to complete for Form 5500 compliance issues.
bond must cover all fiduciaries and any other individuals who handle plan
assets. The minimum bond amount required must be for at least 10% of plan
assets as of the beginning of the plan year. The maximum bond required
under ERISA is for $500,000 ($1,000,000 if assets hold non-ESOP employer securities).
You should evaluate the plan’s bond
coverage at the beginning of each plan year.