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Nondiscrimination Testing

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Now You Can Be Up to Your QNEC in Forfeitures

January 20, 2017

Authors

Sarah Bhagwandin and Chris Rylands

Now You Can Be Up to Your QNEC in Forfeitures

January 20, 2017

by: Sarah Bhagwandin and Chris Rylands

Money in basket. Isolated over whiteOn January 18, 2017, the IRS issued proposed regulations allowing amounts held as forfeitures in a 401(k) plan to be used to fund qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs). This sounds really technical (and it is), but it’s also really helpful.  Some plan sponsors of 401(k) plans use additional contributions QNECs and/or QMACs to satisfy nondiscrimination testing.  Before these proposed rules, they could not use forfeitures to fund these contributions because the rules required that QNECs and QMACs be nonforfeitable when made (and also subject to the same distribution restrictions as 401(k) contributions).  If you have money sitting in a forfeiture account, then by definition it was forfeitable when made, so that money couldn’t possibly have been used to fund a

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Undermining the Goal of Expanding Coverage for Nonhighly Compensated Employees

March 16, 2016

Authors

benefitsbclp

Undermining the Goal of Expanding Coverage for Nonhighly Compensated Employees

March 16, 2016

by: benefitsbclp

Piggy Bank in CrosshairsOne might be led to believe that the current administration is in favor of expanding retirement savings opportunities. After all, the DOL has somewhat apologetically subverted ERISA to allow the States to sponsor employer-based savings plans.  And the President’s recently proposed budget endeavors to provide a national retirement savings program. (See page 135 of the General Explanations of the Administration’s Fiscal Year 2017 Revenue Proposals) So why then would the IRS reverse two decades of regulation that favors cross-tested plans in small businesses, an action that might cause many small employers to terminate their qualified plans or amend them to reduce the employer contribution to employee’s accounts?

Some background may

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