Retirement Plan Provisions

Plan ProvisionOptions
Legal employer nameThe name of the entity that will appear on all official documents or legal papers.
Legal plan nameBenefit plans are required to have their own identifying information, including plan name, which is required on the annual Form 5500 and summary plan description (SPD).
EIN (employer identification number)The EIN is a unique nine-digit number assigned by the IRS to business entities operating in the United States for the purposes of identification.
Plan yearThe calendar, or fiscal year on which the records of the plan are kept.
Fiscal yearThe period your company uses for accounting purposes and preparing financial statements.
Own other companies?If so, please provide the name and EIN for all entities in the plan.
Other plansCannot sponsor Simple IRA/401(k) and regular 401(k) in the same year.
Excluded employeesMost plans exclude nonresident aliens, leased employees, and independent contractors. The plan can exclude part-time employees with less than 1,000 hours in a 12-month computation period. It can also exclude other classifications, but additional testing would apply.
CompensationMost plans use W-2 wages, including deferrals and compensation, from entry date for mid-year entrants, no exclusions (includes bonuses, overtime, and commissions). If there are compensation exclusions additional testing will apply.
Hours computationMost plans use actual hours; however, you can also use equivalency or elapsed time.
Recognize service?The plan can choose to recognize service with another company for eligibility, vesting, and/or contributions.
Age requirementThe plan cannot have an age requirement over age 21.
Eligibility requirementThe plan cannot have a service requirement over one year of service with 1,000 hours.
Entry datesThe plan can have immediate, monthly, quarterly, or semi-annual entry dates.
Salary deferralsMost plans allow deferrals up to the maximum allowed by law and permit participants to change deferrals any day. Most plans also allow catch-up deferrals for participants over age 50.
Roth deferralsThe plan can allow for after-tax Roth deferrals. If a participant has deferrals in the plan at least five years from the first contribution and takes distribution after attaining age 59½, death, or disability, earnings on Roth deferrals are not taxable.
Automatic enrollmentThe plan can require participants that have not completed an enrollment form to have an automatic deferral set up.
Safe harbor contributionThe plan can allow for a safe harbor contribution. A safe harbor contribution is a required contribution that may allow highly compensated employees to defer up to the maximum allowed by law by potentially alleviating most discrimination testing. A safe harbor contribution is required to be 100% vested. There are two types of safe harbor contributions:
  • Safe harbor profit sharing – goes to all plan participants and must be equal to or greater than a 3% contribution.
  • Safe harbor match – goes to participants that deferred into the plan and must be equal to or greater than 100% of the first 3%, plus 50% on the next 2%.

  • Match contributionThe plan can allow for a matching contribution. Most plans have a discretionary match per payroll. The plan can also have an annual match and require participants have 1,000 hours and be employed on the last day of the plan year to receive it.
    Profit-sharing contributionThe plan can allow for a profit-sharing contribution. Most plans have a discretionary profit-sharing contribution and require employees have 1,000 hours and be employed on the last day of the plan year to receive it.
    VestingThe maximum schedule allowed is 20% vested after two years of service with an additional 20% each year and
    100% vesting after six years of service. Most plans use 1,000 hours in a plan year to calculate one year of service and do not exclude service (include service prior to effective date, age 18). The plan can have a more generous schedule.
    ForfeituresThe plan can use forfeitures to reduce contributions/expenses or reallocate as an additional contribution.
    Normal retirementMost plans use age 65.
    LoansThe plan can allow loans. The standard loan policy is $1,000 minimum, one loan at a time, prime interest rate plus 1%, loans due 60 days after a participant terminates, and can be issued for any reason.
    Age 59½ withdrawalThe plan can allow age 59½ in-service withdrawals from employee and/or employer money.
    In-plan Roth transferThe plan can allow active employees an in-plan Roth transfer of their pre-tax account balance.
    HardshipsThe plan can allow hardship withdrawals from employee and/or employer money.
    Distribution optionsThe plan must allow for lump distributions and may also allow for installments or partial distributions.
    Mandatory distributionsThe plan can force out distributions for terminated participants with balances less than$5,000. Balances between $1,000 and $5,000 can be forced into an IRA and participants with balances less than $1,000 can be issued a check. Cash distributions are only allowed for balances less than $1,000.
    Default fundRequired for contributions for those participants who do not select investment elections.
    Payroll frequencyRequired to know the payroll frequency.
    Fidelity bond and auditA fidelity bond of 10% of estimated assets is needed. An audit is needed if there are over 100 participants.
    Effective dateWill employer contributions be calculated on the entire year or from the effect date with Alerus?