Contributions and Futures

Question 1

Actual Contribution Percentage (ACP)

Answer 1

Annual testing that prevents a plan from discriminating in favor of highly compensated employees (HCEs)

Question 2

Actual Deferral Percentage (ADP) testing

Answer 2

An ADP test ensures a fair level of deferral contributions from non-HCEs exists and that contributions to a 401(k) plan do not discriminate in favor of HCEs

Question 3

After-Tax Contributions

Answer 3

After-tax contributions are deducted from pay and made to the plan after customers have paid all applicable taxes. At withdrawal, after-tax contributions are nontaxable; however, any earnings are taxable

Question 4

Annual Increase Program (AIP)

Answer 4

Customers who enroll in the AIP agree to increase their contributions by a certain amount on an annual basis. On the scheduled increase date, Fidelity sends the employer the new contribution amount based on the increase increment

Question 5

Catch-Up Contributions

Answer 5

Catch-up contributions allow customers who are age 50 and older to contribute more than the IRS limit. These contributions allow customers nearing retirement age to save more. *Catch-up contributions do not apply to the 415(c) limit