Retirement

Question 1

Safe Harbor 401k Plan

Answer 1

Avoid nondisc testing if plan meetings safe harbor, 100% vested

1) nonelective contribution of 3% (no matter who is deferring)
2) employer match of 100% on first 3% of non-HCE, plus 50% match on next 2% of non-HCE = total of 4% for non-HCE deferring salary

• Can only make 1 year waiting period for eligibility
• Saves on annual testing

Question 2

Active Participation in Employer Sponsored Plan

Answer 2

Defined Benefit Pension Plan - employee is eligible to accrue benefits

Defined Contribution (Simple IRA, SEP, 403b) - employer contribution or forfeiture is allocated to participant’s account or if participant contributes an elective deferral.

*Participating in Section 457 plan is not an active participant for determining deductibility of IRA contribution

Question 3

Loans from Qualified Plans, Section 403b, and Govt Sec 457 (TSP) Plans

Answer 3

No IRA type plans allow loans

Most common type of plan to offer loan is 401k
Sometimes 403b and 457 allow loans

Repayment plan must be adhered to otherwise it’s a distribution. Plan loans limited to 50% vested account balance, limit of $50k. If below $20k, loans up to $10k are permitted without % limits.