How do I upload the census file?

Uploading your 401(k) census file accurately is a key part of nondiscrimination testing and helps to ensure your plan remains in good standing. Setting aside time to carefully review and complete your census file will help prevent delays and ensure accurate reporting. Best Practices for Uploading Your Census File Use the Provided Tutorials and Formatting Guide The compliance questionnaire includes step-by-step tutorials and a formatting guide to help you complete your census file correctly. ...

Who is considered an owner in a company?

An owner is any individual who holds a direct or indirect ownership interest in a company. Ownership status is important for 401(k) nondiscrimination testing, as it helps determine whether an employee is classified as a Highly Compensated Employee (HCE) and impacts nondiscrimination testing. An employee is considered an owner if they: Own more than 5% of the company in the current or prior plan year, regardless of compensation. Own 1% or more of the company and earn more than the IRS-defined ...

How can we avoid Highly Compensated Employee (HCE) refunds?

Employers can take proactive and retroactive steps to reduce the likelihood of HCE refunds due to nondiscrimination testing failures. Some strategies require changes before the testing period, while others may help correct issues after a failure occurs. Proactive Strategies (Before Nondiscrimination Testing Fails) Adopt a Safe Harbor 401(k) Plan – Safe Harbor plans are exempt from Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) testing by requiring employer ...

Understanding 401(k) True-Up and True-Down Contributions

What is a true-up and a true-down? A 401(k) true-up contribution is an additional employer contribution made at the end of the year to make sure employees receive the full match they are entitled to under the plan’s terms. A true-down contribution occurs when an employee has received more in employer match contributions than they were eligible for, requiring an adjustment. When are true-up contributions required? A true-up contribution is due when employer contributions are owed to an eligible ...

Compensation Types For Nondiscrimination Testing

What is the difference between statutory compensation and plan compensation? Statutory compensation and plan compensation are often the same, but they differ when a plan has exclusions outlined in the plan document. Employers must report compensation accurately for proper 401(k) contributions and discrimination testing. Statutory compensation includes an employee’s total earnings, such as: Wages and salaries Bonuses Overtime Commissions Taxable fringe benefits Plan compensation is defined in ...

What is an NAICS code?

An NAICS (North American Industry Classification System) code is a six-digit number that categorizes businesses based on their primary economic activity. It is used for government reporting, compliance testing, and industry analysis. Employers must provide their NAICS code on the compliance questionnaire for their 401(k) plan. This code is used to: Classify the business for compliance testing and regulatory reporting. Create accurate industry benchmarking for economic analysis. Support ...

Why is a fidelity bond required for a 401(k) plan?

A fidelity bond protects 401(k) plan assets from fraud, theft, or dishonesty by individuals handling plan funds. ERISA § 412 and related regulations require every fiduciary of an employee benefit plan and every person who handles funds or other property of a 401(k) plan be properly bonded. Under ERISA, 401(k) plans are required to maintain a bond equal to at least 10% of total plan assets, with: A minimum bond of $1,000. A maximum bond of $500,000 per plan (or $1 million if the plan holds ...

What is a controlled group?

A controlled group consists of two or more companies with common ownership that must be treated as a single employer for 401(k) plan administration and nondiscrimination testing. There are two primary types of controlled groups: Parent-Subsidiary Controlled Group: One company owns at least 80% of another business. Brother-Sister Controlled Group: Five or fewer individuals, estates, or trusts collectively own 80% or more of two or more businesses and have more than 50% identical ownership in ...

Who is considered an officer in a company?

An officer is a high-level executive or decision-maker within a company. Common officer titles include: Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Operating Officer (COO) President, Vice President, Secretary, or Treasurer While job title is a factor, officer status is also determined by an individual’s authority, responsibilities, and decision-making power within the company. The plan document and corporate records help confirm officer status. Officer status must be ...

When are employer contributions due?

Employer contributions, including matching and profit-sharing contributions, must be made by the company’s tax filing deadline, including extensions, to be tax-deductible and compliant with IRS regulations. Key Deadlines for Employer Contributions Standard Deadline: Contributions are due by the company’s federal tax filing deadline (typically March 15 for S-corporations and partnerships or April 15 for C-corporations and sole proprietorships). Extended Deadline: If the company files a tax ...

Profit-Sharing Contributions

Profit-sharing contributions are employer-funded contributions made to employees’ 401(k) accounts. These contributions are optional and allocated annually during nondiscrimination testing to ensure they meet IRS nondiscrimination rules. How Are Profit-Sharing Contributions Allocated? The plan document specifies how profit-sharing contributions are distributed among employees. The chosen allocation method affects nondiscrimination testing and must be followed as outlined in the plan. Common ...

How do I report employer contributions?

All funded employer contributions, including discretionary matches, Safe Harbor match, Safe Harbor nonelective contributions, and profit-sharing allocations, must be reported in the corresponding column on the compliance questionnaire census to ensure accurate nondiscrimination testing and plan administration. Profit-sharing contributions should only be reported if they were funded in the plan year they apply to. Steps to Report Employer Contributions: Review the Pre-Filled Census: The ...

How do discretionary matches affect nondiscrimination testing?

Discretionary matches are flexible employer contributions that must still be included in nondiscrimination testing. Employers should document these contributions to ensure they do not disproportionately benefit highly compensated employees (HCEs) and cause testing failures. Reporting Discretionary Matches for Nondiscrimination Testing Employers must report the intended discretionary match on the annual compliance questionnaire to ensure proper inclusion in Actual Contribution Percentage (ACP) ...

Are the corrective contributions and distributions required?

If a 401(k) plan fails nondiscrimination testing, employers must take corrective action. This may include issuing refunds to Highly Compensated Employees (HCE) or making additional employer contributions to non-highly compensated employees (NHCE), known as Qualified Non-Elective Contributions (QNECs) or Qualified Matching Contributions (QMACs). Additionally, true-up contributions may be required to ensure employees receive the full employer match they were eligible for, but did not receive due ...

Why doesn’t my census data match my records?

Mismatched census records typically occur if your plan converted to Betterment mid-year. In this case, you need to upload the full year’s census data to ensure accuracy. If your plan did not convert mid-year, a mismatch may be due to incomplete or inconsistent payroll records. To resolve mismatched census records: Gather complete payroll records – Ensure you have full-year data, including all employees, compensation details, and contributions. Upload the full-year census – Submit the complete ...

What should we do with our nondiscrimination testing report?

Your nondiscrimination testing report package is provided for audit purposes and should be saved to your company’s records. The package does not need to be distributed to employees. Participants should only be notified if the plan fails testing and there is an impact on their personal accounts. We will let you know if that is the case.

Why do I need to complete the compliance questionnaire?

The compliance questionnaire collects essential information to confirm your 401(k) plan meets IRS requirements. This data is used for required annual nondiscrimination testing and the preparation of Form 5500, which must accurately reflect the plan’s details for the year. Since factors like Highly Compensated Employees (HCEs) and ownership status can change from year to year, it’s important to provide updated information annually. Completing the questionnaire helps maintain compliance and helps ...

Prior-Year Compensation for 401(k) Plans

When is prior-year census data needed? If a business had a 401(k) plan in the prior year, census data from that year is required to properly identify highly compensated employees (HCEs). This includes information such as employee compensation, hire dates, and ownership details. However, if the business did not have a 401(k) plan in the prior year or was not in business, prior-year data is not required. In these cases, the current plan year’s compensation will be used for HCE identification. ...

Understanding 401(k) Nondiscrimination Testing

What is 401(k) nondiscrimination testing? 401(k) nondiscrimination testing, also known as nondiscrimination testing, is an annual process required by the IRS to help ensure that 401(k) plans benefit all employees fairly and do not disproportionately favor highly compensated employees (HCEs). These tests help maintain equitable access to tax-advantaged retirement savings. What are the key nondiscrimination tests? Actual Deferral Percentage (ADP) Test: Compares the average salary deferral rates ...

Nondiscrimination Testing

Uploading your 401(k) census file accurately is a key part of nondiscrimination testing and helps to ensure your plan remains in good standing. Setting aside time to carefully review and complete your census file will help prevent delays and ensure accurate reporting. Best Practices for Uploading Your Census File Use the Provided Tutorials and Formatting Guide The compliance questionnaire includes step-by-step tutorials and a formatting guide to help you complete your census file correctly. ...
Read More
An owner is any individual who holds a direct or indirect ownership interest in a company. Ownership status is important for 401(k) nondiscrimination testing, as it helps determine whether an employee is classified as a Highly Compensated Employee (HCE) and impacts nondiscrimination testing. An employee is considered an owner if they: Own more than 5% of the company in the current or prior plan year, regardless of compensation. Own 1% or more of the company and earn more than the IRS-defined ...
Read More
Employers can take proactive and retroactive steps to reduce the likelihood of HCE refunds due to nondiscrimination testing failures. Some strategies require changes before the testing period, while others may help correct issues after a failure occurs. Proactive Strategies (Before Nondiscrimination Testing Fails) Adopt a Safe Harbor 401(k) Plan – Safe Harbor plans are exempt from Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) testing by requiring employer ...
Read More
What is a true-up and a true-down? A 401(k) true-up contribution is an additional employer contribution made at the end of the year to make sure employees receive the full match they are entitled to under the plan’s terms. A true-down contribution occurs when an employee has received more in employer match contributions than they were eligible for, requiring an adjustment. When are true-up contributions required? A true-up contribution is due when employer contributions are owed to an eligible ...
Read More
What is the difference between statutory compensation and plan compensation? Statutory compensation and plan compensation are often the same, but they differ when a plan has exclusions outlined in the plan document. Employers must report compensation accurately for proper 401(k) contributions and discrimination testing. Statutory compensation includes an employee’s total earnings, such as: Wages and salaries Bonuses Overtime Commissions Taxable fringe benefits Plan compensation is defined in ...
Read More
An NAICS (North American Industry Classification System) code is a six-digit number that categorizes businesses based on their primary economic activity. It is used for government reporting, compliance testing, and industry analysis. Employers must provide their NAICS code on the compliance questionnaire for their 401(k) plan. This code is used to: Classify the business for compliance testing and regulatory reporting. Create accurate industry benchmarking for economic analysis. Support ...
Read More
A fidelity bond protects 401(k) plan assets from fraud, theft, or dishonesty by individuals handling plan funds. ERISA § 412 and related regulations require every fiduciary of an employee benefit plan and every person who handles funds or other property of a 401(k) plan be properly bonded. Under ERISA, 401(k) plans are required to maintain a bond equal to at least 10% of total plan assets, with: A minimum bond of $1,000. A maximum bond of $500,000 per plan (or $1 million if the plan holds ...
Read More
A controlled group consists of two or more companies with common ownership that must be treated as a single employer for 401(k) plan administration and nondiscrimination testing. There are two primary types of controlled groups: Parent-Subsidiary Controlled Group: One company owns at least 80% of another business. Brother-Sister Controlled Group: Five or fewer individuals, estates, or trusts collectively own 80% or more of two or more businesses and have more than 50% identical ownership in ...
Read More
An officer is a high-level executive or decision-maker within a company. Common officer titles include: Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Operating Officer (COO) President, Vice President, Secretary, or Treasurer While job title is a factor, officer status is also determined by an individual’s authority, responsibilities, and decision-making power within the company. The plan document and corporate records help confirm officer status. Officer status must be ...
Read More
Employer contributions, including matching and profit-sharing contributions, must be made by the company’s tax filing deadline, including extensions, to be tax-deductible and compliant with IRS regulations. Key Deadlines for Employer Contributions Standard Deadline: Contributions are due by the company’s federal tax filing deadline (typically March 15 for S-corporations and partnerships or April 15 for C-corporations and sole proprietorships). Extended Deadline: If the company files a tax ...
Read More
Profit-sharing contributions are employer-funded contributions made to employees’ 401(k) accounts. These contributions are optional and allocated annually during nondiscrimination testing to ensure they meet IRS nondiscrimination rules. How Are Profit-Sharing Contributions Allocated? The plan document specifies how profit-sharing contributions are distributed among employees. The chosen allocation method affects nondiscrimination testing and must be followed as outlined in the plan. Common ...
Read More
All funded employer contributions, including discretionary matches, Safe Harbor match, Safe Harbor nonelective contributions, and profit-sharing allocations, must be reported in the corresponding column on the compliance questionnaire census to ensure accurate nondiscrimination testing and plan administration. Profit-sharing contributions should only be reported if they were funded in the plan year they apply to. Steps to Report Employer Contributions: Review the Pre-Filled Census: The ...
Read More
Discretionary matches are flexible employer contributions that must still be included in nondiscrimination testing. Employers should document these contributions to ensure they do not disproportionately benefit highly compensated employees (HCEs) and cause testing failures. Reporting Discretionary Matches for Nondiscrimination Testing Employers must report the intended discretionary match on the annual compliance questionnaire to ensure proper inclusion in Actual Contribution Percentage (ACP) ...
Read More
If a 401(k) plan fails nondiscrimination testing, employers must take corrective action. This may include issuing refunds to Highly Compensated Employees (HCE) or making additional employer contributions to non-highly compensated employees (NHCE), known as Qualified Non-Elective Contributions (QNECs) or Qualified Matching Contributions (QMACs). Additionally, true-up contributions may be required to ensure employees receive the full employer match they were eligible for, but did not receive due ...
Read More
Mismatched census records typically occur if your plan converted to Betterment mid-year. In this case, you need to upload the full year’s census data to ensure accuracy. If your plan did not convert mid-year, a mismatch may be due to incomplete or inconsistent payroll records. To resolve mismatched census records: Gather complete payroll records – Ensure you have full-year data, including all employees, compensation details, and contributions. Upload the full-year census – Submit the complete ...
Read More
Your nondiscrimination testing report package is provided for audit purposes and should be saved to your company’s records. The package does not need to be distributed to employees. Participants should only be notified if the plan fails testing and there is an impact on their personal accounts. We will let you know if that is the case.
Read More
The compliance questionnaire collects essential information to confirm your 401(k) plan meets IRS requirements. This data is used for required annual nondiscrimination testing and the preparation of Form 5500, which must accurately reflect the plan’s details for the year. Since factors like Highly Compensated Employees (HCEs) and ownership status can change from year to year, it’s important to provide updated information annually. Completing the questionnaire helps maintain compliance and helps ...
Read More
When is prior-year census data needed? If a business had a 401(k) plan in the prior year, census data from that year is required to properly identify highly compensated employees (HCEs). This includes information such as employee compensation, hire dates, and ownership details. However, if the business did not have a 401(k) plan in the prior year or was not in business, prior-year data is not required. In these cases, the current plan year’s compensation will be used for HCE identification. ...
Read More
What is 401(k) nondiscrimination testing? 401(k) nondiscrimination testing, also known as nondiscrimination testing, is an annual process required by the IRS to help ensure that 401(k) plans benefit all employees fairly and do not disproportionately favor highly compensated employees (HCEs). These tests help maintain equitable access to tax-advantaged retirement savings. What are the key nondiscrimination tests? Actual Deferral Percentage (ADP) Test: Compares the average salary deferral rates ...
Read More