It depends. The Program is prepared to calculate your contributions based on the plan’s design, eligible employees and compensation. This will allow you to maximize all available contributions while still adhering to the contribution limits. Respond to the compliance team’s solicitation email in January to have all applicable testing performed as well as contributions calculated.
Based on the method you elected in your adoption agreement, you will either use the funds in the forfeiture account to offset your employer contribution costs (most common) or reallocate the funds on an annual basis to the eligible participants. The Program can assist you in calculating a reallocation if that’s the method chosen.
The Program can monitor the dollar limit for contributions (401(k) deferral limit as well as 415 annual additions limit). We can only monitor the percentage limit if we are also calculating your employer contributions for the year. If a participant does exceed one of the contribution limits, please submit a Corrective Measures for Contributions form. Use section 3A for excess contributions over the annual additions limit, or section 3B if the 401(k) deferral limit was exceeded.
Participant Contribution Decisions
Participants have three decisions to make about their contributions and account:
- For plans with a 401(k) feature, do they want to make contributions to the plan? If so, how much do they want to contribute and in what form will contributions be made (pre-tax elective contributions, after-tax employee contributions and/or Roth 401(k) contributions)?
- Note that a participant’s elective contributions for the year can’t be greater than the IRS annual deferral limit ($23,000 in 2024). A participant who has reached age 50 by the end of his or her taxable year may make additional catch-up contributions (maximum $7,500 in 2024).
- How do they want to invest employee (if applicable) and/or employer contributions among the funds offered by the Program?
- Who should they name as beneficiary or beneficiaries?
Timely Deposit Rules
Remember, participant contributions must be forwarded to the Program as soon as they can be segregated from the employer’s assets.
Participants make their investment election decisions when they complete the Enrollment Form. Participants may make subsequent changes to their investment elections as described in Participant Investment Decisions. Your firm may also have forms that participants can use to establish or change the amounts or percentages of their 401(k) pre-tax elective deferral contributions, voluntary after-tax employee contributions (if allowed) and/or Roth 401(k) elective deferral contributions. Please note that if the plan has an automatic enrollment design feature, an eligible attorney or staff member shall be deemed to have elected to participate at a level provided in the firm’s adoption agreement, unless the eligible participant makes an affirmative election to contribute a different amount including an election to not defer.