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Reducing retirement plan match
Benefits & Compensation
Reducing retirement plan match
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
Other than the very obvious, like recruitment and retention tools, what are the more complex disadvantages to reducing or eliminating a retirement plan match to cut expenses during this economic downt
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Forums » Topic Forums » Benefits & Compensation » Reducing retirement plan match
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Reducing retirement plan match
posted at 7/8/2009 8:27 AM EDT
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Posts: 42
First: 7/13/2005 Last: 8/5/2011 |
Other than the very obvious, like recruitment and retention tools, what are the more complex disadvantages to reducing or eliminating a retirement plan match to cut expenses during this economic downturn? Thanks! |
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Reducing retirement plan match
posted at 7/9/2009 1:48 PM EDT
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Posts: 94
First: 2/7/2008 Last: 3/21/2011 |
If this is a 401(k) and you have a safe harbor match, bear in mind that if you discontinue it mid-year, you will not be deemed to pass your nondiscrimination testing and thus may fail the test. Changing your plan document at the beginning of the year will allow you to inform participants to ensure compliance. |
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Reducing retirement plan match
posted at 7/9/2009 5:40 PM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Aactually I have read articles about how a the DOL is allowing 401ks to stop safe harbor mid-year, but the above poster is correct...it won't automatically pass nondiscrimination tests, so the plan would still have to be tested. It might or might not pass.
We stopped our match 1/1/09. All but one participant (me) stopped contributing, and I don't blame them. Without the match, most prefer to invest/save elsewhere where the money restrictions aren't so tight. As of July 15th, we will be terminating the plan totally. I only have 9 participants with balances and all 5 of my terminated ees have taken their balances in the last two weeks. Just not worth the $s to have a plan for our small company right now. And plan termination is actually going smoother than I expected. But I was always fortunate that at least 1 of my HCEs never contributed and a lot of my NHCEs did...so I never had issues with nondiscrimination. |
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