Compliance Stuff

Contributions Employers can contribute to their employees’ 401(k) accounts in two main ways:  matching contributions  and nonelective contributions. Matching contributions are tied to employee deferrals—employers contribute only when employees do. In contrast, nonelective contributions are made to eligible employees regardless of whether they contribute to the plan themselves. Understanding nonelective contributions is critical for both employers and employees. For employers, they offer flexible tools to meet plan goals—whether avoiding annual testing, maximizing owner contributions, rewarding employees, or fixing compliance issues. For employees, they can mean guaranteed retirement savings even without personal deferrals. This guide breaks down the three major types of nonelective contributions—safe harbor, profit sharing, and corrective (QNECs)—and when each may be appropriate. What Are 401(k) Nonelective Contributions? Nonelective contributions are employer contributions ma...

Contributions 401(k) matching contributions are one of the most powerful tools employers can use to boost retirement savings and increase plan participation. They act like a guaranteed return on employee salary deferrals—essentially “free” money . But despite their value to employees, matching contributions are not always the best fit for every 401(k) plan. In some cases, nonelective contributions—such as  profit sharing —may better serve a company’s goals . Understanding your matching options is key to designing a 401(k) plan that meets the needs of your business and workforce. What Is a 401(k) Matching Contribution? A 401(k) matching contribution is an employer-provided benefit where the company contributes additional funds to an employee’s retirement account based on the amount the employee contributes from their own salary . Their amount must be calculated using a predetermined formula defined in the plan document. Unlike nonelective contributions—which are made to all eligible...