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The Challenges

The client was frustrated with their plan provider because they were failing nondiscrimination testing on an annual basis. In addition to this issue, the plan had over 120 participants and thus was audited every year.

Since the plan provider was running testing and census information without reviewing it for potential savings, these two issues cost the plan and its highly-compensated employees (HCEs) money. Due to the plan’s nondiscrimination testing failures, its HCEs either had to have money returned to them or the plan had to contribute additions to its non-highly compensated employees (NHCEs) to raise their benefits. In the end, either the HCEs had to lose money for their retirement savings or the employer had to put more money into the plan.

The Solutions

Eliminate the Audit
We started by adjusting eligibility from immediate to requiring six months and 500 hours, and we removed the automatic enrollment feature. The prior provider was not forcing out terminated employees with balances below $5,000, so we instituted an automatic rollover of these balances out of the plan. Through these actions, we were able to decrease the pool of eligible employees below the minimums for an audited plan.

Achieve Better Testing Outcomes
We tested gross compensation as opposed to eligible compensation. Many providers will simply run their testing based solely on the limited information already collected. We analyze the document and payroll information to assist clients in achieving their objectives. Our team includes experienced compliance and document personnel (ERPA, JD, QPA, several QKAs) to look beyond the textbook numbers and find innovative solutions.

What Were The Benefits To The Client?

Because of our proactive and focused actions, our new client saved approximately $7,000-$10,000 in annual auditing expenses and their HCEs were able to contribute more into their personal retirement plans without being reliant on NHCE behavior.

Heartland Retirement Plan Services are offered through Dubuque Bank and Trust Company. The information provided herein is general in nature and is not intended to be nor should be construed as specific investment, legal, or tax advice. The factual information has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Heartland Retirement Plan Services makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on it.

Products offered through Heartland Retirement Plan Services are not FDIC Insured, are not bank guaranteed and may lose value, unless otherwise stated.