401(k) Compliance Testing

The availability of your testing results will vary depending on your plan type. Traditional plans can expect to receive your company’s 2023 testing results and employer contribution calculations no later than March 12, 2024. If you have to approve corrective actions, the deadline to do so is March 15. Safe Harbor plans can expect to receive your company’s 2023 testing results and employer contribution calculations allocation no later than May 31, 2024. If your plan offers or requires an ...

If your company would like to avoid refunds for Highly Compensated Employees (HCEs), there are several potential resolutions to consider: Add automatic enrollment/escalation to your plan if not already part of your plan design Encourage your employees to contribute more by adding a matching contribution or through general education Consider using a Safe Harbor plan, which includes provisions that certain employer contributions be made with an accelerated vesting schedule. This can reduce the ...

Annual compliance testing helps ensure that your 401(k) plan benefits all employees—not just business owners or highly compensated employees (HCEs). Because the government provides significant tax benefits through 401(k) plans, it wants to ensure that these perks don’t disproportionately favor high earners. The process involves a few steps: We ask you, the plan sponsor, to review and complete a few questionnaires within your Plan Sponsor dashboard. We refer to this as the “compliance hub.” ...

We need last year’s census information because Highly Compensated Employees (HCEs) are calculated on a lookback year. In other words, in order to prepare your compliance testing for the year in question, we need to calculate who the HCEs are based on the prior year’s compensation. This is not an optional request.

The information we request during compliance testing is used to prepare an annual Form 5500 on your company’s behalf. Similar to other tax forms, the information detailed on this form must accurately reflect the plan’s state over the course of the plan year. Things do change. For example, HCEs and owners may vary from one year to the next. For this reason, we ask that you provide this information annually.

Your compliance 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.

Mismatched census records typically indicate that your plan converted to Betterment mid-year. If you converted mid-year, please be sure to upload the full year’s worth of census information. If you did not convert plans mid-year, the mismatch could be the result of Betterment receiving incomplete payroll records or inconsistent payroll records from earlier in the year, where the records we received did not match the actual payroll information. It certainly happens, but what matters most is that ...

CSV files can have tricky formatting requirements. We have listed out some troubleshooting tips below: Do not change any headers in the file, and keep numbers in simple form Do not include dollar signs, commas, percentage symbols, or any other special symbol Keep any cells blank that should show a 0 value

During the onboarding of your plan, you may have acquired a Fidelity Bond through an insurance provider. Alternatively, you may have had an existing Fidelity Bond if you transferred from a different provider to Betterment at Work. Betterment does not offer Fidelity Bonds, nor do we manage them on your behalf. For more information or assistance with your Fidelity Bond, you will need to contact your provider directly.

Yes, any corrective contributions or distributions that we ask you to approve are required in order to keep your plan compliant.

It is the employee’s responsibility to monitor their collective 401(k) contributions to ensure they do not exceed the annual limit. While there may be penalties for the employee if they over-contribute, there is no impact to the plan.

Offering a match is one way to reward your employees for participating in the 401(k) plan. Unlike a safe harbor matching contribution, a discretionary match is a matching contribution that is not required and does not provide any non-discrimination testing relief. There are many reasons to offer a match. For more on the importance and benefits of offering an employer match, visit this resource.

As part of the “Discretionary employer contribution questionnaire,” we request information about discretionary contributions. If you sponsor a safe harbor plan, you are not required to enter your existing formula here. Safe harbor formulas are written into the plan document, which we already have on file. However, if you utilize a safe harbor formula and would like to make additional discretionary contributions on top of that formula, you will need to provide those details. If you are not sure ...

Unlike a match, profit sharing contributions go to all eligible employees and not just those who participate in the plan. There are three types of profit sharing contributions. Section D.22 of your plan document will explain which of the following options your plan allows. Pro-rata: By far the most common, a pro-rata contribution allocates money as an even percentage of compensation amongst all employees. Integrated: Integrated contributions are similar to pro-rata except for that amounts over ...

To qualify as a deduction, employers must deposit employer contributions into the plan no later than the business’s federal income tax filing deadline for that year. If the business has a filing extension, the contribution may be made up until the extended deadline. Please note, if your plan offers or requires an employer contribution and you would like to apply your employer contribution by a specific tax deadline, you will need to let us know at least 45 days in advance of that deadline to ...

Officers are generally defined as individuals who are authorized to make key organizational decisions, typically a CEO, CFO, COO, or other senior leaders. We recommend confirming officers with your legal counsel if you are not sure who to list in the compliance hub, as we are not able to provide you with legal or financial advice.

Ownership information is an important part in identifying Highly Compensated Employees (HCEs). An owner is anyone who owned or owns at least 1% of the company in the plan year for which you are completing the compliance hub, or for the prior plan year. You will also need to provide information on who is related to owners as ownership may be attributed to specific family members, namely spouses, parents, children, and grandchildren. We will determine if ownership is attributed with the ...

A controlled group is a group of companies that have shared ownership and, by meeting certain criteria, can combine their employee populations into one 401(k) plan. Controlled groups can take on one of two structures: parent-subsidiary or brother-sister. We need to know if your company is part of a controlled group for compliance testing. Learn more about how we manage 401(k) plans for controlled groups in this article.

Form 5500 is a required governmental filing for all 401(k) plans. The form discloses details about the financial condition, investments, and operations of the plan. Betterment will prepare your Form 5500 after compliance testing is completed and will contact you if additional information is needed. To learn more about Form 5500, visit this resource.

NAICS is short for North American Industry Classification System. This code is required to execute Compliance testing, so we ask that you provide it to us annually. If you need help finding your code, visit this resource.

Total (gross) compensation is not always the same as plan compensation. Plan compensation is defined in your plan document and may exclude certain compensation such as bonuses, commissions, taxable fringe benefits, and pre-entry compensation. Certain types of excluded compensation may require additional compliance testing, so it is important that we receive both figures. Please review section A.15 of your Adoption Agreement to determine if your plan compensation is different from your total ...