Posts tagged 401(k).

A December 27, 2019 post to this blog by Jon Nason provided an overview of the many changes affecting retirement plans made by the SECURE Act, which was enacted as part of the Further Consolidated Appropriations Act of 2020 on December 20, 2019.  Today’s post takes a deeper dive into one of the key changes.

Division O § 112 of the SECURE Act requires that 401(k) plans extend eligibility for making elective deferral contributions to certain long-term part-time employees.  Because this change is mandatory, it is important for employers to understand how it will affect their 401(k) plan as ...

Employers face a constant struggle to attract and retain quality employees.  This is especially true in a strong economy where jobs are plentiful and the demand for well-qualified workers is high.  Historically, employer contributions to 401(k) plans have been viewed as an effective and efficient recruitment and retention tool.  Unfortunately, many employers are finding this inadequate in today’s market because some employees, especially younger employees, prioritize other financial needs ahead of saving for retirement.  For many young employees, student loan debt is a ...

A recent Tax Court decision suggests that employers may want to review their 401(k) plan loan programs and payroll practices. In Louelia Salomon Frias and Mervyngil Salomon v. Commissioner, TC Memo 2017-139 (July 11, 2017), the Tax Court held that an employee on maternity leave: (1) defaulted on her 401(k) plan loan; (2) failed to cure the default within the applicable cure period; and (3) as a result, there was a "deemed distribution" of the outstanding balance of the loan plus accrued interest which was taxable to the employee.

As described below, the loan default language in the ...

A recent case reminds us that people need to be careful when dealing with their retirement plans, particularly if those accounts are used as investment vehicles to fund business activities relating to the plan participant or owner of an IRA or 410(k) plan account. Although for many people their IRA or 401(k) account may appear to be a ready source of capital for launching a second career or finally moving that business out of the garage, if investments involving these accounts are not carefully and thoughtfully structured, adverse income tax consequences and other losses can occur.

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