Thursday, October 23, 2008

Company offers employers major compliance tool for 401K plans

A somewhat obscure topic is 401K compliance testing. These have to do with government and IRS rules that are supposed to prevent employers from favoring “highly compensated employees” unfairly. In view of the concerns over CEO pay during the financial crisis, it’s possible to debate how effective these are. A typical source on the subject is CPAS, “401K Compliance Testing Rules,” link here.

There are "discrimination tests" called ACP and ADP regarding qualified non-elective contributions (QNEC’s) or qualified matching contributions (QMAC’s), described, for example, at Benefits Link, “Safe Harbor Corrections for ACP and ADP test failures”, link here.

Today I got an email from a company called Peachtree LBP which offers a product LBP 401(k) Plus, which it says eliminates non-discrimination testing issues with methods alternative to safe harbor. The link is here.

There is a Reuters story Oct 23 that GM has suspended 401K contributions, link here.

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