Just because a 401k plan is appropriately set up doesn’t mean it can be ignored as a company’s needs shift. A 401k plan we consulted with learned this the hard way.
This NJ based manufacturing companies’ 401k had grown to service hundreds of employees with $50 million in retirement assets. But over time, the plan’s annual contributions had become lopsided. Executives were depositing lots of money into their accounts while lower-level employees weren’t. The IRS has rules that disallow this “discrimination” but provides a simple fix too under “safe harbor” rules. By agreeing to offer a significant match and proper notice to all employees, companies can avoid the anti-discrimination tests and the resultant substantial costs to rectify them.
Unfortunately, while the client’ s 401k advisors were pocketing tens of thousands in annual commissions, they never brought up this easy fix. This oversight needlessly cost the company over $1 million for three years of non-compliance!
Leatherback investment works proactively with clients and their TPAs to manage ongoing shifts in plan structures and minimize unnecessary costs and complications.