Heartland Consulting Group, Inc.

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FAQ's

What is the deadline for depositing participants' salary deferrals into the plan?
Department of Labor regulations require participant contributions to be deposited by the earlier of : a.) the 15th business day of the month following the month contributions were withheld form wages, or b.) the earliest date contributions can reasonable be segregated from the employer's general assets.

Note that the date in a. above is the maximum deadline only if the date in b. does not precede it.

What is the latest date we can deposit our profit sharing and matching contributions?
These company contributions must be paid into the trust by the due date of your company's tax return, including any extensions.

What is a Fidelity Bond and how much coverage is required?
A Fidelity Bond must be obtained for plan fiduciaries to protect the plan against fraud and dishonesty. A plan fiduciary is any person or entity who handles the plan's assets including, but not limited to, the Plan Administrator, Trustee and Employer. The minimum bond amount required is usually the greater of $1,000 or 10% of the plan's assets. However, a bond need not be secured for fiduciaries that are banks or insurance companies. Bonding is also not required when the employer is wholly owned by an individual and/or his or her spouse and where such individual and spouse are the only employees.

Bonds can generally be obtained through a commercial insurance company as a rider to an employer's general liability policy.

One of our employees is going through a divorce and his attorney has asked about QDRO procedures. What is a QDRO?
A QDRO (Qualified Domestic Relations Order) is an order, issued by a state court, that gives a spouse, former spouse, child or other legal dependent of the participant the right to any part of the participant's interest in the plan. Each plan sponsor must adopt and follow a Qualified Domestic Relations Order procedure. This procedure tells you how to determine whether an order is a valid QDRO. You are strongly advised to obtain legal counsel in determining the validity of the order. Payment of benefits must be made in compliance with a QDRO, provided it does not conflict with the terms of the plan.

What steps must the plan administrator take to locate a missing participant?
The Department of Labor requires a plan fiduciary to take at least four steps to locate a missing participant. The steps are: a.) Certified Mail. Send notice of the distribution to the participant by certified mail. b.) Other plan records. Check records of other plans of the employer, such as a group health plan, to ascertain the participant's location. c.) Designated beneficiary. Attempt to identify and contact the participant's designated beneficiary to locate the participant. d.) Letter-forwarding service. Use either the IRS or the Social Security Administration letter-forwarding service. Contact your Heartland consultant regarding the details of either of these programs.

Our company is contemplating an acquisition of another entity. Will this change our retirement plan?
It is possible. There are many complex ownership attribution rules relating to qualified retirement plans. These rules can affect what groups of employees are covered, the determination of key employees and highly compensated employees in compliance testing, as well as plan features. It is extremely important to coordinate any change in business structure (acquisition, disposition, etc.) with qualified legal counsel and your retirement plan consultant prior to the transaction.

What are the main differences between a SIMPLE 401(k) plan and a Safe Harbor 401(k) plan?
First, the limit on employee pre-tax deferrals is less for a SIMPLE 401(k) plan versus a Safe Harbor 401(k) plan. (For 2007: $10,500 for SIMPLE 401(k) and $15,500 for Safe Harbor 401(k).) However, the employer contributions requirement is less in the SIMPLE plan: 2% nonelective contribution or 3% matching contribution compared with a 3% nonelective contribution or 4% match under the Safe Harbor.

In addition, the employer may not make a discretionary profit sharing contribution under the SIMPLE 401(k), and cannot make contributions to any other retirement plan. An employer with a Safe Harbor 401(k) may make additional contributions to the plan and may maintain other plans.

What is a blackout period?
A blackout applies when there is any restriction, limitation or suspension of the participant's normal ability to conduct investment, distribution or loan transactions. It typically occurs when plans change recordkeepers or investment options. A participant notice requirement is necessary if the blackout period lasts more than three business days.

What are Roth contributions and how do they differ from traditional employee contributions to a 401(k) plan?
In a "traditional" 401(k) plan, participants may elect to defer a portion of their current compensation to the plan. The deferrals are excluded from taxable income when deferred, but they are taxed, along with any earnings, when the funds are withdrawn from the plan. Thus, there is a deferral of taxes on the contributions and earnings.

Roth contributions are made with after-tax compensation. However, there is no taxation when a qualified distribution of the contributions and earnings is made from the plan. The result is that the earnings are tax-free rather than tax-deferred as is the case with traditional 401(k) contributions.

What are the differences between Roth contributions to a 401(k) plan and contributions made to a Roth IRA?
There are two key distinctions: (1) the contribution limits, and (2) the employees who are eligible to make the contributions.

The maximum amount that may be contributed to a 401(k) plan is generally larger than the amount that may be contributed to a Roth IRA (for 2007, $15,500 vs. $4,000).

In addition, an individual may be precluded from making a Roth IRA contribution if the individual has gross income in excess of certain dollar amounts (e.g., $150,000 for a married taxpayer filing jointly). These limits do not apply to Roth contributions to a 401(k) plan. There are no rules limiting the ability to make Roth contributions to a 401(k) plan solely because an employee's income is too high.


	Brochures Available Choosing a Retirement Solution 401(k) Plans for Small Business The Rollover Chart	Links Internal Revenue Service Department of Labor Social Security Administration Wall Street Journal Prime Rate FAQ's What is the deadline for depositing participants' salary deferrals into the plan? Department of Labor regulations require participant contributions to be deposited by the earlier of : a.) the 15th business day of the month following the month contributions were withheld form wages, or b.) the earliest date contributions can reasonable be segregated from the employer's general assets. Note that the date in a. above is the maximum deadline only if the date in b. does not precede it. What is the latest date we can deposit our profit sharing and matching contributions? These company contributions must be paid into the trust by the due date of your company's tax return, including any extensions. What is a Fidelity Bond and how much coverage is required? A Fidelity Bond must be obtained for plan fiduciaries to protect the plan against fraud and dishonesty. A plan fiduciary is any person or entity who handles the plan's assets including, but not limited to, the Plan Administrator, Trustee and Employer. The minimum bond amount required is usually the greater of $1,000 or 10% of the plan's assets. However, a bond need not be secured for fiduciaries that are banks or insurance companies. Bonding is also not required when the employer is wholly owned by an individual and/or his or her spouse and where such individual and spouse are the only employees. Bonds can generally be obtained through a commercial insurance company as a rider to an employer's general liability policy. One of our employees is going through a divorce and his attorney has asked about QDRO procedures. What is a QDRO? A QDRO (Qualified Domestic Relations Order) is an order, issued by a state court, that gives a spouse, former spouse, child or other legal dependent of the participant the right to any part of the participant's interest in the plan. Each plan sponsor must adopt and follow a Qualified Domestic Relations Order procedure. This procedure tells you how to determine whether an order is a valid QDRO. You are strongly advised to obtain legal counsel in determining the validity of the order. Payment of benefits must be made in compliance with a QDRO, provided it does not conflict with the terms of the plan. What steps must the plan administrator take to locate a missing participant? The Department of Labor requires a plan fiduciary to take at least four steps to locate a missing participant. The steps are: a.) Certified Mail. Send notice of the distribution to the participant by certified mail. b.) Other plan records. Check records of other plans of the employer, such as a group health plan, to ascertain the participant's location. c.) Designated beneficiary. Attempt to identify and contact the participant's designated beneficiary to locate the participant. d.) Letter-forwarding service. Use either the IRS or the Social Security Administration letter-forwarding service. Contact your Heartland consultant regarding the details of either of these programs. Our company is contemplating an acquisition of another entity. Will this change our retirement plan? It is possible. There are many complex ownership attribution rules relating to qualified retirement plans. These rules can affect what groups of employees are covered, the determination of key employees and highly compensated employees in compliance testing, as well as plan features. It is extremely important to coordinate any change in business structure (acquisition, disposition, etc.) with qualified legal counsel and your retirement plan consultant prior to the transaction. What are the main differences between a SIMPLE 401(k) plan and a Safe Harbor 401(k) plan? First, the limit on employee pre-tax deferrals is less for a SIMPLE 401(k) plan versus a Safe Harbor 401(k) plan. (For 2007: $10,500 for SIMPLE 401(k) and $15,500 for Safe Harbor 401(k).) However, the employer contributions requirement is less in the SIMPLE plan: 2% nonelective contribution or 3% matching contribution compared with a 3% nonelective contribution or 4% match under the Safe Harbor. In addition, the employer may not make a discretionary profit sharing contribution under the SIMPLE 401(k), and cannot make contributions to any other retirement plan. An employer with a Safe Harbor 401(k) may make additional contributions to the plan and may maintain other plans. What is a blackout period? A blackout applies when there is any restriction, limitation or suspension of the participant's normal ability to conduct investment, distribution or loan transactions. It typically occurs when plans change recordkeepers or investment options. A participant notice requirement is necessary if the blackout period lasts more than three business days. What are Roth contributions and how do they differ from traditional employee contributions to a 401(k) plan? In a "traditional" 401(k) plan, participants may elect to defer a portion of their current compensation to the plan. The deferrals are excluded from taxable income when deferred, but they are taxed, along with any earnings, when the funds are withdrawn from the plan. Thus, there is a deferral of taxes on the contributions and earnings. Roth contributions are made with after-tax compensation. However, there is no taxation when a qualified distribution of the contributions and earnings is made from the plan. The result is that the earnings are tax-free rather than tax-deferred as is the case with traditional 401(k) contributions. What are the differences between Roth contributions to a 401(k) plan and contributions made to a Roth IRA? There are two key distinctions: (1) the contribution limits, and (2) the employees who are eligible to make the contributions. The maximum amount that may be contributed to a 401(k) plan is generally larger than the amount that may be contributed to a Roth IRA (for 2007, $15,500 vs. $4,000). In addition, an individual may be precluded from making a Roth IRA contribution if the individual has gross income in excess of certain dollar amounts (e.g., $150,000 for a married taxpayer filing jointly). These limits do not apply to Roth contributions to a 401(k) plan. There are no rules limiting the ability to make Roth contributions to a 401(k) plan solely because an employee's income is too high.