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Important Reminders for 2017
Minimum Required Distributions (MRDs) must be taken by owners having more than 5% ownership, and by terminated/retired employees who are over age 70.5. The first distribution must be taken by April 1 of the year following the participant turning age 70.5 (if greater than a 5% owner), or the later of the participant turning age 70.5 or retiring/terminating employment (if not greater than a 5% owner). Each subsequent distribution must be taken by December 31st. Please contact your ARS Plan Administrator if you have a participant in your plan that is age 70.5 or over and terminated/retired.
Employer contributions (such as safe harbor, profit sharing, cash balance) must be deposited before the filing due date of the company return, including extension if applicable. If your plan year end is December 31st and you have not filed the 2016 company return yet, the due date is September 15, 2017. Thus, the due date for when employer contributions must be deposited into participants' accounts under the qualified retirement plan is also September 15, 2017. There is not an extension of time beyond this date.
The 401(k) / Roth contribution limit is $18,000 plus $6,000 catch-up for employees age 50 and over.
The maximum compensation eligible for plan purposes, including calculation of employer or matching contributions is $270,000.
The maximum total contributions in a defined contribution plan is $54,000 per person.
For a full chart of limits, visit http://www.ars401k.com/highlight/annual-dollar-limits
Employee 401(k) and Roth contributions and loan payments must be deposited as soon as administratively feasible, or within 7 days after withholding from wages if the plan is small, or sooner if the plan is large.
Federal withholding of 20% is required on most cash distributions. If your company is responsible for this, the withholding must be deposited with the IRS by the 15th day of the following month in most cases.
Refunds to correct failed discrimination testing must be processed within 2.5 months following the close of the plan year, or the IRS charges a 10% penalty on the excess amount.
Employer contributions must be deposited before the filing due date of the company return, which is within 3.5 months of the company’s year end, or 8.5 months if extended for C corporations.
Minimum Required Distributions must be taken by owners, having more than 5% ownership, and by terminated or retired employees who are over age 70.5. The first distribution must be taken by April 1 of the year following the participant turning age 70.5. Each subsequent distribution must be taken by December 31st.
Form 1099-Rs are required to be provided to participants who receive distributions from the plan by January 31st of the following year.
Form 5500 is required to be filed for qualified retirement plans by the end of the 7th month following the plan year end, or 9.5 months after year end if extended.
Other Forms may need to be filed for specific situations. ARS will advise when applicable.
Participants must be provided fee disclosures annually, within 14 months of when their prior notice was distributed. One participant fee disclosure will come from ARS, and one will come from your investment company. ARS will automatically send a new annual participant fee disclosure to you each year. You do not need to intiate it. Each investment company has a different process for their participant fee disclosure distribution. Call them to confirm their process.
Annual Notices relative to safe harbor provisions, automatic enrollment provisions and qualified default investment alternatives (QDIA) are required, if applicable to your retirement plan.
Compensation is defined in the plan document. In most definitions, 401(k) contributions must be taken from all compensation, including bonuses and commissions. If your payroll runs any compensation separately and 401(k) is not taken from it, this may be incorrect. The plan document must specifically address compensation if it is addressed differently. Contact your ARS Plan Administrator to discuss compensation if you have any questions.
Employees should be provided a few items when they become eligible for the retirement plan: Summary Plan Description, any Summaries of Material Modification, applicable Annual Notices, applicable Fee Disclosure Notices, Enrollment Kit including fund information and Enrollment and Beneficiary Forms.
Exit Package - You may consider creating an “Exit Package” to provide to employees who terminate employment and have an account balance in the retirement plan. It would include a Distribution Form, Special Tax Notice, and possibly a Memo with return instructions. This would encourage distributions sooner rather than later so you won’t have to worry about missing participants in the future.
In order to assist ARS in receiving timely payment of invoices, we will be adding a 1% per month interest charge to invoices outstanding more than 30 days. To avoid this expense, please pay invoices within 30 days.