Despite 20-plus years of advertising and matching contribution
programs -- and, more recently, default contributions (automatic enrollment) programs -- a sizable percentage of participants remain left behind or have seen their savings "leaked out." Because 401(k) plans provide for participant asset-allocation decisions (recently mitigated by the use of target-date funds) and a retail mutual fund investment model, with accompanying retail fees, 401(k) plan investments underperform DB investments.
401(k) plan." It provides for a mandatory, fully vested employer nonelective contribution or matching contribution
that will result in the plan automatically passing the ADP and ACP tests.
An employer satisfies the ADP safe-harbor matching contribution
requirement if it implements either a basic matching formula or an enhanced matching formula.
Typically, payroll services or third-party administrators make errors when a 401(k) plan has a matching contribution
subject to a percentage-of-pay ceiling.
If an employer elects to make a safe-harbor matching contribution
, it must be no less than 100% of the first 3% of an employee's deferred compensation, plus an additional 50% match on the next 2% of the employee's deferred compensation.
If an employer elects the matching contribution
safe harbor, the rate of any HCE matching contribution
cannot exceed the rate used for any non-HCE.
The deferrals would still be subject to Medicare withholding and the matching contribution
. On the other hand, if the employer wanted to defer FICA payments, the nonqualified deferred compensation plan could be structured to include a vesting schedule for the deferred amounts over a predetermined number of years.
The FCA US 401(k) plan features: immediate eligibility for all employees including automatic enrolment and automatic escalation; a company matching contribution
equal to USD0.50 of every dollar contributed up to 10 percent of deferred pre-tax base pay or a Roth, with immediate 100 percent vesting; a 3 percent (of base pay) unmatched company contribution with a three-year vesting schedule; 12 target date funds and 12 core menu investment fund options, among others.
Let's say an employee contributes up to the $19,000 limit in 2018, receives a matching contribution
of $2,500, and a profit sharing contribution of $1,500.