Cortburg Speaks Retirement


December 21, 2022 Miguel Gonzalez, MBA, AIF®, CPFA®, CRC® Season 2022 Episode 115
Cortburg Speaks Retirement
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Cortburg Speaks Retirement
Dec 21, 2022 Season 2022 Episode 115
Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®

In this audio podcast episode, Miguel Gonzalez has compiled a year-end checklist for traditional and safe harbor 401k plans.

Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®



Show Notes Transcript

In this audio podcast episode, Miguel Gonzalez has compiled a year-end checklist for traditional and safe harbor 401k plans.

Welcome to Cortburg Speaks Retirement Podcast
with Miguel Gonzalez, MBA, AIF®, CPFA®, CRC®




Welcome to Cortburg Speaks Retirement

An audio podcast about investing in the stock market, financial planning, money management and retirement planning.  Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.

Now here is your host, Miguel Gonzalez.



Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.   

On this week’s audio podcast, I share A YEAR-END CHECKLIST FOR TRADITIONAL & SAFE HARBOR 401(k) PLANS.



The popularity of 401(k) plans today is because they offer certain tax advantages to employers and employees. For employers to qualify to have 401(k) plans, they must meet specified fiduciary responsibilities. Managing these tasks is complicated and can feel, at times, overwhelming. Receiving guidance from a financial professional can help you navigate the myriad of tasks you might face. We compiled a year-end checklist to help you get organized in preparation for that consultation with a financial professional.

☐ Have you completed all the required tasks?

☐ Has your plan document been updated within the past few years?

· Have you distributed the following required notices?

☐ Qualified Default Investment Alternative (QDIA) notice

☐ Safe harbor 401(k) notice (if applicable)

☐ Automatic (negative) enrollment notice

☐ Participant fee disclosure notice

☐ Forms or website instructions (for newly eligible employees)

☐ Beneficiary designations (for newly eligible employees)

☐ Have you completed the nondiscrimination tests? (This only applies to Traditional 401(k) plans)

The Employment Retirement Income Security Act (ERISA) requires several tests annually to ensure 401(k) plans do not discriminate in favor of employees earning higher incomes. The tests get broken up between non-highly compensated employees (NHCEs) and highly compensated employees (HCEs). To be considered a highly compensated employee, you need to:

· Own more than five percent of the interest in the business at any time during the year or the preceding year without regards to the amount of compensation earned or received. 

· Being in the top 20 percent of employees when ranked by compensation, or, for the preceding year, received compensation from the business of more than $135,000 (2022 and 2023), up from $130,000 in 2021.

Once the NHCEs and HCEs are identified, you look into the plan’s benefits, rights, and features to ensure they are non-discriminatory. The actual deferral percentage (ADP) and actual contribution percentage (ACP) tests are used for this purpose.

☐ Actual Deferral Percentage (ADP)/Actual Contribution Percentage (ACP) test

☐ Excess deferral (IRC section 402(g)) test (Included in the ADP test in the year the amounts were deferred)

☐ Annual addition (IRC section 415(c)) test

☐ Rate group (IRC section 401 (a)(4)) test ii

☐ Top heavy (IRC section 416) test. Lastly, the top-heavy test evaluates the overall benefits that key employees have accumulated. Suppose the total value of the plan accounts of key employees is more than 60 percent (different from HCEs) of the total value of the plan assets. In that case, the plan is top-heavy, and certain minimum benefits may need to be provided to the non-key employees. If a 401(k) plan is top-heavy, the employer must contribute up to three percent of compensation for all non-key employees. To be a key employee requires the employee to be:

· An officer making over $200,000 (for 2022);

· Be a five percent owner of the business; or

· An employee owning more than one percent of the business and making over $150,000 for the plan year.

A non-key employee is everything else. iii

☐ Are you up-to-date on contributions, distributions, deposits, and refunds to correct failed ADP/ACP tests?


· If your employees have Safe Harbor 401(k) plans you are required to contribute to their accounts whereas a Traditional 401(k) plan does not require it, but contributions can be made. Both Safe Harbor and Traditional plans have an annual contribution limit that may not exceed the lesser of 100% of your compensation or $61,000 for 2022 (possibly increasing as much as $67,000 in 2023; $66,000 if inflation is less than 0.25 percent per month for July, August, and September). iv This includes elective deferrals, employee contributions, employer matching, discretionary contributions, and allocations of forfeitures but does not include catch-up contributions for those aged 50 and older. However, if you are 50 or over, you qualify for catch-up contributions, increasing the ceiling to $67,500. 


☐ Matching or nonelective contributions made to appropriate employees under the plan terms

☐ Top-heavy minimum contributions made

☐ Hardship distributions made

☐ Safe harbor or Qualified Non-Elective Contribution (QNEC) contributions made

☐ Distribute contribution refunds to correct a failed ADP/ACP test with a 10 percent excise tax (non-safe harbor plans only)

☐ Distribute Required Minimum Distributions (RMDs) to participants that became RMD-eligible in the prior year

☐ Ensure employee salary deferrals and loan payments are deposited timely

☐ Cash-out account balances associate with terminated employee participants

☐ Process any defaulted loans

☐ Use any unallocated forfeitures

☐ Deposited employee elective deferrals

☐ Are all eligible employees identified and given the opportunity to make an elective deferral? 

☐ Was form 5500 filed? vii

☐ If IRS form 5500 was not filed did you request an extension to file it using IRS form 5558?

☐ Have you taken the steps to seek guidance from a financial professional?

· There is a lot involved with year-end 401(k) planning if you are an employer. Still, with the help of an experienced financial professional, you can create a strategy to manage some of the potential challenges that come with completing the necessary fiduciary responsibilities.


Make sure to visit our website, Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances.  As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.

This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.  



Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision. 

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

CRC conferred by The International Foundation for Retirement Education.

Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Private Advisor Group, LLC, a registered investment advisor.  

Private Advisor Group, LLC and Cortburg Retirement Advisors, Inc. are separate entities from LPL Financial.

Investing involves risk including possible loss of principal.

·         This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

·         All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

·         This article was prepared by LPL Marketing Solutions