Blog
September 24, 2018
Plain Vanilla? How About Vanilla/Chocolate Swirl?
BEI strives to keep our client’s plans “plain vanilla” and we take this approach because when retirement plans become too complex, there are increased government regulations, and thus more oversight. Advanced plan design also drives up the cost of maintenance and this will become a “cost - to - benefit” comparison. However, we are finding adding some chocolate swirl, in certain situations, can be worth the hassle.
As I was actually writing this article I received an interesting question…“Can my company’s 401(k) Plan exclude bonuses from our matching calculation?” In essence, an employer had paid large bonuses and did not want to provide the 3% matching contribution on all employee income. Their current payroll provider was both a payroll company, as well as the 401(k) record-keeper.
When the employer checked with their provider, the employer was told they could not exclude bonuses from matching calculations. Period, end of sentence. I happen to know that the reason they got this response was because the provider’s system only calculated total income. Excluding bonuses did not fit into their box, but it is perfectly legal as long as the plan passes certain nondiscrimination tests.
It is worth noting that all providers of Plan Documents are not the same. Some documents as well as some plan providers may not allow chocolate swirl.
Would it be valuable to learn more about plan design features and benefits? Call our experienced team at BEI at 800-899-9141 or email to Planoperations@benefitequity.com and perhaps choose a “Chocolate Swirl.”
Author: Robert Gorelick, APA, Founder Benefit Equity Inc.