SIMPLE 401(k) User Guide
The SIMPLE 401(k) plan is a type of 401(k) plan that is exempt from ADP, ACP, 401(a)(4), and top-heavy testing as long as specific requirements are met. Coverage testing, annual additions, and elective deferral limits will still apply to a SIMPLE 401(k) plan.
WHO CAN ESTABLISH A SIMPLE 401(k) PLAN?
Any employer who is eligible to establish a 401(k) plan and who has no more than 100 employees can establish a SIMPLE 401(k) plan. In any calendar year that an employer maintains a SIMPLE 401(k) plan, they cannot maintain any other type of retirement plan. SIMPLE 401(k) plans are still subject to the Form 5500 filing requirements.
WHAT ARE THE CONTRIBUTION REQUIREMENTS FOR A SIMPLE 401(k) PLAN?
A SIMPLE 401(k) plan has mandatory contribution requirements. The plan must give either (1) a matching contribution of 100% on the first 3% of compensation deferred or (2) a non-elective contribution of 2% of compensation, but not both. Aside from elective deferrals and rollover contributions, no other employee or employer contributions can be made to a SIMPLE 401(k) plan.
WHAT ARE SOME OF THE OTHER REQUIREMENTS FOR A SIMPLE 401(k) PLAN?
- Limitation year, plan year and determination period must all be the calendar year.
- Compensation must be defined as unreduced W-2 compensation.
- All plan assets must be fully (100%) vested. This includes any assets that were subject to a vesting schedule prior to the adoption of the SIMPLE 401(k) provisions.
- Notice must be provided every year to all eligible employees.
HOW SHOULD A SIMPLE 401(k) PLAN BE SET UP ON THE ftwilliam.com DOCUMENT SYSTEM?
Below is a chart that lists the questions that must be set a certain way to ensure that the SPD and SIMPLE 401(k) notice populate correctly.
Edit checks will trigger to help guide you in setting up the SIMPLE 401(k) plans when using PPA versions of the Volume Submitter Prototype, Volume Submitter IDP, Prototype Non-Standardized, and Prototype Standardized 401(k) documents, including the Answers Only versions.
Please note that this chart includes the responses for plans that have matching contributions and plans that have non-elective contributions.
|
Question |
Required Response |
|
Plan Year End (Month Day) |
December 31 |
|
Limitation Year means |
Calendar Year |
|
Voluntary (after-tax) Contributions are permitted (If "No", questions regarding Voluntary Contributions are disregarded) |
No |
|
Definition of Compensation for purposes of allocations |
W-2 |
|
For purposes of allocating Employer Contributions, Compensation is determined over the period specified below ending with or within the Plan Year |
Calendar year |
|
Include deferrals in definition of Compensation |
Yes |
|
Deferrals included for purposes of Matching Contributions (Match Only) |
Yes |
|
Deferrals included for purposes of Non-elective Contributions (Non-elective Only) |
Yes |
|
Exclude pay earned before participation in Plan from definition of Compensation |
No |
|
Exclude pay earned before participation in Plan from definition of Compensation For Matching Contributions (Match Only) |
No |
|
Exclude pay earned before participation in Plan from definition of Compensation For Non-elective Contributions (Non-elective Only) |
No |
|
Exclude other pay from definition of Compensation for the following Participants |
No |
|
Exclude Employees covered under a collective bargaining agreement from definition of Eligible Employee |
Exclusions must match between the different sources allowed |
|
Exclude leased Employees from definition of Eligible Employee |
Exclusions must match between the different sources allowed |
|
Exclude nonresident aliens from definition of Eligible Employee |
Exclusions must match between the different sources allowed |
|
Eligibility for Matching Contributions (Match Only) |
Same as Elective Deferrals |
|
Eligibility for Profit Sharing Contributions (Non-elective Only) |
Same as Elective Deferrals |
|
This is a safe-harbor plan exempt from most testing |
N/A |
|
Maximum Elective Deferral contribution as a percent of Compensation (enter "100%" if no limit applies) |
100% |
|
Indicate whether a lower maximum Elective Deferral contribution applies for HCEs |
No |
|
Plan provides for automatic enrollment |
None |
|
In order to share in the allocation of Matching Contributions, a Participant is required to be employed by the Company on the last day of the Plan Year or complete Hours of Service in the applicable Plan Year (Match Only) |
No |
|
In order to share in the allocation of Matching Contributions, a Participant is required to be employed by the Company on the last day of the Plan Year (Match Only) |
No |
|
In order to share in the allocation of Matching Contributions, a Participant is required to be employed by the Company on the last day of the Plan Year or complete at least the Hours of Service specified below in the applicable Plan Year (Match Only) |
No |
|
Modifications shall be made to the service described above for an allocation of Matching contributions (Match Only) |
No |
|
Matching Contribution formula (Match Only) |
Single rate |
|
First rate of Matching Contributions (without % sign - percent of elective deferrals match) (Match Only) |
100 |
|
Maximum amount of Employee contributions matched (without % sign - maximum percent of compensation matched at rate above) (Match Only) |
3 |
|
Further discretionary Matching Contributions may be made in addition to those described as first - third steps (Match Only) |
No |
|
Further fixed Matching Contributions will be made in addition to those described as first - third steps (Match Only) |
No |
|
Plan limits Matching Contributions to a maximum amount/percentage in each Plan Year (Match Only) |
No |
|
Continuing Eligibility for Profit Sharing Contributions (Non-elective Only) |
Pursuant to options selected below |
|
In order to share in the allocation of Profit Sharing Contributions, a Participant is required to complete Hours of Service in the applicable Plan Year (Non-elective Only) |
No |
|
In order to share in the allocation of Profit Sharing Contributions, a Participant is required to be employed by the Company on the last day of the Plan Year (Non-elective Only) |
No |
|
In order to share in the allocation of Profit Sharing Contributions, a Participant is required to be employed by the Company on the last day of the Plan Year or complete at least the Hours of Service specified below in the applicable Plan Year (Non-elective Only) |
No |
|
Amount of Profit Sharing Contributions (Non-elective Only) |
Other |
|
Enter the other Profit Sharing Contribution amount (Non-elective Only) |
Amount needed to meet the SIMPLE 401(k) Contribution requirements |
|
Profit Sharing allocation formula (Non-elective Only) |
Fixed Amount |
|
Profit Sharing Contributions are subject to a minimum amount (Non-elective Only) |
No |
|
Profit Sharing Contributions are subject to a maximum amount (Non-elective Only) |
No |
|
Plan also provides for an allocation formula required under a collective bargaining agreement (Non-elective Only) |
No |
|
Plan also provides for a Prevailing wage allocation formula as regular Profit Sharing Contribution (Non-elective Only) |
No |
|
Plan also provides for a Prevailing wage allocation formula as QNEC (Non-elective Only) |
No |
|
The Plan may accept voluntary contributions to deemed IRAs |
No |
|
Matching Contribution Account Vesting Schedule (Match Only) |
100% |
|
Profit Sharing Contribution Account Vesting Schedule (Non-elective Only) |
100% |
|
Plan has a vesting schedule other than the schedules described above |
No |
|
Retain old Profit Sharing Vesting for pre 2007 contributions (Non-elective Only) |
No |