Retirement Services Instructional Guide

Transcription

1 Retirement Services Instructional Guide Index of Content Click the topic you want to learn more about! Introduction to Your Quarterly Package Paychex Retirement Services for Employers Website Employee Census Report - Why Accuracy is Important - Submitting Census Changes Understanding Employee Classifications - Submitting an Employee Classification Change ADP/ACP - Compliance Tests Top Heavy Testing (Year End Only) Automatic Enrollment Plans and Compliance Testing (Year End Only) Other Types of Plans and Plans with Sole Proprietors or Partners Plan and Participant Summary Reports Participant Statements Fee Disclosure Statement for Participants Additional Information - Qualified Default Investment Alternative Notice - Automatic Enrollment Notice Contact Paychex Introduction to Your Quarterly Package This booklet contains instructions for understanding and reviewing the variety of reports and tests included in your quarterly package. You must review the reports for accuracy and examine your test results; each test will indicate whether the plan is in or out of compliance. You may need to take corrective action to bring your plan into compliance at year end. Action items are indicated by a green check mark. A qualified retirement plan must satisfy Internal Revenue Code (IRC) testing requirements in order to maintain its qualified status and receive certain tax advantages. Failure to take corrective action for a plan that is out of compliance at year end may result in Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) penalties and/or plan disqualification. After reviewing the package, please retain the documents with your plan records. Questions? Call us at We are available to assist you Monday through Friday between 8:00 a.m. and 8:00 p.m. ET.

2 Paychex Retirement Services for Employers Website Free, online retirement plan management tool you can access from your home or office computer. Log in to to: View and update employee census data and other plan information Fund year-end required and discretionary employer contributions View and print quarterly plan and participant financial reports Obtain frequently used plan documents and forms Learn more about retirement planning Not Yet Registered? Call to receive your 16-digit registration code! Please note: MyPaychex clients must use to access the website. Be alerted to Plan requirements right on the Home page. See important Plan data at a glance! View and update employee data at your convenience!

3 Employee Census Report Why Accuracy is Important Census information is critical for determining eligibility for enrollment, performing compliance testing, and calculating contribution allocations. Review the census information on the report and submit any changes to Paychex. Be sure to verify the following for accuracy: Employee name, status, birth date, hire date, and termination date Employee classifications for Key and Highly Compensated Employees (HCEs) Allocation groups (applicable to New Comparability plans only) Excluded employee types Submitting Employee Census Changes Submit Changes Online* You may submit changes to date of birth, date of hire, HCE/Key classifications, allocation groups, and exclusion types online through the Paychex Retirement Services for Employers website. All other changes must be submitted by fax. To make updates online, log in to and follow these steps: 1. Select Retirement Services from the left menu. 2. From the Employee Data menu, select Census Report. 3. Click Edit, scroll to the affected employee, and enter the missing data or make an update. You can also use the Sort by menu to sort employees by specific criteria such as Date of Birth, and then click Edit. 4. Click Save. * Paychex HR Solutions - PEO clients and clients using Paychex Preview software must submit changes by fax or through payroll. Submit Changes via Fax To submit employee census updates via fax: 1. Write changes on the Employee Census Report. 2. Fax the report to Paychex Participant Support at Updated reports and compliance tests will be available on five business days from the date of the request. Note: You must generate a new ADP/ACP and Top Heavy test after making census updates.

4 Understanding Employee Classifications When reviewing your documents, you need to verify that your employees are properly classified as either a Highly Compensated Employee (HCE) and/or a Key Employee to ensure accurate test and reporting results. The following table provides employee classification definitions. Highly Compensated Employee (HCE) An employee who satisfies at least one of the following: Key Employee or Former Key Employee* *A Former Key employee is an employee who during a prior plan year satisfied a Key employee requirement, but no longer does. An employee who satisfies at least one of the following: Greater than five percent stockholder/owner Employee who owns, directly or indirectly, more than five percent of the stock, capital, or profits of the company during the current or prior year. Greater than five percent stockholder/owner Employee who owns, directly or indirectly, more than five percent of the stock, capital, or profits of the company during the prior year (or first plan year in the case of a new plan). Family member Employee who is a spouse, parent, child, or grandparent of a greater than five percent stockholder/owner during the current or prior year. Greater than one percent stockholder/owner Employee who owns, directly or indirectly, more than one percent of the stock, capital, or profits of the company and earns more than $150,000 annually during the prior year (or first plan year in the case of a new plan). Employee earning greater than the compensation limit for the prior year ($115,000 in 2014): Paychex has updated your 2015 HCE classifications based on compensation earned in the prior year. Verify that employees who earned more than $115,000 in 2014 are classified as HCEs. Family member Employee who is a spouse, parent, child, or grandparent of a greater than five percent stockholder/owner during the prior year, Or Employee who is a spouse, parent, child, or grandparent of a greater than one percent stockholder/owner during the prior year and earned more than $150,000 annually during the prior year (or the first plan year in the case of a new plan). Note: If your plan uses the Top Paid Group Election, the number of employees classified as HCEs based on compensation is limited to the top 20 percent of employees ranked by compensation earned in the prior year and all key employees. Officer Employee who has the authority of an administrative executive and earned more than $170,000 in The number of officers classified as Key is limited to either 10 percent of all employees or three employees, whichever is greater, not to exceed 50 employees. Submitting an Employee Classification Change To update an employee s classification online*, log in to and follow these steps: 1. Select Retirement Services from the left menu. 2. From the Employee Data menu, select Census Report. 3. Click Edit, scroll to the affected employee, and enter the missing data or make an update. You can also use the Sort by menu to sort employees by specific criteria such as Date of Birth, and then click Edit. 4. Click Save. * Paychex HR Solutions - PEO and Paychex Preview clients must submit changes by fax to

5 ADP/ACP - Compliance Tests The Actual Deferral Percentage (ADP) test compares the average salary deferrals of the Highly Compensated Employees (HCEs) to the average salary deferrals of the Non-Highly Compensated Employees (NHCEs). The test aims to prevent discrimination in favor of the HCEs. If, as of the year-end test, the HCE average exceeds the NHCE average by more than the permitted limit, corrective action is required and you will have to provide instruction. The Actual Contribution Percentage (ACP) test is calculated in the same manner as the ADP test; however, it tests employer matching contributions. Safe Harbor, SIMPLE, Profit Sharing, and Money Purchase Plans are generally not subject to this testing. Review the Test(s) The test results are provided so that you, the Plan Administrator, may monitor the plan deferrals throughout the year and keep your plan compliant. As a reminder, Paychex is not the Plan Administrator; this individual is designated by the adopting employer. Review the test for accuracy and compliance status. Ensure all employees are included in the correct classification group (HCE or NHCE) on the test, and all eligible employees are listed on the test. If changes are needed, follow the steps for Submitting Employee Census Changes. All employees who have satisfied the plan s age and service requirements for making salary deferrals, regardless of whether they make deferrals into the plan, should be included on the test. Identify Test Results In Compliance No further action is required Out of Compliance Action is required - If corrective action is not taken by the deadline shown in the year-end package, Paychex will process ROEs to HCEs to meet the IRS deadline. To take corrective action online, log in to and follow these steps: Throughout the Year - 1. Consider encouraging increased participation among NHCEs, and/or modify the HCE deferral percents by completing the HCE Deferral Amount Change Form. 2. Select Retirement Services from the left menu. 3. From the Documents & Reports menu, select Forms, and click HCE Deferral Amount Change Form. 4. Complete and fax the form to Paychex Participant Support at At Year End You must choose a corrective option 1. Select Retirement Services from the left menu. 2. From the Administration menu, select Compliance Information, and locate the Compliance Testing section. 3. Select View Results under ADP/ACP Compliance Testing 4. Follow the prompts to electronically authorize one of the following corrective options: a. Return of Excess (ROE) Contributions to HCEs b. Fund a Qualified Non-Elective Contribution (QNEC) (Paychex HR Solutions - PEO clients cannot fund a QNEC via the website.) c. Notify Paychex of your intent to fund a QNEC after the 3/15 Return of Excess IRS Deadline To send corrective action via fax: 1. Sign the appropriate corrective option page, located after the test. Note: If you intend to fund a QNEC later, you must fax the request on company letterhead and have it signed by the plan administrator. 2. Fax the page to Paychex Participant Support at Safe Harbor Plan A Safe Harbor 401(k) Plan may not be subject to annual compliance testing as with traditional 401(k) plans. To amend your plan to a Safe Harbor plan for the next plan year, contact Paychex by November 1.

6 Top Heavy Testing (Year End Only) The IRS requires qualified plans to perform an annual Top Heavy test. We will provide results of your plan s Top Heavy test in your year-end package. A plan is considered to be top heavy if the account balances of the Key employees exceed 60 percent of the total plan account balances as of the determination date. (Former Key employee balances are excluded from this calculation.) You can view your plan s top heavy status from last year online and take corrective action now if you have not already done so. Safe Harbor, SIMPLE, Profit Sharing, and Money Purchase Plans are generally not subject to this testing; the Top Heavy test will be satisfied as long as you have not made any additional contributions to the plan during the plan year. Review the Test Online Log in to and follow these steps: 1. Select Retirement Services from the left menu. 2. From the Administration menu, select Compliance Information, and locate the Compliance Testing section. 3. Select View Results under Top Heavy Test. 4. If changes are needed, follow the steps for Submitting Employee Census Changes. Identify Test Results In Compliance Out of Compliance No further action is required Action is required To take corrective action online, log in to and follow these steps: 1. Select View Results under Top Heavy Test 2. Follow the prompts to electronically authorize one of the following corrective options: a. Fund a Top Heavy Contribution b. Fund a Profit Sharing Contribution To send corrective action via fax: 1. Sign the appropriate corrective option page, located after the test. 2. Fax the page to Paychex Participant Support at Safe Harbor Plan A Safe Harbor 401(k) Plan may not be subject to annual compliance testing as with traditional 401(k) plans. To amend your plan to a Safe Harbor plan for the next plan year, contact Paychex by November 1.

7 Automatic Enrollment Plans and Compliance Testing (Year End Only) With an automatic enrollment feature, eligible employees are automatically enrolled at a contribution amount/rate specified by the plan administrator, requiring no action from the employee unless they choose to opt out or change investment choices. This feature decreases the administrative burden of the employee enrollment process and can increase participation rates, which may improve compliance testing results. If your plan has an automatic enrollment feature, the employees who were automatically enrolled in the plan have 90 days to decline enrollment and take a distribution from the plan. This is called an opt-out election. If an automatically-enrolled employee makes this opt-out election, the deferral and match contributions (if applicable) are not included when calculating the ADP/ACP and Top Heavy tests. Because of the possible impact of the opt-out election on testing results, final compliance tests may not be prepared until April of the following plan year. This additional time ensures that the 90-day opt-out period has elapsed for all employees. For example, employees automatically enrolled in December have until March of the next year to make their opt-out election. Review the Test(s) The test results are provided so that you, the Plan Administrator, may monitor the plan deferrals throughout the year and keep your plan compliant. As a reminder, Paychex is not the Plan Administrator; this individual is designated by the adopting employer. Review the tests for accuracy and compliance status. Ensure all employees are included in the correct classification group (HCE or NHCE) on the test, and all eligible employees are listed on the test. If changes are needed, follow the steps for Submitting Employee Census Changes. Note: All employees who have satisfied the plan s age and service requirements for making salary deferrals, regardless of whether they make deferrals into the plan, should be included on the test. Identify Test Results Test Result Your company does not have employees eligible to make an opt-out election during the first quarter. Therefore, the test results enclosed in your year-end package are final. Take the appropriate steps as outlined on ADP/ACP and Top Heavy Testing pages. Estimated Test Result Your company has employees whose first check date with automaticallyenrolled contributions occurred in October, November, or December of the plan year. These employees are eligible to request an opt-out distribution, which can affect the results of the ADP/ACP and Top Heavy tests. Any employees eligible to take an opt-out distribution will display on the test with an O next to their name. Final tests will be prepared and mailed to you in April. At that time, you may need to take corrective action by June 1, if the tests indicate an out-of-compliance result. If your plan has the automatic enrollment feature, you are responsible for annually notifying participants about automatic enrollment by distributing the required Automatic Enrollment Contribution notice, along with Summary Plan Description, to all eligible employees by December 1 of each plan year. Both documents are made available on the Paychex Retirement Services website under Documents & Reports Plan Documents. Paychex also provides this notice to you in the third quarter package. Safe Harbor Plan A Safe Harbor 401(k) Plan may not be subject to annual compliance testing as with traditional 401(k) plans. To amend your plan to a Safe Harbor plan for the next plan year, contact Paychex by November 1.

8 Other Types of Plans and Plans with Sole Proprietors or Partners Safe Harbor and SIMPLE 401(k) Plans A Safe Harbor 401(k) plan can encourage employee participation because employer contributions made to the plan are fully vested. Also, by selecting to amend to a Safe Harbor plan you may not be subject to annual compliance testing as with traditional 401(k) plans. To amend your plan to a Safe Harbor plan for January of the next plan year, contact Paychex by November 1 of the current plan year. Safe Harbor 401(k) plans may not be subject to ADP/ACP testing; therefore, test results in the quarterly and year-end packages will indicate No Test Required where applicable. Safe Harbor 401(k) plans are exempt from the Top Heavy test if no employer contributions have been made in addition to the required Safe Harbor contribution. SIMPLE 401(k) plans are not subject to ADP/ACP or Top Heavy testing. If you have a Safe Harbor 401(k) Plan and have selected a Non-Elective Contribution or an Annual Safe Harbor Matching contribution, an notification was sent to you when the allocation was made available electronically on the Paychex Retirement Services for Employers website. If you have a SIMPLE 401(k) Plan and have selected a Non-Elective Contribution, the contribution allocation will be included in this package. The Non-Elective Contribution is an amount equal to at least 3% of each eligible participant s compensation for Safe Harbor plans, and 2% of compensation for SIMPLE plans. IRS regulations require that the contribution be made no later than December 31. In order to be eligible for a tax deduction, the contribution must be made by the company s tax filing deadline. Money Purchase Plans Money Purchase Plans require that a contribution be made to the plan annually, based on elections in the plan s adoption agreement. A Money Purchase Plan contribution allocation is enclosed in the year-end package, if applicable. The contribution deadline is based on your company s tax filing deadline. Sole Proprietors and Partners Sole Proprietors and Partners must provide wage, hour, and personal information to Paychex because this information is not maintained on the payroll system. Make a Year-End Profit Sharing Contribution Log in to and follow these steps: 1. Select Retirement Services from the left menu. 2. From the Administration menu, select Employer Contributions, then Profit Sharing. 3. Follow the system prompts. For New Comparability, Social Security Integrated or Age Weighted allocation formula plans, please contact us at Note: Sole Proprietor and Partner contributions may affect the Top Heavy test result.

9 Plan and Participant Summary Reports These reports contain a summary of the plan and participant investment activity during the calendar quarter. Review these reports for accuracy, report updates to Paychex, and then file and maintain them with your plan records. Note: Please be aware that if a contribution occurred in one quarter but was not traded during the same quarter, it will be included in the reports for the quarter in which it trades and you will not be able to match contributions to your payroll report. Participant Statements In Separate Envelopes These statements contain the participant contribution and investment activity during the calendar quarter. Distribute the participant statements to your employees (including terminated participants). The statements are ready to mail to your employees. Remember, it is the responsibility of you, the Plan Administrator, to ensure that plan participants receive their statements. Are there terminated employees with balances in the plan? Terminated employees can access or call to request a distribution. Employers can also force out terminated employees with an account balance of $5,000 or less. Participants who will be at least 50 years of age during the plan year have the ability to start making salary deferral catch-up contributions to their 401(k) plan as early as January 1 of that year. These participants can contribute more than the current salary deferral limits, but not to exceed the applicable catch-up contribution limit. Refer to the IRS Plan Limits table on the next page. Fee Disclosure Statement for Participants Employers who sponsor certain qualified retirement plans, including 401(k) and profit sharing plans, must provide participants and beneficiaries of the plan with a summary of plan fees, expenses, and investment related information a fee disclosure. The disclosure must be given to newly eligible employees of the plan upon eligibility, to current plan participants whenever updates are made to plan fees, and annually thereafter to all plan participants. Paychex has prepared a Participant Fee Disclosure Statement for your plan and made it available on the Paychex employer and employee websites. You must provide a paper copy of the fee disclosure to participants who did not elect to receive it electronically, when applicable. Participants can sign up for electronic delivery on our website anytime. To access a report identifying those employees who require a paper copy, follow these steps. 1. Log in to the Paychex website and select Retirement Services. 2. From the Administration menu, select Compliance Information, then choose Distribute Fee Disclosures under the Participant Fee Disclosure section. Participants who must receive a paper copy of the disclosure are listed in the table as well as those that have elected electronic delivery will be displayed along with their address. 3. To access the disclosure, click on the Participant Fee Disclosure link in the Action Required box. 4. Print and distribute a copy of the Participant Fee Disclosure to each employee listed. For participants who elected electronic delivery, Paychex will provide a link to the disclosure via an sent directly to participants.

10 Additional Information IRS Plan Limits for Qualified Retirement Plans Plan Limits: (k) Salary Deferral $18,000 SIMPLE Salary Deferral $12,500 Catch-up Contribution 401(k) (50+ years old) $6,000 Catch-up Contribution SIMPLE (50+ years old) $3,500 Social Security Taxable Wage Base $118,500 Highly Compensated Employee Wage Base $120,000 Key Employee Officer Wage Base $170, Contribution Limit $53,000 Maximum Wages Used for Plan Purposes $265,000 Note: HCE classification is based on compensation earned in the prior plan year, and Key employee officer classification is based on compensation earned in the prior plan year except for first year plans. 410(b) Coverage Testing If your plan uses a last day rule (LDR) or a minimum hours worked requirement for allocating profit sharing or year-end matching contributions, a 410(b) coverage test was prepared for the matching, profit sharing, and forfeiture allocations. If your plan failed the Top Heavy test, the Top Heavy corrective measure will be included with the allocation, if applicable. If the 410(b) test indicates failed, one or more of the non-highly compensated employees who were excluded from receiving a contribution because of the LDR or minimum hours worked requirement, must be included in the matching, profit sharing, and/or forfeiture allocation. These employees are noted with a C next to their name on the allocation. Increasing Deferral Percentages By increasing the plan s maximum deferral percentage, your employees can save more for their retirement. To increase the plan s maximum deferral percentage, contact Paychex and a plan amendment can be processed at no additional charge. Recharacterization of Employee Contributions At the end of the plan year, Paychex will determine if your employees have exceeded the plan or IRS deferral limits within this plan. Based on the amount of each contribution type, one of the following will occur: If a participant made catch-up contributions and has not reached the plan or IRS elective salary deferral limit for the plan year, then all or a portion of the salary deferrals designated as catch-up contributions will be recharacterized as a traditional salary deferral up to the applicable deferral limit. exceeds the plan or IRS salary deferral limit and has not maximized his or her catch up contribution, excess deferrals will be recharacterized as a catch-up contribution up to the applicable catch-up limit. is an HCE and has excess contributions as a result of a failed ADP test and is eligible for catch-up contributions and has not maximized his or her catch up contribution, excess contributions will be recharacterized as a catch-up contribution up to the applicable catch-up limit.

11 Qualified Default Investment Alternative Notice You are required to distribute annually a Qualified Default Investment Alternative (QDIA) notice to all active, eligible employees and any terminated employees with an account balance in your retirement plan no later than December 2 of each plan year. When a plan has immediate eligibility, the QDIA notice must be provided to the participant no later than their date of eligibility. In addition to the annual requirement, the QDIA Notice must be provided 30 days prior to: the date the QDIA is first included in the plan the date an employee becomes eligible to participate in the plan the date a participant s assets are invested in the QDIA A copy of the notice is available on the Paychex Retirement Services website under Documents & Reports Plan Documents. Depending on your fund lineup and plan features, Paychex will provide a copy of the correct notice to you by mail or in your third quarter package. Automatic Enrollment Contribution Notice If your plan has the automatic enrollment feature, you are responsible for annually notifying participants about automatic enrollment by distributing the required Automatic Enrollment Contribution notice, along with a Summary Plan Description, to all eligible employees by December 1 of each plan year. Both documents are made available on the Paychex Retirement Services website under Documents & Reports Plan Documents. Paychex also provides this notice to you in the third quarter package. Contact Paychex Employers Online*: Phone: , Monday - Friday, 8:00 a.m. to 8:00 p.m. ET. Mail: Contribution Checks Paychex Retirement Services PO Box New York, NY Please make check payable to: Paychex FBO "company name" "plan number" Other Correspondance Paychex Retirement Services Attn: Participant Support 1175 John Street West Henrietta, NY Participants Fax: Online*: Phone: , Monday - Friday, 8:00 a.m. to 8:00 p.m. ET. Information is available on this line 24/7. *Note: MyPaychex clients and participants must use to access the website.