Who can establish this Plan?
Any employer with one or more employees
When must the Plan be established?
By the end of the fiscal year-end (12/31 for calendar year)
Are employee contributions mandatory?
Are employer contributions mandatory?
No. The contribution is discretionary.
What are the employer contribution limits?
25% of participating compensation with the allocations limited to 100% of compensation or $53,000 per participant in 2016.
What are the employee contribution limits?
No employee contributions.
What is the funding responsibility?
Annual employer contribution is discretionary.
When must contributions be made?
Employer contributions must be deposited by tax-filing date plus extensions.
What are the eligibility requirements?
The maximum allowable eligibility requirements that can be imposed are 21 years of age and 1,000 hours of service in 2 preceding years. The employer has the option of reducing these requirements.
What are the vesting requirements?
Employee salary deferrals are 100% vested. Employer contributions may vest over time, typically a graded schedule with full vesting after 6 years.
Is the Plan subject to non-discrimination testing?
Yes. This is a complex plan design and requires discrimination testing under IRC 401(a)(4).
Is the Plan subject to top heavy minimums?
Yes. If 60% or more of the plan assets are allocated to Key employees, up to a 3% employer contribution is required.
When is an employee eligible to withdraw from the Plan?
Generally, salary deferrals cannot be withdrawn until separation of service, death, disability, or retirement. A plan may allow for hardship distributions.