Most the answers can be found in archived blogs on this site – “the 411 on Employee Benefit Plans” Don’t have time to read through them? Post a question and we will be happy to help. 

1. What happens to my account when my Employer sponsored 401(k) Plan incurs a partial plan termination?

a) Your employer has terminated the 401(k) Plan and you will have lost all money contributed to the Plan to date.
b) You were a laid-off employee during the Partial Plan termination year, and as such you will automatically be fully vested in accrued benefits, to the extent funded on that date, or in the amounts credited to your account. 
c) Every employee in the company is automatically fully vested in all account balances. 

Hint – read article “Partial Plan Termination” – June 30, 2009 – authored by Jonathan Poppel, CPA.  

2. My employer notified me that they have an automatic enrollment feature to their 401(k) Plan, and I will be automatically enrolled after 3 months of working service. Which of the following is true?

a) I have no alternative, and I have to contribute to the auto-enrollment minimum as required by my employer.
b) I don’t have to worry about tracking my 401(k) contributions or options, as my employer will pick the best fund to invest my money in, and they will ensure that I am enrolled in 3 months time.
c) I have the option to “opt-out” of the auto-enrollment feature, and I should ask my employer for the applicable forms to make this election. 

Hint – read article “Streamlining of the Automatic Enrollment Process” – October 6, 2009 – authored by Shelby Williams

3. True or False:  My employer mentioned that they pay all administrative expenses incurred by the 401(k) Plan. Accordingly, my individual account incurs no fees, and I don’t have to worry about “outrageous” investment fees. 

Hint – read article “The FYI on 401(k) Plan Fees” – November 17, 2009 – authored by Joe Goodmiller

4. My plan administrator told me that I will earn my employer match based on a vesting schedule.  The vesting schedule is:

a) a tiered schedule for what percentage of your income you can contribute.
b) a tiered schedule for when money the employer contributes to your account is yours/earned.
c) A tiered schedule for the penalty you have to pay depending on your age, if you take your money out early.

Hint- its not letter “a” or “c”. Also – you can find this information in your “Summary Plan Description”, which can be provided by your plan administrator.

5. I am a plan administrator and I was recently out from work for 6 weeks due to illness.  No one at work knew how to remit the employee 401(k) contributions to the third party administrator; however we did make sure we deducted the contributions per the participants elections, so we are not out of compliance with regulations, right?

Not exactly.  The DOL Reg. 2510.3-102, “Definition of ‘Plan Assets-Participant Contributions,” states that employee contributions (including amounts withheld and elective contributions) become the Plan’s assets as of the earliest date on which such contributions can reasonably be segregated from the employer’s general assets, but no later than the 15th business day after the end of the month from the date on which such amounts are received by the employer or withheld from wages. If the employer does not comply with the regulation, this could be considered a prohibited transaction and should be reported in the annual filing. In some cases the DOL may rule that if the employee contributions were not remitted based on average lead time, then that would constitute a prohibited transaction.  If this has occurred, then you would want to talk to your third party administrator on how to “self-correct” this issue. 

Victor Fuentes