A Special Halloween Edition

Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

In the true spirit of Halloween, the Experts have both Tricks AND Treats for you, as follows:

Trick: The House of Representatives is reportedly considering a reduction of the pre-tax elective deferral limits for 403(b),401(k) and 457(b) plans to as little as $2,400, though the remaining amount up to the existing deferral limits could be contributed as a Roth contribution. Scary stuff!

Treat: The President, fortunately, appears to be against this proposal. And, the elective deferral limit is slated to go UP next year, by $500, to $18,500 ($24,500 if age 50 or older by 12/31/2018).

Trick: The compensation limit for determining who is a Highly Compensated Employee (HCE) for nondiscrimination testing purposes is remaining at $120,000 as it has each year since 2015. Since HCEs are determined by measuring prior-year compensation, this means that this compensation threshold will remain the same for testing through the 2019 plan year. Since salaries have increased at many organizations since 2015, more employees are now considered to be HCEs for testing purposes, which may negatively impact nondiscrimination test results.

Treat: Though the HCE compensation threshold did not change, many other retirement plan limits increased, including the elective deferral limit described above, the 415 limit on total annual additions to a participant’s account (from $54,000 to $55,000) and the limit on annual compensation that may be taken into account (from $270,000 to $275,000).

Trick: The Department of Labor is cracking down on plans with missing participants, and auditing plans specifically with missing participants in mind. Though the initiative is currently limited to defined benefit (DB) plans, it is certainly feasible that such audits will be expanded to include defined contribution (DC) plans at some point.

Treat: Many “missing” participants are not actually missing at all. The DOL was able to find many participants in plans that they audited by simply sending certified letters to participants’ last-known addresses. And, if that fails, many participants can be located via a variety of methods, including simple internet searches and participant locator services.

The Experts wish all of you a Happy Halloween!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.