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Tips to Fix 401(k) Refunds

March is a time that many 401(k) plans have refunds to their highly compensated employees. Below are some ways that we have helped reduce or eliminate refunds:


1. Safe Harbor 401(k) Plan


2. Bottom-Up QNEC or Qualified Non-Elective Contribution (a contribution to the lowest-paid employees to try and increase the average deferral, must be 100% vested)


3. QMAC or Qualified Matching Contributions (this requires making part of the match 100% vested, but could help pass the non-discrimination tests)


4.Consider using a different compensation amount for testing


5. Consider allowing for earlier entry in the plan and using carve out testing to exclude participants before one year of service


6. Automatic Enrollment and Re-Enrollment


7. Targeted Automatic Enrollment


8. Targeted Employee Education


9. Easy Enrollment

Are you unsure if your Plan has had corrective distributions?

Click here to look up your latest IRS Form 5500 and find out. Simply type in your plan name and look for Corrective Distributions under Schedule H, Part 2f.


If you have questions, please reach out to your ProCourse Advisor.


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