Frequently Asked Questions
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What is a Third Party Administrator?
A Third Party Administrator or TPA's purpose is to administer qualified retirement plans for Business Owners. The TPA assists the Plan Sponsor (Employer) with the overall design of a qualified plan, preparation of the Plan Document, annual administration of the plan inclusive of calculating eligibility, contributions, vesting, preparation of the applicable tests as required by Regulations, preparation of the 5500 / PBGC forms to be filed with the DOL, IRS and PBGC, assist with participant loans and distributions from the plan. The TPA would also oversee all aspects of maintaining the plan to ensure compliance and provide consulting services.
What is a QDRO?
A Qualified Domestic Relations Order (QDRO) is a Court approved judgment, order or decree which determines who the Alternate Payee is and the rights they have to receive benefits from the plan with respect to a plan participant. This Order states the Alternate Payee's right to receive benefits, the portion of the benefit they are entitled and when the benefit is available to them.
Why must a Qualified Plan be Restated?
The IRS requires that in order for a plan to maintain its tax qualified status, it must be restated every five (5) or six (6) years depending on the form of Document adopted by the Employer.
When can a terminated participant receive distribution of their benefit from the plan?
The Plan Document will state the earliest date a terminated participant may receive their benefit from the plan. At this time, the participant must complete the distribution election statements indicating how they will receive their benefit - cash subject to tax, rollover to another qualified plan, rollover to an IRA, etc. Along with the election statements, they will receive the applicable Tax Notice which will inform them of their options regarding distribution of their retirement benefits.
By when must Employer contributions be deposited into the plan to avoid penalty?
Employer contributions must be deposited by the due date for filing the Business tax return, including extensions in order for the contribution to be deductible. Generally, if a due date falls on a weekend, the due date is the following Monday. However, in the case of a Defined Benefit Plan, the plan must be funded within 8 1/2 months after the close of the plan year. Even though the tax code allows for an extension of deadlines if the filing deadline falls on a weekend or holiday, there is no extension beyond the 8 1/2 month period. If the Defined Benefit contribution due date falls on a weekend or holiday, the contribution must be made by the due date that falls on the weekend or holiday, which generally means the last business day before the deadline.
When must Employee 401(k) deferral contributions and loan repayments be deposited into the plan?
The Department of Labor (DOL) requires that the employee 401(k) contributions and loan repayments be deposited into the plan as soon as they are reasonably segregated from the general assets of the Employer but no later than the 15th business day of the month following the month in which the contribution was withheld from the employee's pay. However, the DOL has issued a safe harbor date which is 7 business days following the date the contribution is withheld from the employee's pay.
What is the due date for filing the 5500 forms with the DOL?
5500 forms must be electronically filed with the DOL by the end of the 7th month following the end of the plan year. If Form 5558 is filed prior to the end of the 7th month requesting an extension of time to file, then the 5500 forms must be electronically filed 9 1/2 months following the end of the plan year.