Has your qualified plan nondiscrimination testing resulted in refunds to any highly compensated employees (HCEs) during the past five years? This is the question posed to 282 public and private for-profit companies, during the 2020 Annual Survey conducted by Newport Retirement Services and PLANSPONSOR.
Below are the survey results provided to us courtesy of Newport Retirement Services.
401(k) Nondiscrimination Testing Refunds Survey Findings
Sixteen percent of companies surveyed responded that in the past few years, they have experienced 401(k) refunds paid back to highly compensated employees (compensation of $130K+ annually) due to nondiscrimination testing.
In recent months, due in large part to recent economic concerns arising from the pandemic and its serious impact on all employees and particularly on lower wage earners, there has been an increased level of discussion in the plan sponsor community around qualified plan nondiscrimination testing.
As nondiscrimination testing continues to impact an increasing number of employees, one of the key takeaways is the ability for plan sponsors to implement a nonqualified deferred compensation (NQDC) plan that includes a deferral election feature that allows for an automatic increase in a participant’s annual deferral equal to the amount of the qualified plan refund. Note that plan sponsors can also add this feature to an existing NQDC plan.
Source: Newport/PLANSPONSOR Executive Benefits Survey, 2020 edition.
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