ADP Retirement Services Guide to your Year-End Employer Contribution Report Package IMPORTANT DEADLINES: March 1 For Clients with March 15th Corporate Due Date November 30 December 14 Last day for ADP Retirement Services to receive your signed authorization form to debit your bank account and to post the contributions to the participants accounts by this corporate due date. For dates other than March 15th, refer to The Authorization Page section for detailed information. Last day to request your 2017 Year-End Employer Contribution report (for calendar year plans). Last day to submit your signed authorization form to debit your bank account and to post the contributions to the participants accounts before the end of the year (for calendar year plans). ADP, the ADP logo and ADP A more human resource are registered trademarks of ADP, LLC. All other trademarks and service marks are the property of their respective owners. 04-2747-0118 Copyright 2009-2018 ADP, LLC. ALL RIGHTS RESERVED.
Table of Contents What You Need to Review... Page 2 The Allocation Report... Page 3 Important Notations If You Need to Make Corrections... Page 5 The Authorization Page... Page 6 General Information When You Are Satisfied with the Allocation Safe Harbor Plans... Page 8 Important Information Impact on Your Year-End Compliance Test... Page 9 GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 1
What You Need to Review Review the Allocation Report and the IRS Limits below. Make any necessary changes. Sign your authorization form and return to ADP via email to compliance@adp.com. The IRS Annual Compensation, Contribution and 415 Annual Additions Limits 2016 2017 2018 Compensation Limit for Testing and $265,000 $270,000 $275,000 Contribution Determination (401(a)(17)) Social Security Taxable Wage Base $118,500 $127,200 $128,400 401(k) Maximum Annual Elective $18,000 $18,000 $18,500 Deferrals (402(g) Limit) 401(k) Catch-Up Contributions $6,000 $6,000 $6,000 NOTE: Participants who are 50 or older, or who will reach 50 during the calendar year, are allowed to make additional catch up elective deferrals over and above the current elective deferral limit. 415 Annual Additions $53,000 $54,000 $55,000 GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 2
The Allocation Report Review the summary of plan provisions. Review the compliance identification and status provided on the Year-End Employer Contribution Allocation Report. These items are used to determine who is eligible to share in the Non-Elective Profit Sharing Contribution, Discretionary Match Contribution and/or Match True-up Contribution. PLEASE NOTE: The information on the Allocation Report is from your Compliance Year-End test. It is important to review the Compliance Year-End Test and the Guide to Your Year-End Compliance Test Package before you make any changes on the Allocation Report. If corrections are needed, see If You Need to Make Corrections section of this Guide. Review your adoption agreement for the eligibility provisions of your plan. An eligible employee is an employee who has: Completed the age and service requirements before the last plan entry date of the year. Is not excluded from the plan. If the plan has an hours requirement to share in the contribution, they must have worked the number of hours during the year. If the plan has a last day rule, to be eligible to receive the contribution the employee must be: 1) employed on the last day of the plan year; 2) was on leave from the employment of the company; 3) is deceased or disabled or 4) retired. If your adoption agreement has the last day rule provision for the employer contribution, you should review carefully the status code on this report. If the Status Code is... A T L D R Then the employee is... Active and eligible to share in the allocation. Terminated and unless terminated on the last day of the plan year will not be eligible to share in the allocation due to the last day rule provision. Eligible to share in the allocation as a result of his/her leave of absence. Eligible to share in the allocation as a result of his/her death or disability. Eligible to share in the allocation as a result of his/her retirement The column COMP USED to confirm that the correct compensation is listed. The compensation used is based on your Adoption Agreement. If you have a short plan year, the compensation should only be for the plan year. The COMP USED is capped at the IRS compensation limit of 275,000. If the plan year is not 12 months long, then the limit is pro-rated according to the number of months in the plan year. For example, if the calendar year plan terminated June 30, the annual compensation limit is 6/12 of $275,000 or $137,500. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 3
The Allocation Report, continued PLEASE NOTE: If you are: A Non-ADP Payroll client that excludes compensation from the allocation you will need to provide the correct compensation. A Plan that converted to ADP Retirement Services this year you may need to correct the compensation if it is based on compensation with exclusions or if the compensation should only be compensation while eligible. Discretionary Match allocations: The salary deferral shown on the Allocation Report and used in the calculation of the discretionary match allocation is: Salary Deferral contribution, plus Voluntary After-Tax contribution, if applicable, plus Catch-up contributions, if applicable, minus Excess Deferrals from failed 402(g) test, minus Excess Annual Additions of salary deferrals from failed 415 test, minus Excess Plan Deferrals from the Plan Deferral Limit test, minus Excess Contributions from the ADP test Important Notations If the Then... Notation Code is... R The employee s contribution amount has been reduced to meet the 415/Annual Additions Limit. The Annual Additions Limit for 2017 is the lesser of 100% of compensation or $55,000. An additional $6,000 may be available for catch-up eligible employees if they did not already make a catch-up contribution for the plan year. If the plan has a short plan year due to either: a) the company is a new company during the year, or b) the plan was an existing plan and the plan year changed, the 415 Annual Additions limit has been prorated. For more information on the 415 Annual Additions test, refer to either the Year-End Compliance Test Guide or the Plan Administration Manual. Both are available on the Plan Sponsor Website. If you are making a NEC, then the excess amounts due to 415 Annual Additions Limitation will be reallocated to all other eligible employees based on a ratio of compensation formula unless you notify ADP Retirement Services Client Services that you do not want to do so. X The employee s Salary Deferral Used was adjusted due to discrimination testing excess. Refer to the Discretionary Match Allocations section above. Refer to your plan provisions to determine if catch-up contributions or voluntary after-tax contributions are subject to an employer match. * The employee has not previously enrolled in the plan Distribute the enrollment kit(s) to the employee(s) affected. Employee should follow instructions in enrollment kit to enroll. Zero can be entered as a deferral percentage if the employee does not want to contribute. Inform the employee(s) that the contribution will be placed in the plan s default fund if they do not choose to enroll and make a fund selection. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 4
If You Need to Make Corrections The information on the Allocation Report is from the Year-End Compliance Test. To correct the data used in the allocation, you need to correct the data on the Year-End Compliance Test. Refer to the Year-End Test Guide for instructions on making corrections to your Year-End Compliance Test. The Year-End Test Guide is located on the Plan Sponsor Website by selecting: Compliance >> Plan Testing and Refunds >> Step 2 Year-End Test Guide VIEW YEAR-END TEST GUIDE GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 5
The Authorization Page General Information Verify the Authorization page of your Employer Allocation Report carefully to be sure the company codes appear. If you have more than one company code, the impound will be processed from each bank account associated with the company codes listed on the Allocation Report. If the report displays??? as the company code, clearly write the correct company code; otherwise, we will default to the first company code listed on the report. Verify the funding information (calculated contribution) per company code. This is the amount of money that must be available in each bank account. If there are any region/payroll company code changes subsequent to ADP s receipt of the signed authorization, the impound amount(s) will be processed from the accounts based on those changes. Please indicate if you would like forfeitures to be applied against the contributions, otherwise forfeitures will not be applied. All forfeitures will be used to reduce the contributions. Therefore, a specific amount of forfeitures to be used cannot be noted on the Authorization page. The forfeitures applied will be based on the forfeiture account balance at the time of impound. If you are an ADP payroll client, your account will be debited (impounded) for the full amount of the authorized Year-End Employer contribution and a credit will be given for the forfeitures applied. Note: Forfeitures cannot be used toward your company deduction since the company already took a deduction for them when they were originally contributed. Generally, contributions must be debited from your bank account no later than the date you file your corporate tax return. However, ADP must receive the Year-End Employer Contribution Authorization Form at least 5 business days preceding the due date of your corporate tax return filing in order to ensure that the funds will be impounded in a timely manner. In any event you should consult with your tax advisor regarding the timing and the deductibility of these contributions. The NEC, DM and/or Match True-up contribution will be posted to the participants accounts, 5 to 7 business days after the money has been successfully debited from your bank account. If your year-end employer contribution is made no more than 30 days after the due date of your business s tax return (including extensions), it will be counted in the Annual Additions test for the plan year. For example, if your business is a corporation with a fiscal year that is the same as your plan year, and you receive the maximum corporate extension of September 15, any contribution made by October 15, 2018, would be included in your plan s 2017 415 Annual Additions test. If you need additional information, please refer to the Impact on Your Year-End Compliance Test section of this Guide under 415 Annual Additions Tests. If your corporate tax filing dates are different, please let ADP Retirement Services know your corporate tax filing date so we can properly account for the contributions when doing your year-end compliance testing. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 6
The Authorization Page, continued When You Are Satisfied with the Allocation Sign the Authorization page in the space provided. Email the Authorization Page to compliance@adp.com so the impound can be processed. The impound will occur no later than 5 business days after receipt of this Year-End Employer Contribution Authorization Form. Be sure your bank account has sufficient funds to cover the Total Funding Due shown on the last page of the report for purposes of a timely impound. Please do not send checks to ADP Retirement Services. All year-end employer contributions are processed by impounding the funds from your bank account. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 7
Safe Harbor Plans Important Information If your company s plan provides for either a Year-End Safe Harbor NEC, Year-End Safe Harbor Match, or a Year-End Safe Harbor Qualified Automatic Contribution Arrangement (QACA), the Safe Harbor contribution is required to be funded by the 12th month after the end of the plan year (December 31 for calendar year plans). If you do not make a timely contribution, your plan s tax qualification under the Internal Revenue Code will be in jeopardy, which could result in adverse tax consequences for your business and plan participants. The Internal Revenue Service s employee plans correction program is available to correct disqualifying plan defects. Deadline to submit the signed authorization form is the 10th day of the 12th month after the plan year-end (December 14 for calendar plan years). PLEASE NOTE: If your Safe Harbor contribution is made no more than 30 days after the due date of your company s tax return filing date (including extensions), the contribution will be counted in the Annual Additions test for the period it is based upon. If you need additional information, refer to the Impact on Your Year-End Compliance Test section of this Guide for 415 Annual Additions Test. If your company s plan is a Safe Harbor plan and your company has followed all IRS requirements for the plan to be considered a 401(k) Safe Harbor Plan (including distribution of the annual notice to participants on a timely basis and making the required Safe Harbor contribution timely), ADP, and in most cases ACP, testing is not required. If the Plan s Adoption Agreement says the plan is an ADP only Safe Harbor plan, and a match is made, then an ACP test is needed and will be generated. Top Heavy Testing Your plan is deemed to be NOT Top Heavy and no contribution will be required if all of the following conditions are met: 1. Your company does not make any other employer contribution except Safe Harbor Contribution (i.e. QNEC, QMAT, Non-Safe Harbor NEC). 2. Matching contributions are not made for any Salary Deferrals greater than 6% of compensation. 3. Discretionary Matching Contributions are not greater than 4% of compensation. 4. Eligibility Requirements for Safe Harbor Contributions are the same as for Salary Deferrals. PLEASE NOTE: If all of the above conditions are not met, you are REQUIRED to make the Top Heavy Contribution. However, the Top Heavy Contribution will be substantially reduced or eliminated by the Safe Harbor Contribution. Therefore, do not authorize the Top Heavy Contribution until after the test is rerun (after the Safe Harbor Contributions has been made). GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 8
Impact on Your Year-End Compliance Test A revised Year-End Compliance Test Package will be available on the Plan Sponsor Website the day after the Year-End Employer Contributions have been deposited to the trust. Should any of your compliance tests fail, please refer to the Guide to Your Year-End Compliance Test Package, Corrective Actions Required for Failed Tests. As always, we suggest you review all of your test results with your company s tax advisor. Important Issues: Top Heavy Remedial and Top Heavy Test: If your plan is Top Heavy for the test year, your Non-Elective Profit Sharing and/ or Discretionary Match Contribution may satisfy in whole or in part the Top Heavy Minimum Required Contribution. The contribution will be included on the Top Heavy Contribution Report near the front of the Year-End Compliance Test Package. PLEASE NOTE: Total Gross Compensation is used to determine the minimum required contribution. Therefore, if your plan excludes certain items (such as bonuses or commissions) from Compensation for purposes of calculating benefits, an additional amount may be required. If your plan is a Safe Harbor plan, please see the preceding page for exceptions for some Safe Harbor plans. 415 Annual Additions Test: If a Year-End employer contribution such as a NEC, Discretionary Match Contribution, Match True-up, Safe Harbor NEC, Safe Harbor Match, QNEC or QMAT is made no more than 30 days after the due date of your business tax return (including extensions), the contribution will be counted in the Annual Additions test. Unless you have told us differently, we have assumed that your company s fiscal year is the same as your plan year and that you are on the maximum corporate extension. Therefore, if the plan year is a calendar year (2017), we assume that your tax filing would be September 15 and we would include any contributions made by October 15, 2018 in the 2017 415 Annual Additions Test. For example: Calendar Year Plan 2017 NEC posted on or before October 15, 2018 The contribution is credited as Annual Additions for 2017 and will be included in the 2017 Year-End Test. 2017 NEC posted after October 15, 2018 The contribution is credited as Annual Additions for 2018 and will be included in the 2018 Year-End Test. PLEASE NOTE: If your company s corporate tax filing date is based on a fiscal year, you will need to provide ADP Retirement Services with the appropriate dates and we will adjust the Year- End test accordingly. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 9
Impact on Your Year-End Compliance Test, continued ACP Test (Applies to the Discretionary Match Contribution and/or Match True-up) If the Actual Contribution Percentage Test (ACP) fails after the Discretionary Match and/or Match True-up contribution is made, we cannot guarantee that the corrective actions (such as refunds) will be made prior to the March 15, 2018 deadline. ADP will not be responsible for any penalties your company may incur should the Year-End compliance test fail and refunds have to be issued. Minimum Coverage Test If your company makes a Non-Elective Profit Sharing, and/or a Discretionary Match Contribution, the Minimum Coverage test for that provision will be prepared after the contribution has been deposited and posted to the participants accounts. If your plan fails this test, be sure to check the Minimum Coverage test in your revised package to determine if an additional contribution is required. GUIDE TO YOUR YEAR-END EMPLOYER CONTRIBUTION REPORT PACKAGE 10