The Internal Revenue Service has issued its final safe harbor rules for employers facing business hardships.
The agency ruled that companies that operate at a loss can eliminate or reduce non-elective contributions made to Safe Harbor 401(k) plans midyear.
The Safe Harbor 401(k) has been popular among small business owners because it allows them and their highly-compensated employees to make the maximum contribution either tax-deferred or after tax to their Roth 401(k) regardless of income. In exchange for modest contributions to other plan participants on a matching basis, the plan doesn’t have to go through strenuous nondiscrimination testing requirements that apply to standard 401(k) plans.
Prior to this rulemaking, employers had to have a business hardship to suspend or reduce their non-elective contributions to these plans. Now, employers can reduce or suspend their non-elective contributions no matter what their financial condition as long as they let participants know before the beginning of the plan year that their contributions could be reduced or suspended midyear, and give them 30 days’ notice before the suspension or reduction actually takes place.
According to the IRS in its final rules, which were released Nov. 14, the same rules now apply to both safe harbor non-elective contributions and safe harbor matching contributions.
This is a change from previous rules on matching contributions so the changes don’t go into effect until Jan. 1, 2015.
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Tuesday, December 31, 2013
Monday, December 2, 2013
America’s Small Businesses and the Affordable Care Act:
Myth vs. Fact
Myth: All employers are required to buy health insurance for their employees under the Affordable Care Act.
Fact: The Affordable Care Act does not require businesses to provide health insurance to their employees.
-Starting in 2015, businesses with 50 or more full-time or full-time equivalent employees that do not provide coverage to their full-time employees may be subject to an Employer Shared Responsibility payment.
-However, 96 percent of America’s businesses are too small to be subject to these rules.
Myth: Since my state hasn’t set up its own health exchange, the Affordable Care Act doesn’t apply to me.
Fact: Every state will have an affordable insurance Marketplace (commonly known as an Exchange) for self-employed individuals and small businesses, opening for enrollment on October 1, 2013.
-Depending on where you live, the Marketplace will be operated by either your state or the federal government, or through a partnership with the state and the federal government.
-Regardless of location, insurance plans in the Marketplace are offered by private companies, and all plans offered will cover the same core set of benefits called Essential Health Benefits. No plan can turn you away or charge you more because you or your employees have an illness or medical condition.
-For more information about the Marketplace for small employers, known as the Small Business Health Care Option Program (SHOP), call 1-800-706-7893 (TTY users: 1-800-706-7915), Monday through Friday, 9 a.m. to 5 p.m. EST.
Read more HERE