Employees considered “highly compensated” under IRS rules—typically those who earned more than a specified dollar limit in the prior year (e.g., $155,000 in 2024) or own more than 5% of the company. Plans must ensure benefits don’t disproportionately favor HCEs, hence the testing requirements. 

A core retirement plan principle: plans must not favor highly paid employees at the expense of others. Testing (like ADP/ACP) is performed annually to ensure contributions and benefits are fair and equitable across compensation levels. 

A plan is top-heavy if more than 60% of its assets belong to key employees (think owners and officers). If triggered, special minimum contributions must be made for non-key employees. It’s not a death sentence—but it can be a surprise if no one’s paying attention. 

These are employees who meet specific IRS criteria—such as owning over 5% of the business, being an officer making over $220,000 (in 2024), or owning more than 1% and earning over $150,000. Important for determining whether a plan is top-heavy. 

Vesting means ownership of employer contributions. Employees always own their own deferrals, but employer money is often subject to a vesting schedule (e.g., 20% per year over 5 years). It’s a retention tool—golden handcuffs, if you will. 

The rules that determine when an employee can begin participating in the plan. Often set at age 21 and one year of service, but some plans (especially post-SECURE 2.0) allow or require earlier entry. 

3(16) – Administrative fiduciary. Handles the paperwork and deadlines. 

3(21) – Investment advisor. Shares fiduciary duty with the plan sponsor. 

3(38) – Investment manager. Has full discretion over plan assets. 

Think of it as a spectrum—from co-pilot to auto-pilot. All three are legally bound to act in the best interest of the participants. 

How employer contributions are divided among eligible participants. Could be a percentage of pay, flat dollar amounts, or based on age/service (as in new comparability plans). 

Refers to the source of funds in a retirement account: 

Employer match 

Profit sharing 

Roth contributions 

Rollover money 

Each “type” has its own rules around withdrawal, vesting, and taxation. 

Annual nondiscrimination tests: 

ACP (Actual Contribution Percentage) = Employer match & after-tax contributions 

Used to ensure HCEs aren’t getting a sweet deal compared to everyone else. 

Safe Harbor 

A special plan design that lets employers avoid ADP/ACP testing by committing to certain minimum contributions and notices. It’s like paying for a FastPass to skip the testing line—and participants benefit too. 

Thanks to SECURE Acts 1.0 and 2.0, part-time employees working at least 500 hours in 2–3 consecutive years must now be allowed to make deferrals. Employers may exclude them from employer contributions, but tracking and compliance got a whole lot trickier. 

The age defined in the plan when a participant is considered “retirement eligible”—usually 65 or the fifth anniversary of plan participation, whichever is later. It matters for vesting and when benefits must begin. 

Many 401(k) plans allow participants to borrow from their own account. Repayment is made through payroll and includes interest—paid back to the participant. Useful, but if mishandled, it can become a taxable mess. 

Withdrawals from the plan. Can happen upon retirement, termination, disability, or death. Some plans allow in-service distributions. Timing and type determine how they’re taxed (and whether penalties apply). 

The platform that tracks participant accounts, investments, and transactions. Think of them as the tech and data backbone of the plan, though they typically don’t make plan-level decisions. 

That’s us! We handle the day-to-day operations of the retirement plan—compliance, testing, documents, consulting, and more. We’re the engine room, ensuring everything runs smoothly behind the scenes (and sometimes steering the ship too). 

Each year the IRS sets limits on how much can be contributed: 

Catch-up contributions 

Total annual additions 

Compensation limits 

They’re adjusted for inflation and matter big-time for both planning and compliance. 

What pay counts for retirement plan purposes? Plans define it differently: W-2 wages, 3401(a) income, or 415 safe harbor comp. The choice affects contributions, testing, and sometimes, confusion. 

A type of defined benefit plan that behaves like a 401(k): participants see hypothetical account balances, but behind the curtain, it’s a pension plan with funding rules and actuarial requirements. Great for business owners with high income. 

Traditional pensions. Promise a monthly benefit at retirement, based on a formula tied to pay and service. Less common these days, but still a powerful tool for long-term retirement security (and tax deferral). 

Automatically enrolls eligible employees into the plan unless they opt out. Increases participation rates and can satisfy certain Safe Harbor or Qualified Automatic Contribution Arrangement (QACA) requirements. 

The legal contract that governs how the plan operates. If it’s not in the document, it doesn’t count. This document outlines eligibility, contributions, vesting, distributions, and more. It’s the retirement plan bible—thou shalt follow it. 

This section can use the content on our existing site under the limits section. I would like to expand the table at some point to include more info 

There will be multiple sections of links