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SPACs have become a popular investment strategy, raising substantial funds in 2020. But how do SPACs work? And should you be investing in them?
Generally, correcting this type of oversight concentrates on making the employee whole, i.e. make up for the missed deferral opportunity in a 401(k) plan and/or the missed employer contribution in a profit sharing plan in addition to earnings on the missed deferral or contribution. In a 401(k) plan the correction is accomplished by an employer “Qualified Nonelective Contribution” (QNEC) equal to 50% of the employee’s group Actual Deferral Percentage (ADP). The group refers to either a Highly Compensated Employee (HCE) or a Non-Highly Compensated Employee (NHCE).
A fiduciary is someone who is authorized by an agreement like a trust or service agreement to act on behalf of someone, whether an individual or an entity like a retirement plan. ERISA defines three types of fiduciaries in Section 3: a Section 3(21), 3(38) and 3(16). Let’s begin with the most basic of the three, the 3(16) fiduciary.
The primary benefit of an auto-enroll 401(k) plan is the potentially improved results of the ADP and ACP testing in a plan that does not include Safe Harbor provisions. Typically, the plan will automatically enroll employees once they are eligible based on the plan document provisions. An “Eligible Automatic Enrollment Arrangement (EACA)” does not require employer contributions.