Financial Independence Daily FI discussion thread - Friday, March 05, 2021

Daily FI discussion thread - Friday, March 05, 2021
PSA on Lost Earnings
Weekly FI Frugal Friday thread - March 05, 2021
For Canadians who have FIRE, Which Account Do You Draw From First?
The covid relief bill gets rid of medical subsidy cliff

Daily FI discussion thread - Friday, March 05, 2021

Posted: 05 Mar 2021 02:00 AM PST

Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked.

Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

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PSA on Lost Earnings

Posted: 05 Mar 2021 08:05 AM PST

Original Post

Why my opinion matters: I work at a big TPA, and literally half of my time is spent fixing this specific type of operational failure. I am sharing this because I just told an employer they owe their employees $40k.

If your employer doesn't deposit deferrals into your 401(k) plan as soon as administratively feasible (e.g 7 days) your employer likely owes you money.

There is a subset of the DOL called EBSA that takes this very seriously. If you call them, you will (eventually) get interest on money owed to you. dol.gov/agencies/ebsa/about-ebsa/about-us/regional-offices

Furthermore, the IRS also watches this. They are focusing on the issue this year. This is unsurprising due to COVID, as I noticed a tripling of this issue last year. They are usually looking for bigger fish though.

Comments About Timeliness of Deferrals

Legally speaking, employers have up to the 15th of the following month to deposit deferrals, but that is if it wasn't otherwise administratively feasible. I have NEVER seen the DOL allow this, because technology makes depositing payrolls so easy.

If you work for a large employer (e.g. 100+ employees), the money usually has to be deposited in fewer than 3 business days. These plans are required to be audited by an accountant each year. I have seen some accountants allow 0 days, I've seen some allow 5...I've never seen more than 5 days.

If you work for a small employer (e.g. <100 employees), the government allows a "safe harbor" of up to 7 business days.

Comments About Timeliness of Match

Example 1 - Safe Harbor 401(k) Plan

If your plan document states that safe harbor match is delivered annually, the safe harbor match is considered timely as long as it is deposited by the end of the plan year (usually 12/31) following the year in which it occurred.

Date of paycheck: 03/05/2021

Plan year end: 12/31/2021

Due date: 12/31/2022

Example 2 - Safe Harbor 401(k) Plan

If your plan document states that safe harbor match is delivered each payroll, monthly, quarterly, semi-annually, or any period more frequent than annually, the safe harbor match is due by the end of the quarter following the quarter in which the error occurred.

Date of paycheck: 03/05/2021

Due Date: 06/30/2021

Example 3 - Traditional 401(k) Plan

Usually, the due date is the same as example 1 regardless of the match frequency.

FAQs

How do I get this fixed?
- Always review your plan documents. You should be able to retrieve a "Summary Plan Description" (SPD) from your employer. Read that thoroughly to know what you are entitled to as a participant of the plan.
- Talk to your employer about the DOL's self-correction program if you believe they will actually do something about the issue.
- Tell your employer to reach out to a 401(k) third-party administrator, because that is who will (hopefully) know how to fix the issue.
- Reach out to EBSA (part of the DOL) directly, and big GubMint will come knocking
What if my employer didn't allow me to contribute money to me plan?
- This is called a missed deferral opportunity, and I intend to write an article on the subject in the near future.
What is a deferral?
- Any money that comes out of your paycheck is a deferral.
Do these rules apply to an HSA?
- I'm not an expert on HSAs, but it appears that is the case.

Edit 1: Moved frequent questions/comments up top.

Edit 2: I didn't expect so many people to read this, but I'm glad to see it may be helping out a few of you already. I kinda wanted to quit my job this morning, but this has reminded me that my role is potentially helping one of you FIRE faster!

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Weekly FI Frugal Friday thread - March 05, 2021

Posted: 05 Mar 2021 02:00 AM PST

Please use this thread to discuss how amazingly cheap you are. How do you keep your costs low? How do become frugal without taking it to the extremes of frupidity? What costs have you realized could be cut from your life without pain? Use this weekly post to discuss Frugality in general. While the Rules for posting questions on the basics of personal finance/investing topics are more relaxed here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

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For Canadians who have FIRE, Which Account Do You Draw From First?

Posted: 05 Mar 2021 02:52 PM PST

Is there an order that makes more sense? TFSA vs RRSP vs Taxable.

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The covid relief bill gets rid of medical subsidy cliff

Posted: 05 Mar 2021 12:04 PM PST

Looks like the new bill is going to cap all obamacare plans at 8.5% of income regardless of your income level, with no cliff

This must be the most consequential legislation coming out for FI folks since obamacare, no? No more figuring out how to stay below $60k or whatever.

https://jabberwocking.com/the-first-big-expansion-of-obamacare-is-coming-soon/

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