Archive for the ‘Retirement Plan’ Category

Escape The Summertime Lull Will Expert Business Advice

Tuesday, July 5th, 2016

Top 5 Blog Posts In June

Just because the temperatures are higher and the days are longer doesn’t mean the team at Rea & Associates is taking a break from providing you with the latest financial and business advice.

In June we brought you tips about tax savings, advice on starting your own business, standing out against your competition and so much more. But which blog posts tickled your fancy? The following posts had more clicks than there were fireflies flitting across an open meadow during the summer solstice. Which post was your favorite?

  1. How To Become A Millionaire: The odds of winning Powerball are 1 in 292 million. The odds of winning Mega Millions are 1 in 259 million. The odds of winning Ohio’s Classic Lotto are 1 in 14 million. But if you were to invest the money you would normally spend the lottery into a 401(k) plan, your chances of winning big are all but guaranteed! Keep reading to learn how.
  2. How Are You Different From The Competition?: You have the opportunity to go above and beyond the call of duty every time you engage with a client. And don’t think that your superior work and insight will go unnoticed! Click here to find out why.
  3. Looking to Start a Business? Do It the Right Way: Starting a new business is a brave and exciting endeavor. Avoid common slip-ups by following the advice found in this post and you’ll be well on your way to a successful start.
  4. How Can You Track Use Tax in QuickBooks?:  Now that you have filed for use tax amnesty and are all set up with an account, how are you going to track it daily going forward? If you use QuickBooks, the answer is as simple as 1-2-3.
  5. Do You Know The Best Way To Buy A Business?:  Generally speaking, relationships are easier to develop and maintain when you work with the other person. The same is true in business, especially when you’re considering the relationship between a business owner and an advisor.

Do you have a question for our team of business experts? Is there a topic you are just dying to learn more about? Send me a message and put the Rea team to work helping you take control of your success this summer!

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How To Become A Millionaire

Thursday, May 26th, 2016

Kick Your Lottery Ticket Habit

Your Money Multiplied - Ohio CPA Firm

PHOTO CREDIT: Akron Beacon Journal
The odds of winning Powerball are 1 in 292 million. The odds of winning Mega Millions are 1 in 259 million. The odds of winning Ohio’s Classic Lotto are 1 in 14 million. But if you were to invest the money you would normally spend the lottery into a 401(k) plan, your chances of winning big are all but guaranteed!

I recently found myself standing in line at a local convenience store behind a guy who was in the process of redeeming his winning $2 scratch-off lottery ticket for another chance to uncover his fortune. My mind started to wander and it wasn’t long before I starting wondering how much the Ohio lottery takes in every year and how a person’s lottery habit could be transformed into a pretty substantial retirement plan.

According to the annual report from the Ohio Lottery Commission, about $2.8 billion was collected by the Ohio Lottery between July 1, 2014 and June 30, 2015. Perhaps even more shocking is that more than half of these funds, or $1.55 billion, was a direct result of instant ticket sales – the scratch-offs! Since we know that Ohio has about 9 million residents who are 18-years-old and legally permitted to play the lottery, we can conclude that the average Ohioan is spending $323 annually on the lottery. (And since I know that I spend $0, I can only assume that there are men and women out there spending $600 or more on lottery tickets every year!)

Read Also: Don’t Get Blown Away By A Cash Windfall

For Fun or For Money?

Whether you view the lottery as a form of inexpensive entertainment or “a convenient and accessible tool for radically altering [your] standard of living,” if your objective is to obtain financial security … there’s a better way.

Countless studies have been conducted in order to explain why those with lower incomes tend to spend more of their income on the lottery. Some of the reports are simply astounding. Just a decade ago 21 percent of those who played believed that the lottery was the most practical path to wealth. It’s this skewed thought process that continues to drive lower income residents in particular to spend a significant portion of their income on these tactics rather than invest in more effective wealth enhancement solutions.

  • The odds of winning Powerball are 1 in 292 million.
  • The odds of winning Mega Millions are 1 in 259 million.
  • The odds of winning Ohio’s Classic Lotto are 1 in 14 million.
  • The odds of winning Ohio Rolling Cash 5 are 1 in 575,757.
  • And if you want to know how many prizes are left for the popular scratch-off games in Ohio on any given day you can find that out here.
  • But if you were to invest the money you would normally spend the lottery into a 401(k) plan, your chances of winning big are all but guaranteed!

Your Money Multiplied

Let’s assume a 30-year-old who normally spends $25 a week on the lottery (or $100 a month) decides to invest these funds into a 401(k). What would happen to the investment if we were to assume the following conditions?

  • The employer matches 50 cents on each dollar, bringing the total monthly investment to $150.
  • We assume an 8% average annual return on the investment.

In 35 years, the $100 he previously spent on the lottery plus the $50 his employer is kicking in would come to around $344,000 when you factor in the 8% average annual return. What’s incredible to consider is that over the course of 35 years, this individual will have only invested $1,200 per year of personal income (or $42,000 total).

Now, what if the employee decided to kick their monthly $100 lottery habit earlier at the age of 21?  If we were to apply the same conditions outlined above, in 44 years (when the employee reaches age 65), the same investment and company match would result in a 401(k) plan worth $1,457,677. Over the course of this 44-year career only $52,800 in personal funds would be contributed to the plan, but with the company match and 8% average annual return, the funds would continue to multiply – 27 times to be exact!

Don’t pass up on an opportunity to facilitate a discussion about retirement savings and the big impact even a few dollars can make over time. If you have questions about how you can make the most of your retirement saving strategy, email Rea’s retirement plan services team for more information.

By Steve Renner, QKA (New Philadelphia office)

For more insight into our retirement plan services, check out these articles:

Don’t Let These Common Retirement Plan Mistakes Hurt Your Business

How Your Plan Design Can Help Improve Your Retirement Plan Participation

Retirement Plan Participants Are Content To Watch Their Savings Simmer

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Don’t Let These Common Retirement Plan Mistakes Hurt Your Business

Monday, March 28th, 2016
Administrative Mistakes | Retirement Plan Sponsors | Ohio CPA Firm

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slip up to cause major havoc – especially where your plan contribution records are concerned. Read on to discover some common administrative mistakes retirement plan sponsors should know about and how to avoid them moving forward.

When it comes to saving for retirement, your employees trust you to help them get their finances in order. Don’t undermine their trust by making mistakes that could have been easily avoided. Instead, take a proactive approach to the administrative responsibilities you are expected to manage. Keep reading to discover three areas retirement plan auditors are checking for mistakes and what you can do to avoid future issues.

Enrollment

Pay close attention to your plan’s eligibility requirements. The enrollment dates for some employees can get confusing. Consider the following example.

According to your plan document, in order for an employee to enroll in your company’s retirement plan, they must be at least 21-years-old and have had worked for you for at least six consecutive months. Once they have met these requirements, they can enroll during the plan’s entry dates, which fall on the first day of each quarter.

Considering this scenario, on what day will you be able to enroll “John” into your company’s retirement plan if:

  • He was hired March 17, 2016
  • His birthday is Oct. 25, 1995

While it’s true that John will meet the 6-month employment requirement on Sept. 17, he’s unable to meet the age requirement. When he turns 21 on Oct. 25, he will still have to wait until the first day of the next quarter – Jan. 1, 2017.

If an employee misses the opportunity to participate as a result of an error made by the plan sponsor, the employer is required to correct the mistake by making a corrective contribution.

This common mistake can easily be avoided as long as your business has solid processes in place to determine the appropriate for all new employees who are choosing to enter into the plan.

Contributions

Even data entry gurus aren’t immune to making mistakes and, as many of us are already aware, it only takes a minor slipup to cause major havoc – especially where your plan contribution records are concerned.

When you manually enter your employee’s retirement plan contributions, you become vulnerable to data entry errors. It’s not uncommon for a wrong keystroke to lead to deposits being made into the wrong employee’s account, for example.

Fortunately, this mistake is easily avoidable if you take steps toward automation. Ask your payroll company if they can create a file that can be easily uploaded to your retirement plan’s record keeper in an automated format and save yourself any future data entry headaches.

Compensation

It’s very important to be clear about what your plan document considers to be compensation. For example, if your plan document makes a point to reference “W-2 compensation,” you are required to withhold retirement plan funds from all regular wages, bonuses, commission, overtime, etc. This means, that if you pass out performance bonuses and neglect to withhold their 401(k) contribution, your document has failed and your business is opened to unpleasant consequences.

Fortunately, it’s not too late. Your plan document most likely offers the flexibility to make a separate plan election on bonuses. If your employee does decide to elect a portion of their bonus to the plan, ask them to document the election request for your records as well as their own.

Mistakes happen, but you can minimize the chance of making some pretty major mistakes simply by adopting a more proactive management style. The tips above will certainly help you get started. But for even more, email Rea & Associates today.

By Steve Renner, QKA (New Philadelphia office)

Get more retirement plan advice for your business. Check out these articles:

How Your Plan Design Can Help Improve Your Retirement Plan Participation

13 Fees That Can Kill Your Retirement Plans

Retirement Plan Participants Are Content To Watch Their Savings Simmer

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Business Leaders Were Reading What?!

Monday, December 28th, 2015

2015′s Most Popular Blog Posts

Best Business Blog Posts 2015- Ohio CPA FirmIf you take a moment to scroll through the list of categories, authors and archives on the right-hand side of this page, it’s pretty clear to see just how active Rea’s team of experts are when it comes to providing leaders in the business community with accurate, timely and easy to digest content. We are fortunate to have so much experience and expertise on our staff, and their eagerness to serve you better has allowed us to maintain a bi-weekly electronic newsletter, a quarterly print newsletter, three blogs and a handful of electronic segment specific newsletters. That’s a lot of content – but we are not even thinking about slowing down! I hope you hang around my lily pad for awhile. I’m pretty sure you’ll find a lot of great little tidbits to read about in 2016 too. Until then, I want to invite you to take a look at some of our most popular blog posts and articles. And, if you haven’t already, take a moment to look through the newsletters we offer and sign up to have news, tips and valuable information delivered to your inbox all year long!

Top 5 Dear Drebit Posts In 2015

Dear Drebit is updated every few days with timely information and advice. In addition to covering current trends and issues, readers are also invited to ask financial and business questions on the page, which will be answered by one of Rea’s industry experts. Here are last year’s top posts:

  1. How Far Back Can The IRS Go For Auditing?
  2. Theft Safeguards To Cause Tax Return Delays In Ohio
  3. Six Things 401K Plan Sponsors Need To Do Now
  4. New Adjustments Will Affect Your 2015 Tax Return
  5. File Faster With This Tax Prep Checklist

5 Most Popular Posts On Brushing Up Blog

Brushing Up: The Dental Accounting Blog features a variety of finance and business advice specifically tailored to dental professionals. From purchasing a practice, knowing what to expect from a career in dentistry and hiring the best staff for your practice to general accounting advice, tips for cashing out at retirement and tax tips, this blog is a valuable tool for dental professionals who are looking for ways to secure long-term success in their career. The year’s most-read blog posts are:

  1. How Sales & Use Taxes Apply To Ohio Dental Practices
  2. 6 QuickBooks Tips Every Dentist Should Know
  3. Could A Crown Be A Tax Deduction?
  4. 10 Year-End Tax Planning Strategies For Dentists
  5. Buying An Established Dental Practice? Master The Changeover 

Cultivating Your Business Readers Choose Top 5 2015 Posts

The Cultivating Your Business blog is a resource provided to clients and visitors on the firm’s Know & Grow website. Updated a few times per month, business owners have access to advice, tips and general insight into how to grow their businesses and realize an optimal return on their investment upon retirement. Here are the top blog posts from last year:

  1. Bad Buy-Sell Agreement Claims Another Family Dinner
  2. Will Your Summer Reading List Make You A Better Business Owner?
  3. WARNING: Free Business Valuation Offer Is Unbelievable
  4. Uncover The Secrets To Cashing In On Your Business
  5. How To Communicate To Your Employees That You’re Selling Your Business

Top 10 Articles In Rea’s Library In 2015

In addition to our blogs, the Rea team publishes a lot of other valuable content in print and electronic newsletters. We make sure that all these articles are easily accessible in our article library. This is where you will find many of our niche pieces as well as a lot of general accounting tips and insights. Take a look at some of our most popular posts over the last year.

  1. What Is The Mid-Quarter Convention?
  2. Dangers Of Paying Under The Table
  3. Revenue Recognition Changes Are Coming
  4. Football Ticket Deductions
  5. 401K Loans And Keeping Your Plan In Compliance
  6. Take Control Of Your Vendor Master In Nine Steps
  7. Why Your Traditional Employee Management Method Is Failing
  8. The Birth Of The Taxpayer’s Estate
  9. Parting Is Such Sweet Sorrow: But What About Your 401K?
  10. Purchasing Cards Compromise Business Security
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Move Over Santa, This List Is What Business Leaders are Checking

Thursday, December 3rd, 2015

Top 5 Dear Drebit Post for the Month of November

November is over and the Holiday season is in full swing. But even though we are busy practicing our caroling and searching for the best online bargains, we still have time to share the latest in business and financial news.

From filling you in about some of the topics we have covered in our weekly podcast to providing you with information and updates about unclaimed funds in Ohio and the Affordable Care Act – we were providing you with posts designed to help protect your finances, your identity and so much more.

Take a look to find out what our top 5 blog posts were in November and read up on anything you may have missed.

  1. How Do I Avoid Obamacare Penalties? The Affordable Care Act (ACA) has put a lot of stress on business owners over the last couple years, and 2016 will be no exception. However, if you look closely, you might be able to uncover areas of opportunity. There are three points all business owners should know to avoid penalties, read on to find out what they are.
  2. WARNING: Tis The Season To Practice Safe Online Shopping Habits — While it may be the most wonderful time of the year, cyber criminals are looking for ways to stuff their own stockings – at your expense. The holiday season is also a busy time of the year for scammers because, in general, more money is being spent and more people are clicking through cyberspace for the best deals and tracking their purchases. KnowBe4 recently published a blog about the top five scams shoppers should be on the lookout for, and we wanted to pass these on to our readers. Consider the following information to be an early gift from us to you, and hopefully your bank account can welcome the New Year unscathed.
  3. File and Suspend Strategy Suspended Deciding when to claim your Social Security benefits is often one of the most significant financial decisions older Americans must make today because, for many, Social Security benefits make up a substantial portion of their retirement income. Unfortunately, Congress recently passed legislation that will put an end to two popular strategies being used to maximize benefits married couples receive in their golden years.
  4. Do You Need to Send an Annual Notice to Your 401k Participants?As we begin the last quarter of the year, if your company sponsors a calendar year 401k plan, don’t forget about participant notice requirements.  They must be furnished by December 1 and may impact the operation or qualification of your plan.  Here is a checklist that may be helpful, but check with us if you are not certain which of these requirements apply to your plan.
  5. New Payment Option Available To Ohio Pass Through Entities Do you currently enjoy the benefits associated with owning a pass through entity (PTE) in Ohio, including better tax treatment and limited liability protection? Well, earlier this month the Department of Taxation announced another little perk – online payments! According to the release, the Treasurer of Ohio is now accepting tax payments per its Electronic Funds Transfer (EFT) program on its website.

We hope you enjoy the top five posts from November. We are always updating this page, so be sure to subscribe to Dear Drebit – or you can subscribe to our bi-weekly electronic newsletter – and never miss the critical information we provide to readers. You are also welcome to ask us a specific question about, well … just about anything finance or business related and one of our subject matter experts will provide you with a response. Just scroll up to the top of the page and fill out the form on the top, right corner.

Finally, don’t forget, you that you can always email Rea & Associates to have an in depth conversation about your existing personal or professional challenges. Our CPAs and business advisors are always happy to speak with you.

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File and Suspend Strategy Suspended

Wednesday, November 18th, 2015
File Suspend Strategy - Ohio CPA Firm

President Barack Obama signed legislation on Nov. 2 to put an end to the file and suspend strategy. But, that doesn’t necessarily mean it’s too late to act. There is a six-month window of opportunity, as long as both spouses were born on or before April 30, 1950. Keep in mind that you are up against a May 1, 2016, deadline.

Deciding when to claim your Social Security benefits is often one of the most significant financial decisions older Americans must make today because, for many, Social Security benefits make up a substantial portion of their retirement income. Unfortunately, Congress recently passed legislation that will put an end to two popular strategies being used to maximize benefits married couples receive in their golden years.

Read Also: Retirement Is Knocking … Are You Ready To Answer The Door?

The strategies that are scheduled to be phased out are commonly known as “File and Suspend” and the Restricted Application for Spousal Benefits. These strategies have made it possible for couples to delay laying claim to their individual benefits based on their earnings while still claiming a spousal benefit based on the other’s earnings – as long as both are 66 or older.

How Does File And Suspend Work?

To receive the spousal benefit, one individual would file for their Social Security benefits – then immediately suspend them. The other spouse would then file a restricted application to collect only the spousal benefit rather than the benefit they earned as an individual, even if their individual would have been higher. By employing this strategy, both could increase their earned benefits by taking advantage of the option to delay retirement credits, which would increase their earned benefit by up to 8 percent for each year the benefit is delayed until the individual reaches 70 years of age.

Is It Too Late To Take Advantage Of This Strategy?

President Barack Obama signed legislation on Nov. 2 to put an end to the file and suspend strategy. But, that doesn’t necessarily mean it’s too late to act. There is a six-month window of opportunity, as long as both spouses were born on or before April 30, 1950. Keep in mind that you are up against a May 1, 2016, deadline.

What About The Couples Who Are Already Receiving Benefits?

Fortunately, the couples already using these strategies will be grandfathered in under the new law and will not be asked to pay back any of the benefits they have received to date. Furthermore, they will continue to receive the benefits they have already been granted. The new law will not impact their current Social Security income, which is why it’s so important for eligible couples to take advantage of this 6-month window.

What Happens After The 6-Month Window Closes?

Moving forward, under the new law, individuals will still have the ability to suspend their benefits, but the Social Security Administration will not allow spousal or dependent child benefits based on the earnings of someone who has suspended their own benefits. In other words, to claim a spousal benefit, the earned benefits have to be paid out as well.

When filing for retirement benefits (other than with a restricted application), spouses will effectively claim their earned benefit and their spousal benefit. They will then receive the greater amount.

Fortunately, there are still opportunities to maximize your Social Security benefits. A financial advisor can you help navigate the terrain. There are also free tools available to help you find out how much you can expect to collect from Social Security when you finally decide to claim the benefit. The Social Security calculator is located here. You can also visit the Social Security website to view your Social Security Account Statement. To discover more retirement strategies, check out one of the articles below or email Rea & Associates and ask to speak with a retirement planning expert.

By David Shallenberger, CPA (Wooster office)

Check out these articles to learn more about the importance of planning for your retirement:

Planning For Uncertainty In Retirement

Five Financial Considerations For Every Age Group

How Can I Make The Most Of My Retirement?

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Why would I want to listen to a podcast from an accounting firm?

Wednesday, October 7th, 2015
Unsuitable Podcast - Ohio CPA Firm

Mark Van Benschoten (left) talks with Doug Feller, a principal and financial advisor with Investment Partners, talks about wealth enhancement and investment tactics for an upcoming episode of Unsuitable on Rea Radio, a new financial and business advisory podcast from Rea & Associates. Click here to learn more about Unsuitable on Rea Radio.

I know what you’re thinking – listening to a podcast from an accounting firm is probably about as entertaining and insightful as watching paint dry. But Unsuitable on Rea Radio isn’t your typical accounting podcast, and here’s why.

Real, Simple Solutions

Who doesn’t like a good story? What about one that leaves you with greater insight into the financial wellness of your own company? And if you had a better idea of how other successful entrepreneurs manage their wealth, wouldn’t you try to follow their lead?

The professionals at Rea have seen a lot over the last several decades and they are willing to open the curtain just enough to provide you with the information to forge your own success. And on Unsuitable, they do just that.

An Effective Kick In The Pants

Unsuitable offers a little something for everybody and I am confident that this is a show that will not only help provide you with more clarity, but will motivate you to take the next step as a professional and as a business leader.

Look at what has already been discussed in the first four episodes:

And this is just the beginning. Look for episodes highlighting investment strategies, Affordable Care Act compliance and retirement preparedness – just to name a few.

Accountants Like To Laugh Too

This may come as a surprise to many since those in the accounting profession tend to be thought of as dry, stuffy, number-crunching fanatics, but that’s just not true – well, most of the time. The Rea team consists of some pretty humorous, outgoing folks and I think that the diverse sense of humor of our team shines through. Mark Van Benschoten, the host of the show, helps a lot, of course. He does an excellent job addressing each guest and makes them feel comfortable … then the show gets really good.

Just The Right Length

Our firm has 11 offices throughout Ohio, which means I do a lot of driving. When I’m on the road I like to listen to podcasts – and there are a lot of them out there! What I really like about Unsuitable, is that it’s long enough to be really informative and wraps up nicely before it reaches the point where I am wishing it would end. In fact, when it does end I find myself wanting to start the next one. Mark and his guests get right to the point of the show, provide examples and offer hard-hitting advice in a concise, enjoyable format – all while having a great time and avoiding stuffy accounting jargon.

Go to www.reacpa.com/podcast now and start listening or subscribe to Unsuitable on Rea Radio on iTunes or SoundCloud. I also want to encourage you to use #ReaRadio to join the conversation on Twitter and Facebook.

By Lee Beall, CPA (Dublin office)

Click here and start listening to Unsuitable on Rea Radio now!

 

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Don’t Like Your Retirement Plan Design?

Friday, August 28th, 2015

Time’s Running Out to Establish, Alter Your Plan

Time's Running Out to Establish, Alter Your Retirement Plan Design - Rea & Associates - Ohio CPA Firm

If you haven’t made time to speak with a retirement plan specialist recently to make sure that your retirement plan still addresses your company’s unique needs, there’s a chance you are missing out on a more cost-effective solution. Your retirement plan team can quickly run some illustrative numbers to compare your SEP against a 401(k) plan to reveal whether a better option exists for your business.

Your SIMPLE IRA or Safe Harbor 401(k) plan isn’t going to establish or change itself and if you want yours to be effective in 2015, you need to know that an Oct. 1 deadline is looming – as though you really needed something else to worry about. Fortunately, a retirement plan expert will not only help you meet your deadline, they can make sure your plan is optimized to ensure maximum results.

If you’ve never taken the time to really understand how valuable your retirement plan can be for your business, this is your chance. Read on to learn six other reasons why you might want to pick up the phone and schedule a meeting with a retirement plan expert today.

Read: Why You Should Review Your Retirement Plan Documents Now

Six Reasons To Call Your Retirement Plan Administrator

  1. You have no retirement plan at all. Offering your employees a retirement plan is more than just a great recruitment tool; it’s an excellent way to make your company’s profits go further. Read Retirement Plan Design: One Size Does Not Fit All to learn more about how a retirement plan might help bolster your business’s growth strategy.
  2. You have a SEP Plan with more than two employees. If you haven’t made time to speak with a retirement plan specialist recently to make sure that your retirement plan still addresses your company’s unique needs, there’s a chance you are missing out on a more cost-effective solution. Your retirement plan team can quickly run some illustrative numbers to compare your SEP against a 401(k) plan to reveal whether a better option exists for your business.
  3. You are a business owner who is able to maximize deferrals every year with a SIMPLE IRA. If so, it may be time to consider a Safe Harbor 401(k) plan in 2016 for additional tax deferral. For more insight into how this option can work for you, read Safe Harbor 401(k) Plans Provide Smooth Sailing.
  4. You have a 401(k) but receive corrective distributions every year. You may be missing out on a retirement plan design that can not only alleviate this problem, but can help you maximize the benefits your business receives for being active participants in your employees’ retirement strategy. Access Safe Harbor FAQ here.
  5. You maximize deferrals every year under your Safe Harbor 401(k) plan but offer no profit sharing option. A better plan design for business owners in this situation might be to maximize profit sharing contributions while limiting the amount that has to be provided to employees. For example, cross-tested profit sharing plans may save you money if your company’s staff consists primarily of younger employees. A retirement plan expert can help you identify a plan that helps address the uniqueness of your business.
  6. You are maxing out your profit sharing plan every year. It’s time to add a cash balance option to your existing retirement plan. This is a great option for business owners in this position, because it allows for much higher employer contribution deductibles for owners. Click here to learn more about how these plans can help your business.

Take control of your retirement plan today. Email a Rea & Associates retirement plan expert to find out what you have been missing.

By Steve Renner, QKA (New Philadelphia office)

Check out these articles for more helpful retirement plan advice specifically for small and midsize businesses.

Like Losing Your Wallet – Only Worse
Retirement Roulette
The ‘Van Halen’ Philosophy of Retirement Plan Compliance

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Like Losing Your Wallet – Only Worse

Friday, July 31st, 2015
Retirement Plan Returns- Ohio CPA Firm

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune.

For most of us, misplacing our keys, losing sight of our shoes and occasionally forgetting to pay the phone bill on time is not a catastrophic phenomenon. It happens; and most likely we will freak out for a minute, find what we were looking for and move on – only to repeat our dysfunctional routine countless times over the course of a lifetime. Forgetting to file your retirement plan returns on the other hand … well, let’s just say that’s typically not a stress-free event.

Read Also: Do You Know What Your Retirement Plan Is Costing You?

Typically, owners of businesses and their spouses who fail to file their annual retirement plan returns (Form 5500-EZ) are in full-scale crisis mode – and rightfully so, since missing this deadline results in a penalty that’s about the size of a small fortune. To be more precise, in years past, those who failed to meet their filing obligation could face a penalty totaling up to $15,000 per return. Fortunately, the IRS recently announced that instead of facing such an extreme late fee, eligible business owners can take advantage of a “low-cost penalty relief program.”

How Much Would You Pay?

The relief initiative, which started as a one-year pilot program in 2014, was tremendously successful, resulting in the collection of about 12,000 late returns. Because of this success, the program secured it’s permanency in May of this year. According to the news release, the program allows eligible business owners and their spouses to file late returns and only pay a $500 penalty for each return submitted with a maximum of $1,500 per plan. Because the IRS caps the maximum penalty at $1,500, applicants are encouraged to include multiple late returns in a single submission.

Eligibility

The IRS says that businesses with plans that cover the owner or the business’s partners (depending on how the business is set up) and their spouses are eligible to take advantage of this low-cost plan. Complete information about the program can be found by clicking here.

Learn More

Remember, your return must be filed annually no later than the end of the seventh month following the close of your plan year. So, for example, if your plan is governed by the calendar-year, as most are, your 2014 return was due today (Friday, July 31, 2015). Did you fail to file your small business’s annual retirement plan returns? Would you like to find out if you qualify for this program? Email a retirement plan expert at Rea & Associates and take control of your IRS debt now.

By Andrea McLane, QKA (Dublin office)

Want to read more about the importance of Retirement Plan Compliance?
Check out these articles:

401(k) Loans and Keeping Your Plan In Compliance
Retirement Roulette
The ‘Van Halen Philosophy’ of Retirement Plan Compliance

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Retirement Plan Design: One Size Does Not Fit All

Monday, May 11th, 2015
Planning Ahead for Retirement Makes All The Difference - Rea & Associates - Ohio CPA Firm

When it comes to your retirement plan, planning ahead can mean the difference between sipping tropical drinks on a beach to taking on a part-time job at 75 to make ends meet. Is your retirement plan advisor working in your best interest?

Do your employees dream of spending their golden years on a sun-drenched beach, sipping tropical drinks from a coconut shell? Or do you think they’re looking forward to taking on a part-time job at age 70 to pay medical bills and their mortgage? Like you, they’re probably expecting an R&R-fueled retirement – but they need your help getting there.

Read Retirement Roulette

An employer-sponsored retirement plan is a great tool for business owners. Not only do retirement plans provide businesses with leverage when it comes to attracting and retaining a skilled workforce, employers that make contributions to their employee’s accounts are entitled to tax incentives – which gives you more control over your company’s cash flow.

From Business Strategy To Retirement Planning

Whether your company presently offers a retirement plan or is planning to beef up its benefits package, work with a retirement plan advisor who can review your options and identify the plan that best addresses your company’s unique challenges. You’ll need to:

  1. Identify The Primary Purpose Of Your Retirement Plan
    Will your retirement plan be used as a recruitment tool or as a tax shelter? While all plans accomplish a little of both, make sure your plan design meets your needs. For example, when a closely held business offers a retirement plan, its primary goal is to provide maximum retirement benefits and income tax deferral to the owners, while minimizing the cost of benefits to the employees. Incorporating a retirement plan into your existing benefit package is also an opportunity to diversify your assets away from the reach of creditors – making you less dependent on the value of your company to provide an income stream in retirement.
  2. Get To Know Your Team
    Does your company hire younger workers? Do you have an established workforce that will retire from your company? Do you have high turnover? What does your projected workforce growth look like? Your plan design should consider your demographic information – and promote the short- and long-term financial wellness of your employees and your business.
  3. Put Your Own Retirement Goals In Perspective
    Your employees aren’t the only ones looking at your employer-sponsored retirement plan as a dependable source of retirement income. You and other key employees will likely use the plan as well. That’s why, during the design phase, your advisor will take a look at the current and projected profitability of your company alongside the ratio of key employees and the company’s other employees.

When all is said and done, your plan design could be the thing that stands between your employees and a comfortable retirement – or it could be what lets them reap the benefits of all their years of hard work.

This is a great time of year to explore your options. Email Rea & Associates to learn more.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Retirement Roulette

Wednesday, April 22nd, 2015
Retirement Roulette - Rea & Associates - Ohio CPA Firm

The retirement savings provision outlined in the 2016 Budget Proposal not only provides individual Americans with an opportunity to save, it seeks to provide financial incentives to eligible companies that establish their own 401(k), auto-IRA or that offer another similar retirement plan to their employees by expanding the small business tax credit.

It’s difficult to paint a picture that adequately portrays the retirement readiness of the American people. How prepared the average person is for this phase of their life greatly depends on which report you are reading today. As a whole, however, credible sources indicate that as a population we are simply not prepared to take on the financial responsibility of supporting ourselves later in life, which is a problem that has received a lot of attention from our nation’s leaders.

Last year marked the introduction of myRA, a retirement account program that encourages individuals without access to an employer-sponsored retirement plan to save for their retirement. Developed by the United States Department of the Treasury, myRA seeks to offer a solution to those who “face barriers to saving for retirement.” But that’s not the only chatter heard on Capitol Hill these days, with regard to the retirement savings habits of Americans. Members of Congress have proposed other solutions that they hope will make the retirement picture a little bit brighter.

Read:  Retirement Is Knocking … Are You Ready To Answer The Door?

2016 Budget Proposal Addresses Retirement Savings

The U.S. government’s 2016 Budget Proposal includes provisions that target the promotion of retirement goals.

“Millions of working Americans lack access to a retirement savings plan at work. Fewer than 10 percent of those without plans at work save in a retirement account on their own. In 2015, retirement security will be one of the key topics of the White House Conference on Aging. The Budget would make it easy and automatic for workers to save for retirement through their employer – giving 30 million more workers access to a workplace savings opportunity. The Budget also ensures that long-term part-time employees can participate in their employers’ retirement plans and provides tax incentives to offset administrative expenses for small businesses that adopt retirement plans.”

What is important to note is that, in addition to retirement security, the Proposal focuses on generating government revenue, which would (in part) go toward the creation of new tax benefit programs. The impact, according to the Whitehouse, would result in savings for as many as 30 million American taxpayers.

Today, nearly 78 million working Americans are unable to save for retirement simply because they are not eligible to enroll or because their employer doesn’t offer the opportunity to save for retirement. This Proposal introduces a solution for those who would like to begin saving for their golden years.

For example, one possible scenario outlined within the budget calls for all part time workers (those who have worked for their current employer at least 3 consecutive years and who have worked at least 500 hours during each year of their employment), who are not currently contributing to a retirement plan, to be allowed to contribute to the company’s existing retirement plan without requiring the plan sponsor to add matching contributions for such individuals.

Another is for those who do not have access to an employer-based retirement plan, however, would be automatically enrolled in a separate IRA program, which would be funded by payroll withholdings. Of course, the taxpayer would have the option to opt out of the program.

What’s In It for the Employer?

The retirement savings provision outlined in the 2016 Budget Proposal not only provides individual Americans with an opportunity to save, it seeks to provide financial incentives to eligible companies that establish their own 401(k), auto-IRA or that offer another similar retirement plan to their employees by expanding the small business tax credit.

This provision would also include an additional credit for small businesses that currently offer retirement plans to include an automatic enrollment feature within their plans.

Employees who are still unable to save for retirement will have a third option available. The Budget Proposal calls for the allocation of $6.5 million to the Department of Labor, which would allow a limited number of states to implement state-based auto enroll IRAs or 401(K)-type programs.

Mind the Cap

President Barack Obama’s 2016 Budget Proposal, while ambitious in its initiative to strengthen Social Security and incentivize retirement savings programs for Americans, also includes a provision that had been proposed (and rejected) before. The additional provision seeks to cap (prohibit additional contributions) on IRAs and other tax-preferred retirement plans once they reach a balance of $3.4 million.

According to the president, this step ensures that the individual secures sufficient annual income in retirement while preventing the “overuse” of existing tax advantages by those who are able to contribute additional funds, creating higher balance accounts. The cap would also help the government generate additional revenue because the funds that exceed the $3.4 million cap would now be taxable under this provision.

As always, when it comes to the future of Social Security and the overall retirement readiness of the American people a lot can change in a short amount of time. The 2016 Budget Proposal still has a long way to go before any of the provisions outlined within become reality. It’s important for you to be aware of these provisions and how they could change our current retirement plan landscape.

In the meantime, don’t just wait for changes to happen. Take steps today that will maintain the flexibility of your existing benefit plan while optimizing your company’s current and future ROI. Email the Benefit Plan Audit team at Rea & Associates to learn more.

By Darlene Finzer, CPA, QKA, CSA (New Philadelphia office)

 

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How To Avoid The Retirement Culture Shock

Tuesday, March 24th, 2015
Retirement Doesn't Have To Hurt Contact Rea & Associates To Learn More - Ohio CPA Firm

When many of us start thinking about the realities of retirement, it’s already too late. Don’t let the “retirement culture shock” sneak up on you, these three tips will help as you attempt to navigate the road to retirement.

If you’re a newly retired American, then you are embarking on a new, exciting phase of your life. For many of you, increased travel, spending more time with grandchildren or pursuing a new hobby may be ways to enjoy this new journey.

Read: How Can I Make The Most of My Retirement?

But before you pack up your things and hop that next plane to Florida, here are three tips to help you avoid the retirement culture shock.

1. Taxes Don’t Vanish At 65

When you were an employee, your taxes were likely withheld from your paycheck. Today, however, is a new day. As a retiree, you no longer have a paycheck from which taxes can be withheld. But there are a few things you can do to make sure you won’t get hit with a large tax bill in April. For example, if you receive a regular pension payment or an annuity, consider withholding your tax payments from those. You also have the option of simply making quarterly estimated tax payments if withholding is not an option.

2. Transfer Your Pension To Avoid Added Tax Cost

If you do have retirement income from a pension plan, make sure to structure the transfer of your pension into an IRA as a direct rollover to avoid an additional tax. Basically, you want to make sure that the check is made out to your IRA and not directly to you, which will ensure that the funds are deposited into your IRA instead of your personal bank account. If you don’t structure your pension plan to disperse your money in this way, the company responsible for your pension payments is required to withhold 20 percent of the funds for the Internal Revenue Service (IRS). When this happens, the IRS will likely see fit to assess a tax to this 20 percent, effectively shrinking your retirement nest egg.

3. Don’t Miss Exclusive Tax Benefits

Retirees are eligible to receive a few nice tax incentives – perhaps to offset your new responsibility of paying your own quarterly estimated taxes and transferring your pension plan payments. Either way, these tax breaks are nothing to grumble about. Here are three tax facts to get you started:

  • If you turned 65 during 2014, your standard deduction increased by $1,550. This means that you can claim $7,750 instead of the $6,200 standard deduction allowed for those younger than 65.
  • For the next three years, taxpayers older than 65 are eligible to receive a reduced phase out of their medical expenses. Those who are older than 65 can deduct qualifying medical expenses to that exceed 7.5 percent of their adjusted gross income. Those younger than 65 can deduct qualifying medical expenses that exceed 10 percent of their adjusted gross income.
  • Self-employed individuals who have Medicare Part B, Part D or supplemental Medicare policies are eligible to claim an above-the-line deduction for these costs.

You have spent so many years putting in long hours, stressing over money and putting your wants and needs second. Retirement is your time. Make sure you are in control of your finances – and your future. Email Rea & Associates to learn how to make your money go further in retirement.

By Dana Launder, CPA (Cambridge office)

 

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The ‘Van Halen Philosophy’ of Retirement Plan Compliance

Thursday, March 5th, 2015
David Lee Roth Performs

Singer David Lee Roth once said he “found the SIMPLE life ain’t so simple.: We think the same can be said about retirement plan compliance.
Pictured above: David Lee Roth performs with classic rock band Van Halen during a concert in 2012. Photo by Robert Yager

While I don’t really believe David Lee Roth and Van Halen were thinking about SEP or SIMPLE IRA retirement plans when they performed their 1978 classic rock song, “Runnin’ with the Devil,” the connection between the two is an easy one to make.

“I found the SIMPLE life ain’t so simple”

The many small business clients we work with who choose to sponsor these types of retirement plans do so because they are inexpensive to administer and they enable our clients to provide a reasonable retirement benefit for themselves and to their employees. However, these plans are far from simple to operate and, if you’re not on your game, can be full of costly traps. The “Devil” is in the details as they say.

Top 5 SEP and SIMPLE Compliance Failures

Here is a rundown of the top five compliance failures we see. If not identified and corrected in a timely manner, these compliance concerns can result in the loss of favorable tax benefits for you and your employees or potentially large penalties and corrective contributions for your business.

  1. No Current Plan Document – All retirement plans require a governing document that identifies the plan sponsor (and any related employers) and defines the plan’s terms. The IRS provides a model document for you to use for these types of plans, but you have to complete it and keep it in your plan files.
  2. All Employees are Not Covered – Both SEPs and SIMPLE plans require that all employees (including employees of related employers) meeting a minimum eligibility requirement be covered and that they receive the same contribution (as a percentage of their compensation). Other than for minimal service and age requirements specified in the plan document, no other employees may be excluded.
  3. Using the Wrong Definition of Compensation – Compensation used to determine the contributions that need to be made to the plan generally includes all wages, bonuses, tips, commissions and any elective salary deferral contributions, and is limited to a certain dollar amount depending on the year (for 2014 the limit was $260,000).
  4. Untimely Employee Notices and No Summary Plan Description – Sponsors of SIMPLE IRA plans need to tell employees before the beginning of each year whether they intend to make a  match contribution or a profit sharing contribution . Eligible employees must also receive a summary of the basic SEP or SIMPLE plan provisions.
  5. Untimely Remittance of Employee Salary Deferrals – All employee contributions must be remitted to the IRA of each participant within 30 days after the month in which the employee would have otherwise received the money.

A great time to review your compliance with retirement laws and regulations is during tax time at year end. Whether you need help understanding your plan design options or compliance requirements as a retirement plan sponsor, help is available. Email Rea & Associates for more information.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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File Faster With This Tax Prep Checklist

Tuesday, January 20th, 2015

It’s that time of year again – time to gather your information and prepare to file your tax return. If you want the process to go smoothly, make sure to gather and organize your information before sitting down with your tax preparer. You may be surprised how fast the entire filing process goes if you spend a little time preparing!

Here’s a list of some items to compile before you get started.

Personal Information

Hopefully you know YOUR social security number and date of birth by heart. But do you know your spouse’s SSN? Your kids? Make sure you remember to bring the social security numbers and birth dates of everybody who will be claimed on your tax return.

Income Info

While your W-2 is important, there are many other pieces of information you will need to collect before you will be able to get started. Gather the following pieces of relevant information:

  • W-2s for you and your spouse.
  • Investment income: This type of income will be listed on various 1099 forms including –INT, -DIV, -B, etc.). You may also have K-1s and stock option information to provide to your tax preparer.
  • Income received from state and local income tax refunds and/or unemployment. This income can be found on the Form 1099-G.
  • Gather information about any alimony you may have received.
  • If you are a business owner or farmer, don’t forget to provide a profit/loss statement and capital equipment information.  And if you use your home for business, your tax preparer will need to know the size of your house, the size of your office and what you have paid to maintain your home and office.
  • You will need to provide your IRA/pension distributions as well. This information will be provided to you on Forms 1099-R or 8606.
  • If you rent a home or other type of property, be sure to gather that information that proves the profit or losses you realized as a result of the rental.
  • Be sure to claim any Social Security benefits you may have received. This information is found on Form SSA-1099.
  • If you sold your house in 2014, you must provide your tax provider with Form 1099-C, which will include the income you received from the sale of the property. Your preparer will also take the home’s original cost and cost of improvements, the escrow closing statement and cancelled debt information into consideration.
  • Some other information you will need to pass along to your tax preparer includes items such as jury duty, gambling winnings, scholarships, etc..

Adjustments To Your Income

Now that you have collected all the information you can to adequately identify your income in 2014, some adjustments may need to be made. Making the following adjustments to your income may help increase your tax refund or lower the amount you owe to the government. If you have documentation of any of the following information, be sure to bring them to your appointment.

  • IRA contributions
  • Student loan interest
  • Medical Savings Account contributions
  • Moving expenses
  • Self-employed health insurance payments
  • Pension plans such as SEP and SIMPLE
  • Alimony you paid
  • Educator expenses

Itemized tax deductions and credits

This is another way to increase your refund or reduce what you owe. The following deductions and credits help lower the tax burden on individuals. Be sure to collect this information before filing your return.

  • Child care costs – child care provider’s name, address, tax ID number and amount paid
  • Education costs – these can be found on Form 1098-T
  • Adoption costs – the SSN of the child as well as legal, medical and transportation costs associated with the adoption
  • Home mortgage interest and points you paid, which can be found on Form 1098
  • Investment interest expense
  • Charitable donations that were made to not-for-profit organizations. Make sure you have the amounts and value of the donated property, and any out-of-pocket expenses you may have accrued in your effort to make the donation, including transportation costs. Include receipts for any contribution over $250

o   Losses you realized as a result of casualty and loss (the cost of the damage and insurance reimbursements

  • Medical and dental expenses
  • Energy credits
  • Other deductions include items such as union dues, unreimbursed employee expenses, such as unreimbursed employee expenses

New for 2014 returns

For the first time, you will need to provide information about your health insurance coverage to your tax preparer. Be prepared to answer questions such as these:

  • Was everyone claimed on your tax return covered by health insurance?

o   If not, why?

  • Did you or anyone on your return obtain health insurance coverage through Healthcare.gov or through a state run exchange in 2014?

o   If yes, did any of those individuals receive a premium tax subsidy, cost reduction, or premium tax credit? If yes, provide Form 1095-A.

It’s likely that you have already started receiving tax forms in the mail from various places. It’s easy to misplace these documents if you’re not careful. If you haven’t already, set aside a place for these items until you have collected them all. Once you have everything you need, you can set an appointment to file your taxes with your financial advisor or tax preparer. For additional tax information, or to speak with a tax expert, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Six Things 401k Plan Sponsors Need To Do Now

Friday, January 16th, 2015
2015 Retirement Plan Deadlines - Ohio CPA Firm

Mark your calendars and don’t forget these 2015 retirement plan deadlines. Click on the image to easily see what is due and when to file.

January may be flying by, but the New Year is still fresh. This is still a great time to make sure that the qualified 401k plan you offer your employees helps them effectively save for retirement and remains qualified. Not sure where to start? Here are six ways to get the most out of your 401k plan:

1. Review Your Match Formula

An employer match can be critical to helping your employees meet their retirement goals and stretching the match formula is a great way to entice employees to save more. Instead of matching 100 percent on the first 2 percent of deferrals, consider changing your contribution formula to 50 percent on the first 4 percent of deferrals, or 25 percent on the first 8 percent of deferrals instead. Each one of these formulas will result in a 2 percent wage cost to you, the employer, but changing the formula may encourage additional employee saving. Instead of saving 4 percent of their income (2 percent employee income plus 2 percent employer match), the employee may be motivated to increase contributions to their retirement plan to 10 percent (8 percent employee income plus 2 percent employer match). Contact your TPA to discuss different strategies.

2. Check Your Contribution Limits

Did you know that the 401(k) and 403(b) plan deferral limits have increased to $18,000? Employees older than 50, now have the option to defer an additional $6,000 of their wages toward retirement. Encourage your employees to review their payroll deduction to ensure that they are on target to meet their personal savings goals.

3. Offer Your 401(k) Plan To All Eligible Employees

If your 401(k) plan has an entry date of Jan. 1, be sure all newly eligible employees were provided the opportunity to participate in the plan. Even if you have an employee who doesn’t want to participate, I recommend that you obtain a signed election form that indicates a 401(k) election of “0 percent.” By doing this, you have documentation that they employee was offered the chance to participate, even though they decided not to.

4. Provide Employee Census To Your TPA

Your third party administrator (TPA) needs yearly plan census information to conduct compliance testing, verify 401(k) and to calculate matching contributions and profit sharing allocations. The deadline for most compliance tests is March 15.

5. Check Your Fidelity Bond

The Employee Retirement Income Security Act (ERISA) requires a fidelity bond for every plan fiduciary and for those who handle the funds or property of a plan. The bond must be at least 10 percent of the company’s plan assets. It’s a good idea to ensure that your bond is still meeting the 10 percent minimum requirement.

6. Restate Your Plan Document

Prototype documents for 401(k) plans currently are in a restatement window; therefore, if your plan uses a prototype document, it must be updated to meet new IRS standards. This document restatement period is a great time to examine your plan provisions. For example, do you want to change eligibility requirements or add a loan provision that you have contemplated adding in the past? This is a good time to make those changes. The deadline for restating 401(k) prototype documents is April 30, 2016. Managing your company’s retirement plan can be confusing or overwhelming at times, but it doesn’t have to be. Email Rea & Associates today to learn more. By Steve Renner, QKA (New Philadelphia office)

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Take Control Of Your Financial Wellness In 2015

Monday, January 5th, 2015

Are you still looking for the perfect New Year’s resolution? What about challenging yourself with one that could put you financially ahead? Here are 15 ways you can start your year off on the right foot.

15 Tips For A Prosperous 2015

Adjust your 401(k) plan contribution.

If you have a 401(k) plan, your contribution limit will increase to $18,000 in 2015, and if you’re 50 years or older, you can contribute an additional $6,000 into your plan. When it comes to retirement savings, every little bit helps, so even if you can’t afford to contribute the maximum, at least consider increasing your contribution a little bit over what you put into it last year.

Pay off your debt.

Make 2015 the year you pay off all debts. Once you settle past debts, it will be easier to save for future expenses and retirement. For example, do you have credit card debt? Pay off the cards with the highest interest rates first. Once you have caught up, make it your goal to pay any outstanding balance monthly.

Set up a budget and follow it.

Review your monthly income and expenses and allocate money toward savings, debt resolution and other financial goals. Once you have a plan in place, stick to it. Try to set aside some time to review your budget to make sure you are on track.

Build a “rainy day” fund.

Some people say that you should have enough money saved to cover your expenses for at least six months to protect you and your family against unforeseen events that could impact your finances. Don’t let the timeline intimidate you, though. Get your rainy day fund up to one month’s worth of expenses and build from there.

Work with your significant other – not against them.

If you are planning to strengthen your financial foothold in 2015, make sure you have support from your significant other. If you and your significant other are on the same page, then you will have a better chance for success. For example, coming to an agreement on how much you each can spend on unnecessary expenses early on can save unnecessary drama in the future – and costs less than a divorce.

Review your company’s Section 125 plan.

If your employer offers a Cafeteria Plan to its employees, make sure you are aware of what benefit options are available to you and your family and that you taking full advantage of the pretax nature of these benefits. Benefits offered as part of your employer’s Section 125 plan could include health savings accounts, dependent care assistance, adoption assistance, group-term life insurance and others. If you are not sure what benefits are available to you or would like to make sure you are receiving the maximum benefit, set aside some time to speak with your company’s human resources department.

Know your credit score – then improve it.

An excellent credit score is one that is between 760 and 850. If you’re not sure what yours is, request your free copy and find out. Companies such as Experian, Transunion and Equifax will provide you with a free copy of your credit score. Once you know your score, work to increase your rating. This can be done any number of ways, but it takes time and hard work. And don’t be discouraged if you don’t see a massive increase over the next year. Even 20 points is considered a significant improvement.

Set up your will and power of attorney.

Don’t put off this critically important responsibility. If you haven’t already, make it a priority to establish your will and power of attorney as soon as possible. Or if you already have one in place, make sure it is not outdated. Set aside some time to review your current documents with your significant other and update it if needed.

Plan for the inevitable.

If something happens to you, will your family be able to carry on? Meet with your HR department to make sure you are taking full advantage of your life insurance options and disability plan.

Schedule a wellness visit for your mortgage.

When was the last time you reviewed your home mortgage? If it’s been awhile, you should review the interest rate and conditions of your loan. If you have been in your home for a while, you may be surprised to learn that there might be options out there that could save you money.

Organize, organize, organize.

Improving organization is one of the more popular resolutions to make. While you may be eying your closets, garage or basement, I suggest taking a look at your mailbox. Resolve to gather and organize your tax information as it is received. Doing so will ensure that you are not wasting time trying to find a piece of mail you misplaced a month ago and it will help you cut down on random clutter.

Review your retirement plan.

A new year means that you have another birthday on the horizon, which also means that you are another year closer to retirement. Schedule a time to meet with your financial advisor to determine if you should rebalance your portfolio to remain in line with your retirement goals.

Set up a 529 plan.

Are you saving for your children’s or grandchildren’s college education? Set up a 529 plan today and contribute to it early in the year to earn a return all year long. Earnings generated as a result of your contributions are not subject to federal or state taxes when used for qualified education expenses.

Find savings around the home.

If you take a hard look at your reoccurring monthly expenses, you may find that you don’t really need a lot of the services and utilities you are paying for. For example, does your home internet really need to be turbo-charged? Do you ever use the call forwarding or call waiting options on your home phone? Do you use your home phone at all? Are you paying for extra insurance to protect against a gas line leak? Depending on your circumstances, you could find significant savings by cutting back on some utilities you barely use.

Pass on the product warranties.

While it may seem like a good idea to pay a little extra for a warranty on that new appliance, a better option might be to put that money toward your rainy day fund instead. Sure, warranties are great for your peace of mind, but so is your rainy day fund. By opting out of the product warranty you will be able to put more money away while maintaining the freedom to spend it a way that makes more sense in the future.

Do you want this year to be filled with prosperity for you and your family? Email Rea & Associates to get more information on how you can succeed financially in 2015.

By Dave McCarthy, CPA, CSEP (Medina office)

 

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Save More For Retirement in 2015

Tuesday, December 2nd, 2014

As you work to secure your retirement, you may be pleased to find out about changes to several retirement-related items that may allow you to put a little more cash away in 2015. In October, the IRS announced several adjustments to the limitations previously set on retirement planning tools as a result of an increased cost-of-living. So what does that mean to you and your retirement plan(s) of choice? Take a look:

  • If you contribute to a 401(k), 403(b), 457 plan or a Thrift Savings Plan, the following changes could impact how you contribute:

-        You can now invest up to $18,000 annually – this is an increase up from $17,500.

-        If you’re 50 years old or older and are trying to catch-up on your retirement savings, you may now invest $6,000 annually. The previous catch-up contribution limit was $5,500.

  • If you contribute to an individual retirement account (IRA), you will see the following changes in 2015:

-        The annual limit and additional catch-up contribution limit for an IRA for individuals 50 years old and older will not change in 2015. The annual contribution is $5,500 and the catch-up contribution is $1,000.

-        Single filers and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes (AGI) between $61,000 and $71,000 will no longer be eligible to receive a deduction for contributing to their traditional IRA. This has increased from $60,000 and $70,000 in 2014.

-        Married couples who file jointly, where one spouse makes an IRA contribution that is covered by a workplace retirement plan, will see an increased income phase-out range for taking the deduction as well. The new range is $98,000-$118,000 – up from $96,000-$116,000.

-        If you’re an IRA contributor, not covered by a workplace retirement plan, but are married to someone who is covered, the deduction is phased out if you and your spouse’s income falls between $183,000 and $193,000 – up from $181,000 and $191,000.

-        The phase-out range for a married taxpayer who files a separate return and who is covered by a workplace retirement plan will not change in 2015. The range remains $0 to $10,000.

  • If you make contributions to a Roth IRA, you will see the following changes:

-        The phase-out range for married couples filing jointly is $183,000 to $193,000 – an increase from $181,000 to $191,000.

-        The phase-out range for single filers and heads of household is $116,000 to $131,000 – an increase from $114,000 to $129,000.

-        The phase-out range for a married individual who files a separate return is unchanged.

As we approach the end of the year, there’s not a better time to evaluate your current retirement plan situation and determine if you need to make any changes for 2015. To learn more about how these retirement plan changes could impact your financial situation, email Rea & Associates.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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Manage Your Business’s Ethical Framework After You’re Gone

Tuesday, November 18th, 2014

While the reasons for drafting an ethical will may seem more personal than business-related, an ethical will can be an effective way for business owners to pass along their vision for the future of their company after they are gone.

A properly drafted last will and testament is critical to ensure your estate’s financial well-being. Perhaps equally important is your responsibility to manage your intellectual assets, including knowledge and ethical values. An ethical will, also known as a legacy letter, is a way for you to pass along information to family, friends, colleagues and even communities.

Ethical wills have been around for many centuries. They were very prevalent in Medieval Times, but lost much of their popularity in modern times. Over the past couple of decades, they have regained their popularity.

While a last will and testament details how a person’s possessions will be distributed after death, an ethical will is a way to pass on a person’s values, hopes, dreams and life lessons – among other viewpoints. Though an ethical will is not a legal document, Business Week has described it as an aid to estate planning.

What should I include in my ethical will?

  • Your personal values – the importance of honesty, integrity and personal responsibility.
  • Your views on work ethic, dedication to one’s chosen profession and work-life balance.
  • Your views on charitable giving and community responsibility.
  • How to develop and cultivate personal and business relationships.
  • Your hopes and dreams for your spouse, children and other family members.
  • Anything that you have learned in life and would like to pass on to others.

When should I draft my ethical will?

  • Marriage
  • Birth of a child
  • Children leaving for college
  • When drafting a succession plan for your business
  • End of life
  • Or anytime

An ethical will can be an integral part of your overall estate plan, so consider putting one together today!

By Cathy Troyer, CPA (New Philadelphia office)

 

Related Articles

When Should You Start Thinking About Succession Planning?

Succession Planning: Do You Know Your Options?

How Do You Create A Succession Plan?

 

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Retirees Get Cranky Over Tax Returns

Tuesday, November 4th, 2014

Tax preparation and tax payments often become MORE complicated in retirement. Why? Because retirement taxation is new for a retiree so there’s a learning curve. Here are a few cliff notes to help new retirees navigate these uncharted waters:

Social Security

The money you receive from Social Security will likely be taxable. Fifteen percent of your Social Security benefit is a return on your lifetime payroll deductions and your employer’s match. Eighty-five percent of your Social Security is the excess benefit payment, or “growth,” in your benefit account and, thus, your untaxed benefit. That 85 percent may be taxable depending on the amount of your other income. This calculation is complex and the tax is difficult to avoid, but it is possible.

IRA Distributions

You must take your IRA distributions when you have reached the age of 70-½. The Required Minimum Distribution (RMD) can be managed and will impact your taxable Social Security. Planning is essential.

Capital Gains

As your lifetime investments are sold to help pay for retirement, capital gains is another obstacle to overcome. Here are a few tips to make them more manageable:

  • It may take a little time, but document when you bought those investments and what you paid for them. Once your record is complete, give the information to your broker to record in your investment account statement.
  • If you own your investments directly, gather them up and put them into an investment account to simplify your tracking, cost barriers, tax preparation and estate administration.

Itemized deductions

The good news is that you have likely paid off your mortgage. The bad news is that you may no longer exceed the standard deduction to itemize. So then why do you keep tracking medical bills if you can’t itemize? “Bunching” deductions may be a planning option. For example, every OTHER year, I have my Mom pay her real estate taxes, Ohio tax estimates and charitable contributions she made during the year. Then I have her prepay next year’s real estate taxes, charitable contributions and Ohio estimated taxes in December. That doubles her itemized expenses and raises her total above the standard deduction. Then, I have her take an additional IRA distribution equal to the excess itemized deductions. That excess distribution equates to a tax-free payment because it is offset by the excess itemized expenses! This option is available to you too!

Estimated tax

You are required to calculate and pay your income tax by managing your social security and IRA retirement tax withholding, along with quarterly tax estimate payments. You must project and declare your taxable income by April 15 in the new-year. And remember, there are NO excuses for not paying them on time.

Complexities You Can Avoid

  1. Watch those managed stock accounts. The amount of programmed buying and selling creates more work for your CPA and will raise your tax preparation fee. Ask yourself if that activity really did make you more money after the incurred income tax and preparation fee. If it didn’t, revisit your managed stock accounts.
  2. Understand the publicly-traded LLCs recommended by your broker and know that you may need to extend your tax return because of the K-1 you will receive to report the income. Your preparation fee will be raised as well. Again, if you didn’t make any money after the incurred taxes and preparation fee, is it really worth it to continue?

The transition into retirement is not easy. Unfortunately, your money management and tax filing won’t be easier either. Our tax experts are always happy to answer any question you may have. Email Rea & Associates to learn more about your options for managing your retirement.

Author: Lee Beall, CPA (Dublin office)

 

Related Articles

How Can I Make The Most Of My Retirement?

Retirement Is Knocking … Are You Ready To Answer The Door?

Why Should You Review Your Retirement Documents Now?

 

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You Can’t Know Enough: The Importance of Knowing Your Fiduciary Responsibility

Friday, July 25th, 2014

You may find that the spotlight isn’t for you. But as the fiduciary of your company’s retirement plan, the spotlight is all on you. The Department of Labor (DOL) has placed a major emphasis on fiduciary responsibility in the past few years and continues to push the matter in its initiatives. So it’s important that you understand what you’re responsible for.

To meet your fiduciary responsibilities as a retirement plan sponsor, you need to understand the fiduciary standards of conduct as adopted by the Employee Retirement Income Security Act (ERISA). With these fiduciary responsibilities, there is also potential liability. Fiduciaries that don’t follow the basic standards of conduct may be personally liable to restore any losses to the plan. Pretty serious, right? To help ease your mind, here’s what you need to know.

Identifying Your Plan Fiduciaries

A plan’s fiduciaries will ordinarily include the named trustee in the document, investment advisors and all individuals exercising discretion in the administration of the plan. Under ERISA regulations, fiduciaries are responsible for:

  • Loyalty to the plan participants – acting in their exclusive best interest
  • Prudence – documenting expertise and a decision-making process
  • Following the plan documents
  • Diversifying plan assets
  • Paying only reasonable expenses for necessary services

Mitigating Your Risk As A Fiduciary

As a fiduciary of your business’s retirement plan, you should consider these items and answer these questions to ensure that you comply with ERISA regulations:

  • If participants in your plan make their own investment decisions, have you provided sufficient information for them to exercise control in making those decisions? Regulations under ERISA list the information and process required to be provided to participants in order to legally shift the responsibility for making investment decisions to the participants. Are you making the required participant fee and fund performance disclosures required annually by ERISA of all plans permitting participant investment direction?
  • How frequently do you deposit participants’ contributions in the plan, and have you made sure it complies with the law? Participant contributions, including loan repayments, are required to be remitted on a timely, consistent basis. Not remitting these funds in a timely manner is considered a misuse of plan assets, which is a prohibited transaction. Not meeting this requirement creates penalties for the plan sponsor.
  • If you’re hiring third-party service providers, including investment advisors, have you looked at several providers, given each potential provider the same information, and considered whether the fees are reasonable for the services provided? It’s required that you receive fee and service disclosures from all plan service providers, and you should also receive written acknowledgements from service providers serving in a fiduciary capacity. Here are some other items to consider relating to third-party service providers:

1. Have you documented your service provider hiring process?
2. Are you prepared to monitor your plan’s service providers, including investment fund performance?
3. Do you have a process in place to determine that the fees paid to service providers remain reasonable for the services provided?

  • Have you reviewed your plan document in light of current plan operations and made necessary updates? Have you provided participants with an updated summary plan description (SPD) or summary of material modifications (SMM)? Plans are required to operate according to the provisions stated in the plan document and these provisions must be communicated to participants. Changes are generally permitted, but again are required to be communicated to participants. If the plan is not operating in accordance with the written plan document, the plan could be disqualified, which would result in negative tax implications for you, the plan sponsor, and the participants.
  • Are individuals handling plan assets covered by a fidelity bond as required by ERISA?  Have you considered purchasing fiduciary insurance to mitigate the personal risk of loss to those employees you identified that are serving as plan fiduciaries? While a fidelity bond and fiduciary insurance are slightly different, both are a form of coverage to provide protection in regards to plans. The bond insures the assets of the plan in the event of employee misconduct and the fiduciary insurance provides personal protection to fiduciaries in the event of any claims for alleged errors, omissions, or breach of fiduciary duties.

Being a plan fiduciary comes with enormous responsibility. Don’t take your fiduciary responsibilities lightly. If you’re interested in learning more about what you’re responsible for as a retirement plan fiduciary, consider registering for a FREE seminar all about knowing your fiduciary responsibility. Rea & Associates has partnered with the Human Resources Association of Central Ohio (HRACO) to provide an all-day seminar dedicated to helping fiduciaries understand their responsibilities. The seminar will feature speakers from the Internal Revenue Service (IRS) and the DOL. It will be held on Tuesday, August 26 from 8:30 a.m. to 4:30 p.m. at BMI Federal Credit Union Event Center in Dublin, Ohio. More details, including a schedule, can be found here. Click here to register for this free event.

Fiduciary Responsibility Help

If you need assistance navigating the responsibilities of being a fiduciary, contact Rea & Associates or speak with one of our financial advisors.

Author: Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

Looking for more articles about fiduciary responsibility? Check out these articles!

What Are The Responsibilities of a Fiduciary?

How Can I Make My Benefit Plan Audit A Smoother Process?

Will You Be Ready For Retirement?

 

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What You Should Know Before Dipping Into Your 401(k)

Friday, May 16th, 2014

Got a 401(k) plan? Have you ever withdrawn money from your 401(k) account? If so, you’re part of the growing number of Americans using their 401(k) accounts to fund other areas of their lives. A recent Bloomberg article explains that more and more Americans are turning to their 401(k) accounts rather than to other means, such as a loan, to help cover any unexpected financial needs that come up.

Historically, Americans have used their homes as a source of additional money. According to the article, when home values rose, homeowners refinanced or took out second mortgages. But due to the housing collapse back in 2008, many homeowners don’t have these options anymore – so they turned to their 401(k) accounts. What many people don’t realize is that depending on their 401(k) plan, they could be penalized for either taking an early withdrawal and/or not putting that money back into their account in the appropriate amount of time.

Shocking 401(k) Withdrawal Statistics

The Bloomberg article cites an IRS report that states the agency collected $5.7 billion in withdrawal penalties in 2011. In other words, Americans withdrew nearly $57 billion from their retirement accounts. That’s $5.7 billion that the IRS would otherwise not have banked on receiving. And what’s the federal government doing with this “extra” income? Funding federal agencies and projects.

Think Before You Dip

Before you turn to your retirement plan for help, you should be aware of some things. It may seem like an easy option, but the IRS actually has some rules that you have to meet before taking money from your 401(k). One of the following conditions must occur before you can take money out without being penalized:

  • You lose your job
  • You claim disability
  • You or your spouse dies
  • You turn 59 ½ years old

401(k) Withdrawal Based on Financial Hardship

If you don’t meet the criteria listed above, but are facing a financial hardship, you may also be able to take an early withdrawal from your retirement account. The IRS’ hardship rules require you have one of the following needs to qualify for a hardship withdrawal:

  • Medical expenses for you or your immediate family
  • Financial assistance in the purchase of your primary residence (this excludes mortgage payments)
  • Tuition or other educational fees (maximum of 12 months) for you or your immediate family
  • Prevent the eviction of you from your primary place of residence
  • Burial or funeral expenses for deceased parent, spouse or other immediate family member
  • Expenses for the repair of damage to your principal residence

The amount of money you take can’t be more than the amount you actually need to cover your hardship. It’s important to note that your early withdrawal due to a financial hardship is subject to state and federal taxes, and is also subject to a 10 percent early withdrawal penalty if you are under age 59 ½. So keep all of these considerations in mind when deciding whether to dip into your retirement account.

401(k) Withdrawal Help

If you’re not sure if a retirement withdrawal is the best route to go, contact Rea & Associates. Our team of Ohio retirement plan services professionals can help you determine if you’re eligible and what you need to do to minimize your tax liability from a withdrawal.

Author: Steve Renner, QKA (New Philadelphia office)

 

Looking for more information related to 401(k) or retirement plan withdrawals? Check out these blog posts:

Will I Be Penalized for a Hardship 401(k) Withdrawal?

Raiding Your 401(k)? It’ll Cost You

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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DOMA’s Effect On Retirement Plans And Beneficiary Forms

Monday, May 12th, 2014

Last June, the U.S. Supreme Court, in United States v. Windsor, ruled that Section 3 of the federal Defense of Marriage Act (DOMA) is unconstitutional. As you may recall, DOMA Section 3 states, “In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.”

By holding Section 3 of DOMA unconstitutional, qualified retirement plans must now treat the relationship of same‐gender married couples as a marriage in order to maintain the plans’ tax‐qualified status. The term “spouse” includes an individual married to a person of the same-gender if the individuals are lawfully married under state or foreign law.

The IRS recognizes a valid same-gender marriage even if the married couple is living in a state that does not recognize same-gender marriages. The term “spouse” doesn’t include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not defined as marriage.

Important DOMA Information for Plan Sponsors

  • Participants (and their spouses) who are in same-gender marriages generally must be treated as married for all purposes under a retirement plan. This was effective as of June 26, 2013.
  • As of September 16, 2013, your plan must recognize same-gender marriages that were lawfully performed under the laws of the 50 states, D.C., U.S. territory or a foreign jurisdiction.
  • States that currently recognize same-gender marriages include: California, Connecticut, Delaware, Hawaii, Illinois (law will take effect on June 1, 2014), Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Rhode Island, Vermont and Washington.
  • Depending on whose retirement plan provider plan document you use, you may want to contact the provider to ensure that your retirement plan complies with these new rules. In general, amendments to such plans are due by the end of the plan’s remedial amendment period, or December 31, 2014.
  • As a plan sponsor, you have no obligation to notify current or former participants of the new rules.
  • All qualified plans must recognize same-gender marriages for all plan purposes. This would include provisions applicable to beneficiary designation, death benefits, applicable spousal consent requirements regarding distributions and loans, rollovers, etc.

Retirement Plan Help

Now is the perfect time to update beneficiary forms for all participants in your plan. It’s important you keep a current copy of each participant’s beneficiary form in his or her personnel file. If you need assistance with this, contact Rea & Associates. Our Ohio benefit plan services team can help you determine what you need to do to keep in compliance with IRS and DOL regulations.

Author: Andrea McLane, QKA (Dublin office)

 

Looking for more posts about retirement plan best practices? Check these out:

What Are The Rules For Taking A Distribution from My 401(k) Plan?

What Should Plan Sponsors Ask Their Investment Advisors?

What Are The Responsibilities of a Fiduciary?

 

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How Can I Make The Most of My Retirement?

Wednesday, April 23rd, 2014

During my 30 years of financial planning experience, I have come to find that there are four phases of a person’s life. If you’re a Baby Boomer, each phase is approximately 22 years in length. Phase 1 is our formal education and/or training. During Phase 2, we try to figure out what we are going to do for a living, and then focus on becoming as proficient at it as we can be. In Phase 3, we strive to be on top of our game and begin to accumulate wealth. It’s Phase 4 that should prove to be, as long as we enjoy good health, the most gratifying phase of our lives. For in Phase 4, we should be able to step back and enjoy our journey at a more relaxed pace. It is during this phase that we are oftentimes best positioned to positively impact the people and causes that are important to us, while hopefully leaving this world a little better than we found it.

Financial and Emotional Threats to Retirement

Certainly, there are financial challenges that you may face that you should address in order to live the lifestyle necessary to accomplish your mission. These financial challenges exist for many of us due to longer life spans, the decrease of defined benefit retirement plans, and the uncertainty surrounding programs such as Social Security and Medicare. Because of our longer life expectancies and the disappearance of guaranteed pensions, many Baby Boomers are choosing to cut back the hours that they work rather than retire. For some it becomes a phase-out period of their career, while others choose to commence an entirely new career.

I have had the privilege to work with financially successful people whose fourth phase of life is not threatened by financial insecurity. However, they may have confronted emotional challenges that surface due to their loss of identity. It’s common for a person in a management position of a large company to discover that many of the people they considered friends prove to have been what I refer to as “positional acquaintances.”

Once that person retires and no longer holds a position on the company’s organization chart, the remaining people on the chart begin to interact with the new leader and no longer interact with the retiree.

So regardless of whether the threat to your enjoyment of Phase 4 is financial and/or emotional, below is a list of potential remedies that should be helpful tools as you attempt to position yourself for an enjoyable victory lap of your life’s journey.

7 Remedies To Help You Enjoy Your Retirement

  1. Develop hobbies or participate in community service activities that will provide you with an outlet to use your time and talent.
  2. Diversify your group of friends to include individuals who are not from work.
  3. Be a disciplined contributor to your retirement plan. During Phase 2, always contribute at a minimum the amount that your employer will match. During Phase 3, consider contributing the maximum amount permitted.
  4. Consider phasing out of your career and/or commencing on a new career that is aligned with your time, talents and passions. Continuing to earn an income can afford you the option of delaying access to your retirement funds and Social Security benefits.
  5. Become familiar with your Social Security options. Waiting to access your monthly benefits until you’re 70 years of age can generate a 75 percent increase of your monthly benefit at age 62. With today’s life expectancies, doing so could provide significantly more retirement benefits to you or your spouse during your lifetimes.
  6. Examine your current lifestyle and determine what is important to you. Where possible, trim unnecessary activities and related expenses and begin shaping your desired retirement lifestyle.
  7. Leverage tax law to subsidize the cost of your chosen lifestyle. The American Taxpayer Relief Tax Act of 2012 added a complexity of additional tax brackets and disappearing tax deductions that are tied to income levels. As a result, tax bracket management, where you accelerate or defer income into low tax bracket year and deductible expenses into high tax bracket year has become more important. Proactive tax bracket management, coupled with disciplined investment of realized tax savings, can significantly enhance the cash flow available to you during your victory lap.

By applying the strategies above, the increased amount of cash you could realize during retirement could be the difference between enjoying your retirement or not enjoying it. Consider taking some of these steps today in order to enhance your chances of living your dream in the future.

Retirement Planning Help

If you’re unsure of what your future retirement holds, contact Rea & Associates. Our team of Ohio personal tax professionals can help you evaluate where you’re at currently and can help you map out where you want to go on your retirement journey.

Author: Frank Festi, CPA, CFP (Medina office)

 

Want to gain more tips for retirement planning? Check these blog posts out:

Retirement Is Knocking … Are You Ready To Answer The Door?

Will You Be Ready for Retirement?

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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Retirement Is Knocking … Are You Ready To Answer The Door?

Wednesday, April 2nd, 2014

Traveling to exotic places. Spending hours on the links. Enjoying time with the grandkids. Supporting philanthropic efforts. While these all might be things you hope to do during retirement, do you have any idea the likelihood that you’ll actually get to do them? Sadly, more and more individuals are finding that they’re not adequately prepared for retirement. According to the Employee Benefit Research Institute’s (EBRI’s) March 2013 Retirement Confidence Survey, 49 percent of individuals surveyed are “not very confident” or “not at all confident” that they’ll have enough income when they hit retirement. That’s an astounding, yet insightful number. How would you answer the question, “How confident are you that you’re prepared for retirement?” If you find yourself in either of the categories mentioned above, all hope is not lost.

For many of you, retirement probably seems light years away. But there may be some of you who are fast approaching retirement age. Wherever you’re at on the retirement spectrum there are practices you can put in place now to move you toward your retirement goals.

Five Practical Tips for Retirement Readiness       

  1. Look at your ability to save and cut corners where you can to save money. Even if your savings goal seems beyond reach or too distant in the future to be of concern now, re-evaluate where you can save and strive for it. Some individuals won’t begin to save if they see the goal as unattainable and set themselves up for failure before they even begin. Just as a tiny grain of sand can form into a pearl within an oyster over time, small steps in saving for retirement can lead you to your goals. Take responsibility to make it happen, and get financial advice if you need some help.
  2. Determine what you expect your retirement lifestyle to look like. If you dream or envision traveling to those exotic places I mentioned earlier, or perhaps you want to buy a motor home and travel the United States, it’s critical that you have the funds to do it. In theory it sounds like a great idea, but what many people realize upon retirement is that they don’t have enough funds to support these kinds of adventurous or carefree lifestyles. The EBRI survey cited above also showed that seven out of 10 individuals haven’t talked with a financial advisor about their financial situation nor have they put together a plan for retirement. If you want to have a retirement that’s close to what you dream of, put a realistic plan together for what you expect retirement to look like and go after it to make it happen.
  3. Evaluate your debt. Have you purchased a new car? Is your mortgage paid off? Are you (or are you planning on) paying for your kids’ college education? As you prepare for retirement, it’s important you evaluate your debt situation. Ideally, you don’t want to go into retirement with any debt. Work hard now to pay off debt you may have. It’ll pay off (literally and figuratively) later on down the road!
  4. Consider what monetary resources you have to pull from. There’s a whole slew of ways you can fund your retirement. Make certain you are taking advantage of any retirement plan your employer offers. Not only does this give you the ability to save for retirement, but many employers will also contribute money for you – do your best to take full advantage of the contribution your employer will make for you. Personal savings and other avenues, such as an Individual Retirement Account (IRA) or investment in property, could be considered. Social security benefits can also be factored in as part of your retirement benefits, but should not be viewed as the only or primary source of retirement income.
  5. Anticipate medical costs and needs. You may feel fit as a fiddle. But unfortunately for many of us, that feeling won’t last our entire lives. As we get older, our bodies age, and it’s important for us to prepare financially for any potential medical costs or needs we could encounter. Medical costs are one of the more commonly overlooked items when planning for retirement. Knowing your family’s medical history could be helpful when anticipating your future medical costs. 

Retirement Planning Help

While these five tips won’t completely solve all of your retirement woes, they’ll help you get in better shape for retirement. Don’t wait until it’s too late. To celebrate National Employee Benefits Day, which is today, start preparing for the retirement of your dreams today. If you need guidance or additional insight on how to best plan for your retirement, contact Rea & Associates. Our team of Ohio tax professionals can help you put together a plan to ensure you’re on a good path to retirement.

Author: Darlene Finzer, CPA, QKA, CSA (New Philadelphia office) 

 

Looking for more advice on retirement planning? Check out these posts:

What Are Ways You Can Ensure You’re Ready for Retirement?

Will You Be Ready for Retirement?

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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What Are The Responsibilities of a Fiduciary?

Wednesday, March 19th, 2014

Do you ever long for the carefree bliss of your childhood? No real responsibility. No bills to pay. No one depending on your performance. While it’s nice to daydream, it’s never going to happen, especially considering the fiduciary responsibility you have as a plan sponsor.  (more…)

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What Are Ways You Can Ensure You’re Ready for Retirement?

Wednesday, March 5th, 2014

Yes, yes. You have a million things going on, and retirement planning may be the furthest thing from your mind. But it really shouldn’t be. In order to be well-prepared for retirement, you need to start now regardless of where you’re at in your career. Here are five financial requirements you should focus on as you prepare for retirement: (more…)

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Why Should You Review Your Retirement Plan Documents Now?

Tuesday, March 4th, 2014

“If it’s not broken, don’t fix it.” A lot of people adhere to this philosophy, but in some cases, a review of how something works is not only helpful, it is required. If a business’s retirement plan seems to be working fine, and there doesn’t appear to be anything out of place, many employers believe there is no reason to review the provisions of the plan. This may be the case for a plan that was recently established, but it is always a good idea to review provisions every few years to ensure the plan is still meeting the goals of both the employer and its’ employees.  (more…)

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What Should Plan Sponsors Ask Their Investment Advisors?

Wednesday, February 12th, 2014

Like many business owners, running your business every day is a top priority for you. But as a sponsor of a 401(k) plan, you have an obligation to your employees to make your plan a priority as well. The truth is, most business owners are not 401(k) experts. Therefore, working with a quality 401(k) investment advisor should also be a priority. As a plan sponsor, there are questions you should be asking your advisor to ensure they are helping your meet your fiduciary obligations as the plan sponsor.  (more…)

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How Can I Make My Benefit Plan Audit A Smoother Process?

Thursday, November 28th, 2013

Your time is precious and you want to use it effectively. The last thing you want to face is multiple requests from auditors that make you feel like you’re running around without purpose. It doesn’t have to be this way. A little preparation on your end will help the process run smoother and give you fewer headaches.  (more…)

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What Are Some Changes Plan Sponsors Can Expect To See In 2014?

Tuesday, November 26th, 2013

Every fall, just as we can expect the leaves to change colors and the weather to turn colder and a little dreary, we can also anticipate changes we will see coming in the following year with respect to employee benefit plans.  (more…)

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What Are The Rules For Taking A Distribution from My 401(k) Plan?

Monday, August 12th, 2013

So maybe you’ve been storing up money in your 401(k) plan for years, possibly even decades. Or maybe you’ve just started paying into your 401(k), and have a little bit of money in your account. You suddenly find yourself in a situation where you need money… and you need it now. What do you do? (more…)

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How Can You Ensure You’re Compliant With Disclosure Review?

Thursday, July 11th, 2013

Let’s face it. You like to be prepared when it comes to your finances. So do participants of your benefit plans. That need for preparation is what has driven the recent changes in regards to fee disclosure. As a plan sponsor, you need to comply with these new requirements. Are you sure you’re keeping up with your role in the process? (more…)

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Part 2 | What Happens if My 401(k) Plan is Out of Compliance with an IRS or DOL Rule?

Wednesday, June 5th, 2013

In the last issue of Illuminations, you read about some initial consequences you may face if you find that your 401(k) plan is out of compliance with an IRS or DOL rule. In this week’s issue, check out the second part of the article that explains the statute of limitations and how you can work to rectify any issues you may have with your business’s retirement plan. To refresh your memory, you can read the first part of the article here(more…)

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What Happens if My 401(k) Plan is Out of Compliance with an IRS or DOL Rule?

Wednesday, May 22nd, 2013

With all of the rules in the business world, it sometimes can be difficult to know and understand all of the rules we need to follow – there are a lot of them. So what happens if you find yourself in an unintended situation where your business’s 401(k) plan is out of compliance? Simply put, a plan out of compliance with Internal Revenue Service (IRS) or Department of Labor (DOL) rules is subject to disqualification. But what does that mean? It is very important that you fix any compliance issues when they are identified – whether they are document-related issues, government reporting issues (5500) or plan operational issues. (more…)

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Why is the Timeliness of Employee Contributions Under Scrutiny?

Friday, May 3rd, 2013

The Department of Labor (DOL) has focused on the timely remittance of employee contributions to retirement plans for a few years. And recently, they stepped up efforts during agency-conducted audits, making this a key area of detailed review. The timeliness of your remittances will be under the microscope, and not only the frequency, but also the consistency. (more…)

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How Can Retirement Provisions in the President’s 2014 Budget Proposal Affect You?

Thursday, April 25th, 2013

The past few weeks have been full of high visibility news stories ranging from the tragic Boston Marathon bombing to the devastating plant explosion in West, Texas. Amidst these stories and others, there was one important story you may have missed that could affect you and your retirement in a very significant way. President Obama recently unveiled his 2014 budget proposal that resulted in varied opinions over the retirement-related provisions that could greatly impact the retirement industry. (more…)

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What Does ASU 2011-04 Mean For Your Pension Audit?

Thursday, February 7th, 2013

How to Prepare For Changes to Your Retirement Plan

While the basics of double entry accounting haven’t changed in hundreds of years, the devil, as they say, is in the details. And, when it comes to accounting, the details are always changing. A new accounting standard update has been announced – and it could have a big impact on your pension plan’s 2012 audit.

For the last decade, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working toward accounting convergence; bringing U.S. accounting standards into harmony with international requirements. Through the Accounting Standard Updates (ASUs), FASB has been nudging U.S. standards closer to their international counterparts. Think of it as the accounting equivalent of finally getting America to convert to the metric measuring system. It’ll be great once we’re all on the same page, but the process of getting there… well, it’s a little complicated.

Here’s what you need to know about ASU 2011-04 and what you can do to prepare for its impact on your retirement plan. (more…)

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Do You Have to Take a 2012 Required Minimum Distribution?

Wednesday, January 23rd, 2013

ACT FAST: Limited Time Offer for RMDs

Thanks to a hot-off-the-presses provision in the new tax law, taxpayers over 70 ½ have a very limited window to address 2012 required minimum distributions (RMDs) from their retirement accounts.

Here’s what happened: an incentive for donating your RMDs directly to charity tax-free expired in 2011, so at the end of 2012 many of you weren’t sure what to do. Some of you may have taken your RMD as usual and used that money toward regular living expenses, but other retirees who typically donate their RMD to charity may have taken a different approach. (more…)

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Employee Welfare Benefit Plans Making Your Head Spin?

Friday, December 28th, 2012

Every year, we receive questions regarding whether a filing requirement exists for a client’s welfare benefit plan. Clients want to ensure that their plans remain ERISA compliant without taking on the burden of any unnecessary paperwork.  Here are answers to some of the most frequently asked questions about employee welfare benefit plans. (more…)

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Are You Ready For FASB 715-80 Disclosures?

Thursday, December 13th, 2012

From ERISA fee disclosures to benefit limitation regulations, 2012 has been a year of regulations for retirement plans.  If your company offers a retirement plan, you may feel like you’ve spent the whole year jumping through the hoops that regulators threw at you.  Bad news, you might have one more hoop to hop. (more…)

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What Changes Do Pension Plans Need by Year-end?

Thursday, November 29th, 2012

In the midst of the publicity surrounding the new ERISA fee disclosures requirements, it is important not to lose sight of the fact that other recently enacted legislation may impact your retirement plan.  Changes to IRS regulations may require plan’s to adopt amendments before the end of the year.  (more…)

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Do You Need to Send an Annual Notice to Your 401k Participants?

Friday, November 2nd, 2012

Does your 401k plan have a calendar year end? If so you have until December 1, 2012, to send notice requirements to plan participants or the operation or qualification of your plan could be impacted. Use this checklist of notices to get started: (more…)

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Who is Responsible for Fidelity Bonding?

Friday, October 26th, 2012

When it comes to following the ERISA requirement of fidelity bonding, the devil, as they say is in the details.

The Employee Retirement Income Security Act of 1974 (ERISA) requires that fidelity bonding be obtained to cover each person who “handles” plan assets.  The general rule is the bond amount be ten percent (minimum of $1,000) of plan assets as of the beginning of the plan year, not to exceed $500,000, or one million dollars if the plan holds employer securities.

While this requirement seems relatively straightforward, we find plan sponsors are sometimes unclear about their fidelity bond responsibilities when we are performing  benefit plan audits.   Following are some of the commonly asked questions. (more…)

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Will You Be Ready for Retirement?

Wednesday, October 10th, 2012

You may have heard the retirement terminology “three-legged stool” used to describe the three most common sources of retirement income: Social Security, employer sponsored retirement plan and personal savings. Many factors affect the strength of each “leg,” so you must continually evaluate what changes you need to make to keep the stool strong and upright. (more…)

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Do You Need to Send an Annual Notice to Your 401k Participants?

Tuesday, October 2nd, 2012

As we begin the last quarter of the year, if your company sponsors a calendar year 401k plan, don’t forget about participant notice requirements.  They must be furnished by December 1, 2012 and may impact the operation or qualification of your plan.  Here is a checklist that may be helpful, but check with us if you are not certain which of these requirements apply to your plan. (more…)

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How Do Your Avoid IRS Penalties on Your IRA?

Friday, September 21st, 2012

With our government requiring more cash each year, there is growing sentiment is the financial community that the IRS is becoming more vigilant in obtaining all revenue available related to Individual Retirement Accounts (IRAs). According to a recent article, the Treasury Inspector General for Tax Administration estimates that the IRS failed to collect as much as $286 million of revenue in 2006 and 2007 alone. From a political aspect, it is easier to raise revenue by simply enforcing the existing rules, than it is to cut spending or pass a new tax increase. (more…)

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You’ve Received Fee Disclosures, Now What?

Thursday, August 23rd, 2012

It’s Your Turn to Disclose Fees to Participants

Did you suffer from sticker shock when you received the recent fee disclosures from your service providers? If so, you weren’t the only plan fiduciary to be surprised, even though it’s your job to know the ins and outs of your pension plan.

Now, by August 30, you have to disclose that fee information to your plan participants. How do you think they will react? It is possible they aren’t going to like the news. Worse yet, they may be confused as to why they are suddenly paying new fees when the reality is they have always paid them. Being upfront about plan costs, and plan benefits, can help you make it through this new disclosure requirement. (more…)

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Insurance Company Rebates

Wednesday, August 1st, 2012

Why They’re Coming and What To Do with Them

Not sure why you got a check in the mail from your insurance company? No, they’re not dropping your coverage. They’re crediting you back for what they overcharged your participants in 2011. Why? Because of health care reform.

Since the Supreme Court decided on the constitutionality of the Affordable Care Act (ACA), we told you about how it might mean additional taxes and regulations for your business. But, the ACA isn’t all bad news for small business owners. In fact, it could get you a check from your insurance company! (more…)

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What is a Roth 401(k)?

Thursday, June 21st, 2012

Understanding Employee Benefit Plan Types

In 2001, a new retirement plan option was created.  Although this option, known as a Roth 401(k), has been around for a few years now, there’s still some confusion about how it works and what makes it different from a traditional 401(k).  As a plan sponsor, you need to understand the Roth 401 (k) and its benefits so that you can be sure that you’re offering the right retirement plan options to your employees. (more…)

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Do You Understand the New ERISA Fee Disclosures?

Wednesday, June 13th, 2012

408(b)(2) Regulations Help Meet Fiduciary Responsibilities

Are you wondering why there is so much buzz these days about ERISA Section 408(b)(2) fee disclosures? After all, your service provider tells you what you pay for the services provided, right? Maybe.

Service provider pricing and compensation can be structured many different ways, so it may prove difficult for you, a responsible plan fiduciary (RPF), to evaluate plan fees. The Department of Labor (DOL) recognizes this and, in  408(b)(2) regulations, is mandating what information is to be disclosed to help you assess the reasonableness of fees paid for by the plan. The regulations also aim to help identify conflicts of interest that may impact a service provider’s performance. (more…)

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Can Benchmarking Uncover Money Hiding in Your Retirement Plan?

Tuesday, June 5th, 2012

Benchmarking may result in potential savings

Could you use an extra $26,000 a year? A plumbing company realized that savings after discovering it was overpaying recordkeeping and investment fees in its retirement plan.

By benchmarking the plan, this company saw how the fees compared to plans of a similar size across the country. This provided the plan sponsor with solid data to discuss fees with current providers.

While there are plans out there where reasonable fees are being paid, that’s not the case in every situation. From a law firm that saved $46,000 in investment fees to an administrative services firm that reduced its annual recordkeeping fees by $50,000, some plan sponsors have found that their plan fees are not in-line with similar plans. (more…)

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What does the new ERISA regulation mean for plan sponsors?

Friday, March 30th, 2012

If your company sponsors a 401k plan, a new ERISA regulation could mean extra paperwork… and potentially extra liability. (more…)

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Do you know the 2012 Retirement Limits?

Wednesday, November 23rd, 2011

Employees and individual retirement plan owners can contribute more toward their retirement benefits next year. (more…)

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Have You Determined a Beneficiary for Your Retirement Plan?

Friday, November 11th, 2011

A single dad wanted to designate his two children as beneficiaries of his retirement benefits. He mailed his beneficiary designation form to his employer with a cover letter explaining his wishes. When he died, the benefits administrator noticed the designation form wasn’t signed. Should the plan assets pass to the estate or the children? (more…)

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Will I Be Penalized for a Hardship 401K Withdrawal?

Monday, October 17th, 2011

A reader asked: I wanted to do a hardship with my 401k and was wondering if would be penalized 10 percent of the balance? I borrowed from my 401k and haven’t paid all of it back yet. Will I be able to do a hardship with remaining balance left? (more…)

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Want to Lessen Chances of a DOL Inquiry? Ten Tips

Wednesday, September 21st, 2011

The Department of Labor (DOL) enforces fiduciary, reporting and disclosure requirements for employee benefit plans. The agency is recruiting more investigators, so DOL investigations will be on the rise. (more…)

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Want a More Efficient 401K Audit? Here’s How

Tuesday, July 12th, 2011

Employee benefit plan audits are deadline-driven, and can require plenty of documentation and interaction with your auditor. Delays could mean fees and/or penalties –as well as higher audit fees than originally estimated. (more…)

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Determining a Retirement Beneficiary? It Isn’t Always Simple

Monday, June 20th, 2011

A single dad wanted to designate his two children as beneficiaries of his retirement benefits. He mailed his beneficiary designation form to his employer with a cover letter explaining his wishes. When he later died, the benefits administrator noticed the designation form wasn’t signed. Should the plan assets pass to the estate or the children? (more…)

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Employees on the Fence? Ten Reasons to Join Your Ohio 401(k)

Tuesday, June 7th, 2011

In spite of recent history in the stock market, when you compare 401(k) plans to other savings plans available to employees, the 401(k) plan has many positive points. Here are ten reasons your employees should participate. (more…)

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Are you following fiduciary best practices?

Tuesday, May 3rd, 2011

If you operate a retirement plan, you’re probably well aware that your position as a fiduciary is facing increasing scrutiny – and increasing liability and risk. In addition to increasing rules from the Department of Labor, recent lawsuits and settlements have highlighted the “significant potential liability for breach of fiduciary duty.” (more…)

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Raiding Your 401K? It’ll Cost You

Tuesday, April 26th, 2011

A recent study by Bankrate found that nearly one-fifth of full-time employed Americans have raided their retirement accounts in the past year to cover emergency expenses. These results match a Fidelity Investments study last year that reported the number of workers borrowing against their retirement accounts had reached a 10-year high. Given the financial stress that many workers face today, the numbers are not that surprising, but the long-term consequences can be. (more…)

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Looking at Target Date Retirement Funds? Here Are Some Considerations

Monday, April 18th, 2011

Does your company provide target date funds as an option in its 401(k) plan?  Many 401(k) plans use them as the default investment for plan participants who do not select their investments under the plan. Target date funds do make investing much easier for participants by automating the asset allocation process, but they still require careful consideration both before and after the investment decision is made. (more…)

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Should I Pay Taxes Now or Later for My Roth IRA?

Wednesday, March 30th, 2011

If you took advantage of last year’s law change allowing you to convert your IRA to a Roth IRA, you face a big all-or-nothing tax payment decision on April 18: pay the taxes on your pretax contributions and gains in 2010, or split the tax bill between 2011 and 2012. (more…)

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Add $1,000 to retirement account without sacrifice? Here’s how

Tuesday, February 8th, 2011

A provision of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 decreased the employee portion of the Social Security tax from 6.2 percent to 4.2 percent for 2011. Now you have a rare opportunity for to increase your 401(k) contribution without any change in your net take-home pay in 2011 when compared to 2010. (more…)

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Should I respond to that DOL Employee Benefit Notice?

Thursday, December 9th, 2010

If your company is required to file the employee benefit plan form 5500 or 5500-EZ, and receives a notice of a proposed penalty, be sure to respond to the notice within 30 days. (more…)

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