Posts Tagged ‘retirement plan’

Don’t Forget About Your ERISA Fidelity Bond

Wednesday, February 11th, 2015
Don't Forget About Your ERISA Fidelity Bond

Avoid problems with the Department of Labor, make sure you know the ERISA fidelity bonding requirements.

If your company offers a retirement plan to its employees, make sure you are familiar with the Employee Retirement Income Security Act’s (ERISA) fidelity bonding requirements and the information you must include on your plan’s annual Form 5500.

Over the years we have noticed that many clients struggle with obtaining and keeping an active and accurate ERISA fidelity bond because of a general lack of understanding. The purpose of the fidelity bond is to protect your plan’s assets from the risk of loss due to fraud or dishonesty by employees handling the plan’s funds, such as when remitting plan contributions.

The required bonding amount is “10 percent of plan assets handled.” Because this is a difficult number to know with certainty, most plan trustee’s make sure the plan is bonded for at least 10 percent of all plan assets. This means that as your plan’s assets grow, so does your required bonding amount. There are two primary exceptions to this rule:

  1. The maximum required amount is $500,000 – regardless of your plan assets.
  2. If your plan has more than 5 percent non-qualifying plan assets, then a bond is needed to cover the amount of non-qualifying plan assets.
    • “Non-qualifying plan assets” includes anything that is not a marketable security held by a bank, trust company, registered broker-dealer or insurance company.
    • If a bond in the correct amount is not established, then an independent plan audit by a certified public accountant is required. These audits cost about $10,000 annually.

Even if your plan only contains qualifying plan assets, not maintaining a fidelity bond in the proper amount can be a red flag to the Department of Labor, which could prompt them to take a closer look at your plan.

NOTE: A fidelity bond is different than fiduciary insurance. Fiduciary insurance is not required, but should be in place to protect your plan fiduciaries from personal risk of loss. Your plan fiduciaries include any employee who serves as a plan trustee or who is on a plan investment committee tasked with ensuring that your plan is free from errors or omissions that could result in loss to your plan. Plan fiduciaries are personally liable for these potential losses, so having fiduciary insurance coverage is prudent (albeit not required).

To learn more about the ERISA fidelity bond requirements, email Rea & Associates.

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