Posts Tagged ‘SEP’

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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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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