News & Updates
New VCP Kit for 403(b) Plans Released by the IRS March 8, 2013
404(a)(5) Template for Brokerage Account Plans July 31, 2012
Webinar Slideshow: 404(a)(5) Participant Fee Disclosures July 30, 2012
Benchmarking: Measuring for Success May 30, 2012
Newsletter: 408(b)(2) and Plan Fiduciaries May 29, 2012
Peery & Associates Fee Disclosure Webinar Powerpoint January 23, 2012
Peery & Associates Sample Participant Fee Model Chart January 23, 2012
DOL Fact Sheet Regarding Participant Fee Disclosures October 31, 2011
A White Paper guide to retirement plan fees March 1, 2010
DOL issues final regs for small plan employee deposit deadlines January 12, 2010
What is happening with 403(b) Plans for Nonprofits? August 10, 2009
401(k) or 403(b) for a Non Profit Organization? April 14, 2008
|401(k) and 403(b)||$15,000||$15,500||$15,500||$16,500||$16,500||$16,500||$17,000||$17,500|
|SS Wage Base||$94,200||$97,500||$102,000||$106,800||$106,800||$106,800||$110,100||$113,700|
|415 DC Limit||$44,000||$45,000||$46,000||$49,000||$49,000||$49,000||$50,000||$51,000|
|415 DB Limit||$175,000||$180,000||$185,000||$195,000||$195,000||$195,000||$200,000||$205,000|
HIGHLY COMPENSATED - applies to 401(k) testing:
- At any time during the current or proceeding year the employee was more than a 5% owner of the business (including their children, grandchildren, parents, grandparents and spouses employed by the company)
- Earned more than the compensation limit in annual compensation from the employer in the proceeding year (as indexed)($115,000 for 2012 and 2013)
KEY EMPLOYEE - applies to Top Heavy
A "key employee" is an employee who, at any time during the plan year that includes the determination date, is:
- an officer earning compensation in excess of $165,000
- an over five percent owner
- an over one percent owner earning over $165,000
EGTRRA!! EGTRRA!! Read all about it!
Bill extends the life of EGTRRA. We get to keep our higher limits and our money types, too. Wait, there's more!
EGTRRA was scheduled to end in 2010. With it's end would be the elimination of increased contribution limits, more rollover options and an overall simplicity we've come to know and love as administrators, sponsors, and participants. Congress recently passed a bill that effectively extends EGTRRA changes until they pass something otherwise.
Roth(k) is hear to stay. For those of you waiting to hear that...now you have!
Also big news...
VESTING SCHEDULES ACCELERATED
Effective 2007 all Profit Sharing and Match Vesting schedules can be no longer than 6 years graded, or 3-year cliff ! This means all 7 year graded schedules must be changed to 6, and all 5-year cliff vesting schedules must be advanced to 3-year. *
EMPLOYER STOCK DIVERSIFICATION RULES
Employers must allow participants to diversify contributions made in employer stock effective immediately. This applies to Defined Contribution plans, and generally not to ESOPs (exceptions apply). There are many details regarding this and there are a few effective dates. *
EFFECTIVE AFTER 12/31/06
New prohibited transaction exemptions. Exemptions permit more investment trading options. Some noteworthy exemptions include:
- Block Trading Exemption
- Electronic Communication Network Exemption (ECN)
- Foreign Exchange Transactions
- Also a new exemption was created to help in the case of quick correction of prohibited transactions
- For brokers with plans themselves...the "eligible investment advice arrangement" is available. Investment Advice by a fiduciary to a participant of a participant-directed individual account plan is possible, under the caveat of many very specific guidelines. *
A provision in the new law exempts Trustees from Fiduciary liability associated with choosing a default fund or portfolio for 401(k) plans that include Automatic Enrollment. The same exemption applies to a transfer of funds from one investment vehicle to another, where the funds are mapped to a new funding vehicle. Both exemptions will only apply if the proper notices about Automatic Enrollment or transfer options are provided. *
EFFECTIVE AFTER 12/31/07
SPD's AND 5500s will be available for electronic viewing at the DOL website. The DOL is reintroducing mandatory electronic filing of 5500s. *
Maximum ERISA Bond for plans holding employer securities is increased to $1,000,000.
10% penalty rules no longer apply to just anyone under age 59 1/2. * They have been waived for more types of early withdrawals. Some noteworthy exceptions are listed below:
- Withdrawals from an eligible automatic contribution arrangement, of elective deferrals and earnings, and requested no later than 90 days after the first elective contribution under the arrangement will not incur the early withdrawal 10% penalty.
- Employees in active duty in the military are exempt from the 10% penalty for early withdrawal.
- Government safety officers' normal withdrawal age is lowered to 50, from 59 1/2.
- Government safety officers on disability are exempt from penalty regardless of age for in-service withdrawals up to 3k annually.
The period for distributing excess contributions is increased to six months after the plan year for failed 401(k) tests. *
Preemption Of State Law
A new subsection is added that specifies that ERISA preempts any State law which would directly or indirectly prohibit or restrict the inclusion of an automatic contribution arrangement to any plan.*
EFFECTIVE AFTER FINAL REGULATIONS
Congress added another way to move the funds of Missing participants for terminating plans.*
NEW QACA SAFE HARBOR PLAN
A New Safe Harbor Automatic Enrollment plan design is available. A qualified automatic contribution arrangement (QACA pronounced "quacka") shall be treated as Passing ADP test and will be exempt from top heavy.
- A QACA must provide automatic enrollment of eligible employees, proper notices of the rights and options, and a safe harbor employer contribution.
- Automatic enrollment deferral rates in a QACA are graded from 3% to 6% minimum (1% per year), up to 10% maximum automatic deferral rates.
There are Matching or non-elective safe harbor employer contribution options. Participants are fully vested after 2 years, rather than 1 year as in the current Safe Harbor Plan options.*
NEW FOR DEFINED BENEFIT PLANS
- Now DBs can use pre-participation compensation, but only until December 31, 2009. Basically we can use compensation even before the DB plan even to get the highest deduction possible.
- The IRS no longer wants the actuarial deduction calculations for DB plans.
- The IRS now no longer requires a DB plan to file a 5500 until the assets reach $250,000.
- Congress has done a complete double take on simplifying DB plans and has now made them much more complicated again because large pension plans are grossly under funded.
- ...biggest item is the new DBK - the combined DB and 401(k) available for plans under 500 participants, but not until plan years far, far away.
- It will be exempt from top heavy and 401(k) testing, if rules are met
- can have one trust and one 5500
- combines automatic enrollment and both kinds of safe harbor rules in the 401(k) plan
- creates a top-heavy benefit in the DB
* Please contact us for more details.
DOL AUDITS ARE INCREASING
The DOL has increased its audits for 401(k) Plans with late deposits. "Late" is now defined as the due date of the IRS withholding deposit, which is unreasonably soon for many plans. The best preparation for an audit is a written policy for making deposits that is strictly adhered to. For example, many companies are creating policies stating that the money will be segregated from corporate assets as soon as feasible but no later than 5 business days following payroll. One of the CPA firms we work with described the outcome of a DOL audit that was particularly harsh. The company being audited had faithfully deposited their contributions within 5 days, except once, when they managed to do it in two days. The DOL penalized them for all the payrolls later than 2 days. To ward off this very poor result, a written policy, and minutes of your Administrative Committee Meetings noting the reason for any exceptions, should be established and deposits should be made very consistently.
LOAN REPAYMENTS AND IRS REGULATIONS
Regulations were issued in 2004 that made it clear that loan repayments are due at the same time as payroll deductions would be in a 401(k) Plan. If a loan has not been paid in the past and the balance is still outstanding, a second loan is not allowed. In most plans, terminated participants are not allowed to have loans because payroll deduction is no longer possible. If a participant terminates and has a Plan loan, the participant has to pay off the loan in full, or the loan will be defaulted and the employee will receive a 1099-R for the outstanding loan balance.
AUTOMATIC ROLLOVER RULES
Missing and non-responsive participants who have balances in the Plan between $1,000 and $5,000 will not be cashed out as in the past. The balance remaining will be rolled over to an IRA, unless the Plan eliminates the rules regarding automatically distributing balances for terminating participants with low balances. This change required an amendment to the Plan, which needed to be adopted by the end of the plan year beginning after March 28th 2005.
After March 28th 2005 participants will be given 30 days to respond with distribution instruction. If no response is received the funds will be automatically rolled over to an IRA the employer establishes.
Any Participants with a vested balance of $1,000 or less will have a lump sum distribution processed for them, less federal tax withholding.
ROTH 401(k)/403(b) CONTRIBUTIONS
A different type of contribution is allowed in 401(k) and 403(b) plans for employees. If a plan is amended to include the Roth(k) money type, an employee can decide between pre-tax 401(k) contributions or after-tax Roth contributions. This is an optional addition to the plan.
While a ROTH IRA is subject to a much lower dollar cap and adjusted income restrictions, there are no such restrictions with the ROTH 401(k)/403(b). Overall calendar dollar limits have not been changed. With a 15k limit in 2006, if a participant contributes 10k to their 401(k), 5k will be available for the Roth(k).
The ROTH 401(k)/403(b) is like it's counterpart ROTH IRA in that after-tax contributions and earnings will not be subject to taxation upon withdrawal, if...
- contributions have been in the Plan for 5 years, and
- the payment is made after the participant becomes 59 1/2, disabled, or has died.
Please call us if you are contemplating adding this feature. We recommend that clients choosing this option do not allow Roth 401(k) contributions to be used for hardship distributions or loans, and that in-service or pre-retirement distributions are only allowed if the 5-year requirement has also been met.
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