408(b)(2) – Are You Ready?

On July 1st the Department of Labor’s (DOL) regulation 408(b)(2) is scheduled to become law. All 401(k) plan sponsors will be required to know the fees charged by their 401(k) provider and determine whether those fees are reasonable for the services being rendered.

What exactly is 408(b)(2)? How does this impact plan sponsors and participants? What are reasonable fees?

Piercy Bowler Taylor & Kern (PBTK), a 401(k) plan audit firm, is hosting a workshop to help you understand the impact of 408(b)(2), evaluate your current fees and determine if they are reasonable. PBTK will be joined by Christine Soscia, a 401(k) expert with the Retirement Benefits Group (RBG). RBG manages over $8 billion in 401(k) assets.

Speakers: Michael Fennessy with Great West Retirement Services and John Lacey with MFS

RSVP: Please RSVP by March 12th to shiller@pbtk.com or register online

In a recent article on BenefitsPro, data from Fidelity Investments show that employee contributions are up, even if it’s just a bit.

“Average employee contributions rose slightly in 2011 to $5,750, up from $5,680 a year ago, according to new data on 401(k) savings and behaviors released by Fidelity Investments. On average, participants saved more than 8 percent of their annual savings. As of the end of the fourth quarter 2011, the average 401(k) balance was $69,100, up nearly 8 percent from the end of the third quarter.”

Click here for the full article.

Insurcorp sent us this article that we thought we’d pass along to you about the Profit Sharing/401k Council of America’s 54th Annual Survey of Profit  Sharing and 401k Plans. It provides an in-depth look at current practices in  profit-sharing and 401(k) plans.

Click here to read the full article on the Insurcorp website and compare your plan’s elibility, participation, investment options and more.  Contact Piercy Bowler Taylor & Kern with your 401(k) testing, compliance or audit questions.

The U.S. Labor Department this morning issued its final rules requiring disclosure of 401(k) retirement-plan fees.

The rules require companies that administer 401(k) and other defined-contribution plans to disclose administrative and investment costs to employers who sponsor the plans. Already, plan sponsors and employers have responded with lower-fee options.

The effective date for those disclosures was postponed by three months to July 1. Plan sponsors have 60 days from that date to disclose costs to workers saving within the plans.

Meanwhile, the U.S. Treasury Department today proposed regulations designed to make it easier for retirees to create lifetime-income streams similar to those that were provided through traditional defined-benefit pension plans.

Click to read the full blog post from Kelly Greene on the Wall Street Journal’s personal finance blog.

In fact, 401(k) plans are becoming more popular, and fewer people stopped making contributions in 2011 than in the two previous years, according to the surveys. Only 2.2% stopped saving in the plans in 2011, compared to 3.4% in 2010 and 5% in 2009.

Click here to read the full article from Reuters.

From the folks at Vanguard:

“When it first became available to defined contribution plans in 2005, the Roth 401(k) was seen by many retirement experts as a vehicle that would mostly benefit highly compensated workers. While there are many reasons why the Roth 401(k) may be an attractive option for higher-income employees, what has surprised many about this innovative plan feature are the benefits it offers participants across the income spectrum, making it advantageous for a wide range of employees and plans.

“In contrast to traditional 401(k) plans in which participants make contributions on a pre-tax basis and don’t pay taxes until they make withdrawals in retirement, the Roth 401(k) allows participants to pay taxes on their retirement savings contributions up front and avoid future taxes on their plan savings in retirement. All withdrawals of Roth savings are free from federal income tax in retirement as long as the participant is at least 59½ years old and their account has been open for at least five years.  Participants in plans that offer the Roth feature can choose to make their contributions on a pre-tax basis, a Roth basis, or some combination of the two.”

Click here to read the full article, including a chart comparing pre-tax 401(k) contributions with Roth 401(k) contributions.

If you do, please consult the Rollover Chart from the IRS.  Also, consult with your tax advisor before completing a rollover.

Upcoming deadlines for calendar-year defined contribution retirement plans include the following key dates:

January 17

• Form 8955-SSA – annual registration statement identifying separated participants with deferred vested benefits
• Notice to terminated vested employees – provide a notice describing the amount of the account balance as of the date of termination to terminated vested employees

January 31

• Form W-2 – provide IRS with report on wages, deferrals, etc.
• Form 1099-R – provide IRS with distributions from pensions, annuities, retirement or profit sharing plans
• Form 945 – annual return of withheld federal income tax from 2011 distributions
• Form 5300 – application for determination for employee benefit plans; for plan sponsors with EIN ending in 1 or 6 (Cycle A)

Contact us for information on preparing the tax and audit documents necessary for your 401(k) or defined contribution retirement plan at 702-384-1120.