PBTK Employee Benefit Plan Audits

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.

The folks at The Employee Benefits Report detailed out the Saver’s Tax Credit that may encourage people to contribute to their retirement plans. Individuals can take a tax credit up to $1,000 ($2,000 if filing jointly) for quailfied retirement plan contributions.

Click here to see who is eligible for the credit, and which contributions qualify.

Employee Benefit News says, “For once, it’s the whippersnappers who are behaving more wisely. At least when it comes to saving, Generation X and Generation Y workers are more diligent than their peers.”

Click here for the full article.

Several administrative deadlines are fast approaching for defined contribution retirement plans. December 31, 2011 marks the deadline for the following items:

• Corrective distributions and QNECs
• Safe harbor, QACA, or EACA elections
• Required minimum distribution
• Participant notices
• Self-employed partner elections
• Plan amendment
• Discretionary plan amendments
• Remove safe harbor feature

If you have questions about these deadlines, please contact us at 702-384-1120.

USA Weekend recently included an article about why you should think twice before borrowing from your 401(k):

If you have a 401(k) — particularly a substantial one — it can be tempting to borrow from it. In most cases, however, it’s a dicey move. Here’s why:

• You may compromise your retirement
• Repayment may be tight
• If you can’t pay, taxes and penalties kick in
• Look to other sources first

For the full article, click here.

With reference to the post on December 3, 2011 regarding Housekeeping for Retirement Plans, it is more important than ever to make sure that your tax-qualified retirement plan is in compliance with all relevant rules and regulations.  The Department of Labor (DOL) and Internal Revenue Service (IRS) have not only stepped up their recent enforcement procedures, but they are openly speaking about their efforts.

Within a recent Fact Sheet the Employee Benefits Security Administration (EBSA) agency of the DOL touts that through its enforcement efforts and oversight authority over 708,000 retirement plans, it has achieved $1.05 billion in total monetary results in fiscal year 2010.

In a December 2011 phone forum on its correction programs, representatives from the IRS Employee Plans Examination Program discussed common retirement plan problems and the available correction programs that can be used to restore a plan to the position it would have been in had the error not occurred.

To help plan sponsors ensure they are in compliance, Piercy Bowler Taylor & Kern offers a pre-audit compliance review.  The purpose of this review is to determine the plan’s level of compliance before it is audited by the government and, if any errors or deficiencies are detected, to help correct them as it is less expensive to do so on your own before an official DOL or IRS audit.

Contact us at 702-384-1120 or kparker@pbtk.com for additional information.

“Since the financial crisis and Great Recession, 401(k) plans have undergone dramatic shifts. To foster diversification and greater participation, 51% of participants in Fidelity Investments’ 401(k) plans are in automatically enrolled plans, up from 16% five years ago, and 73% of the plans use target-date funds as the default, up from 11% in 2006.”

Click for full article from EB News.

As with nearly everything else, retirement plans require  periodic maintenance to keep running smoothly. Here are some suggestions to  ensure your plan complies with all laws and regulations and meets the goals of  your benefits program.

• Keep  your plan up-to-date with the law. On a regular basis, ask your benefits  professional “when and what” to change in your plan. Those who specialize in  retirement programs may provide auditing and plan review services.
• Click here for full article from the Employee Benefits Report