Category Archives: Uncategorized

What Type of Retirement Plan is Best for High-earning Professionals?

Journal of Accountancy By Allison L. Evans, CPA, Ph.D., and James H. Irving, CPA, Ph.D.

Cash balance plans for professional practices

Understand the rules for this leading form of retirement benefit.

Cash balance plans offer owner-employees in professional practices a vehicle to defer tax on income well in excess of the annual contribution limits of traditional Sec. 401(k) and profit sharing plans. This option has become increasingly valuable since the total tax burden on owners of unincorporated, flowthrough business entities increased in 2013.

Cash balance plans, often referred to as hybrid retirement plans, are defined benefit plans that in many ways resemble defined contribution plans. The number of active cash balance plans (those without zero participants) rose 70% between 2008 and 2012, and those plans held more than $800 billion in assets in 2012. Professional practices currently account for the majority of cash balance plans, with the highest concentration in the medical field. Cash balance plans are especially appealing to this demographic (e.g., doctors, dentists, lawyers, and accountants) because these professionals often earn much-higher-than-average annual salaries and get a later start in accumulating personal retirement savings.

Recent tax increases affecting highly paid practitioners

The American Taxpayer Relief Act of 2012, P.L. 112-240, increased the highest individual income tax rate from 35% to 39.6%, beginning in 2013. The maximum rate is effective once taxable income (including an owner-employee’s salary/guaranteed payment and flowthrough net earnings from the practice) reaches $413,201 for single filers ($464,850 for married filing jointly) in the 2015 tax year.

Continue reading at Journal of Accountancy.

March 2015 Retirement Plan Deadlines

Retirement plan administrators and 401(k) plan sponsors should be aware of the following March 2015 administrative deadlines for defined contribution plans:

Defined Contribution Retirement Plan Deadlines 

March 15 – For fiscal year-ends, 2 ½ months after plan year-end

  • Corrective distributions – deadline for ADP/ACP refunds without 10% excise tax on employer Please contact Kelly Parker for 401(k) plan audit information.

GAO: Abandoned 401(k)s Might be Depleted by Fees

Financial Advisor: December 22, 2014

Higher-return investments are needed to keep abandoned 401(k)s from being eaten up by fees before their participants or their heirs remember them, General Accountability Office, the investigative arm of Congress, said in a report Monday.

Another recommendation GAO made is for Congress to create a national pension registry to lessen the chance that workers would abandon some of their pensions.

Under existing law, if a worker leaves a job and has left behind a 401(k) with less than $5,000 and no directions on what to do with the money, the employer can “force-transfer” the sum into an individual retirement account (IRA).

Abandoned retirement accounts of $20,000 or less can also be transferred to IRAs if more than $5,000 isn’t from rollovers.

Continue reading at Financial Advisor.

WSJ: In retirement savings, the poor get poorer

When it comes to Americans’ retirement account balances, happy days are here again—but only for some. Average retirement-account balances have actually shrunk for people at the higher and lower ends of the income scale, while the percentage of Americans who have retirement accounts continued a recent decline.

According to a new report from the Federal Reserve, the average balance in Americans’ retirement accounts—a category that includes Individual Retirement Accounts (IRAs) as well as 401(k)s, 403(b)s and Keogh plans—rose 10% over the past three years, from $183,400 in 2010 to $201,300 in 2013. The median balance, meanwhile, was up 25%, from $47,200 to $59,000. The report looked at families whose “head is between ages 35 and 64”—a group whose members are generally “established in their careers” but are “too young for full retirement.”

The rise in balances reflected “a combination of resurgent stock markets and increased contributions by those who participated in retirement plans,” the report said. (U.S. stocks rose considerably faster than savings balances over that same period—the S&P 500, for example, rose 47% between the end of 2010 and the end of 2013.)

Continue reading at the Wall Street Journal’s MarketWatch blog.

Retirement Plan Deadlines – September 2014

Retirement plan administrators and 401(k) plan sponsors should be aware of the following September 2014 administrative deadlines for defined contribution plans:

Defined Contribution Retirement Plan Deadlines

September 15

  • Money Purchase Plan Contributions
  • Form 5500 and Plan Audit
  • Annual Benefit Statements
  • Deductible Contributions

September 30

  • Summary Annual Report

Please contact Kelly Parker for 401(k) plan information.

Are You Too Late? 401(k) Audits are Due July 31

For 401(k) plans with a 12/31 year end, the audit due date is July 31st, a Thursday this year. If you have recently found out your employee benefit plan requires an audit, you can visit the IRS website to find the forms needed for an extension:—Plan-Sponsors—Filing-Requirements.

Extensions are available for 2.5 months if extension request is filed. For a December plan year end, this would be on October 15th.

Piercy Bowler Taylor & Kern can assist you with this extension and the 401(k) audit. Avoid fees and penalties and file the extension by July 31st. Contact Kelly Parker for more information.

EB News: Help your employees make the right 401(k) investment choices

From Employee Benefit News (By Robert C. Lawton): As a retirement plan sponsor, you commit to annual (at a minimum) employee education sessions. One topic that should be covered during your sessions is how participants can become good 401(k) plan investors. In order to invest successfully in their 401(k) plans, participants should:

  • Commit to a regular savings program. Participants should not vary their contributions based on market or economic activity and should plan on contributing to their 401(k) plan for their entire careers.
  • Increase their contributions. Participants need to average 15% in annual additions into their 401(k) plan accounts. Most won’t be able to start contributing at this level and will need to increase their contributions gradually. Increasing contributions can often be done painlessly any time participants receive salary increases.

Continue reading at Employee Benefit News.


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