The 401(k) Amendment Period Is Here. Act now to make sure that your plan keeps up with new laws & regulations

facebooktwitterlinkedinby featherPlan Design grahicThe clock is ticking. Between now and April 30, 2016, 100% of 401(k) plans, profit sharing plans, and other tax-qualified plans that use an IRS-approved prototype plan document must be amended and restated.1

If this doesn’t occur by the above deadline, these retirement plans risk losing their tax-qualified status and the corresponding tax advantages they offer to plan participants. Any amendments to the current plan document must be incorporated into a fresh “core” document.1,2

Here’s your chance to refine your plan – to possibly lower its costs, to get more out of it. A little analysis from a consultant (and perhaps a little surveying of your plan participants) may allow you to answer some crucial questions.

Are the plan fees still reasonable? The required annual benchmarking gives you an opportunity to compare, contrast and see how they measure up vis-à-vis other plan providers.

Are employees nudging you about more provisions? Do they want a Roth option, or a chance to make in-plan Roth conversions? Are they able to take loans? Should non-spousal beneficiaries be eligible for rollovers?

Is there room for improvement when it comes to deductions and allocations? Is the business getting the maximum deduction? Do the highest-salaried workers often end up with percentages of their 401(k) deferrals refunded back to them?

Should the vesting schedule be revisited? Should you change from three-year “cliff” vesting to a six-year gradual vesting schedule, or vice versa? What benefits might result from such an alteration?

Have employee demographics at your business shifted? Do the plan participation criteria need adjusting? Is auto enrollment a good idea, and should there be an automatic escalation option?

This is the time to “look under the hood” of your plan. You will probably need to rewrite or at least notably revise your 401(k) plan document by the spring of 2016. Why not opt for a formal review of your 401(k) plan in the process? Some plans only permit changes at the start of a calendar year, so looking ahead now is quite wise.

Who has the ultimate responsibility to make sure that your plan complies with ERISA? You do.

Don’t risk controversy and possible legal action from plan participants as a result of inattention or procrastination. Ask today about a plan review – it could be very illuminating, and it could help you amend, reassess and improve your company’s 401(k).

 

 Contact Jaimie Blackman to arrange for your complimentary compliance review.
212-829-0001. jb@bhwealth.com

 

Citations.

1 – irs.gov/irb/2014-17_IRB/ar08.html [4/21/14]

2 – claconnect.com/Private-Client/Wealth-Advisory/2014-Tax-Qualified-Retirement-Plan-Restatement-Reasonable-Fees.aspx [4/1/14]

 

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Written by Jaimie Blackman

Jaimie Blackman

Jaimie Blackman has created Sound Financial Decisions ™ powered by MoneyCapsules®, to help guide business owners through the complexities of succession planning.

Jaimie writes “Smart Succession”, a monthly column in Music Inc., and also writes a bimonthly column for Canadian Music Trades magazine. He has spoken at NAMM U Idea Center, and at Yamah’s Succession Advantage.

As a financial literacy educator he has taught at New York University and has lectured at the 92nd Street Y, Marymount Manhattan College, and CUNY.

As President of BH Wealth Management, Jaimie also helps his clients implement investment and insurance solutions which are aligned to their personal values. Visit bhwealth.com to learn more.

To subscribe to Jaimie’s Succession Success: Insights for Music Retailers, visit moneycapsules.com.

The purpose of this post is to educate. Our content should not be construed as advice. If legal, tax or other advice is required by the readers, professional advice should be sought.

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