Sometimes SIMPLEs aren’t always simple and mistakes can happen.

By Jerry Kalish on Posted in SIMPLE-IRAs

SIMPLEs were designed by Congress in 1996 to make it, well simple, for employers with fewer than 100 employees to establish tax-advantaged retirement plans for their employees. Hence, the legislative branding naming the new law the Savings Investment Match Plan for Employees to make the acronym, SIMPLE.

It’s a special type of IRA and adopted because they’re easy to use. But they still have to be in compliance with many of the tax and ERISA provisions required of 401(k) and other qualified plans in order to continue to enjoy tax advantages.

It’s an especially current concern for those employers who have decided that a SIMPLE no longer fits, and will be replacing it in 2021 with a 401(k) plan. SIMPLEs must continue to be kept in compliance prior to termination, and plan document or operating mistakes should be corrected to preserve the tax advantages.

SIMPLEs haven’t always fared well in IRS audits with over 50% reported to have operational errors. Here are the 9 most frequent mistakes that the IRS has found need fixing.

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A Cautionary Note on the President’s Memorandum on Payroll Tax Deferrals

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, Defined Benefit Pension Plans, Social Security

On August 6 President Donald Trump signed a series of executive orders that expanded economic relief to taxpayers. One of those orders calls for employee payroll tax deferrals from September 1 through December 31, 2020.

It includes the 6.2% of the employee’s share of Social Security taxes but not the 1.45% employee’s share of Medicare taxes; and it is applicable for employees with biweekly pre-tax income of less than $4,000.

In the absence of any Treasury guidance, there were several uncertainties. On Friday, August 28, four days before the start of the deferral period, the IRS issued the 3-page Notice 2020-65, which cleared up some of the concerns but left some questions unanswered. Here’s my take on it. Be cautious, and here’s why.

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So you missed the July 31, 2020 Restatement Deadline for Pension Plans and 403(b) Plans. Here’s what you can do about it.

By Jerry Kalish on Posted in 403(b) Plans, Defined Benefit Pension Plans

The deadline to restate preapproved defined benefit pension plans or 403(b) plans for the Pension Protection Act (“PPA”) has come and gone.

July 31, 2020 was the date the IRS required that these plans be updated to reflect changes since the PPA was passed in 2016.

The PPA restatement is not optional. Failure to do so by the deadline is a plan disqualification issue that could adverse tax consequences for plan sponsors and participants. However, the IRS does provide a method to avoid plan disqualification. Here are the details.

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But wait. It may not be too late to set up a retirement plan for 2019.

By Jerry Kalish on Posted in Defined Benefit Pension Plans, SEP-IRA

That plan would be a SEP, the acronym for Simplified Employee Pension, an IRA-based retirement plan. Unlike a “qualified” retirement plan (401[k}, profit-sharing, or defined benefit) which must be in place no later than the last day of the year, a SEP is subject to a different rule.

Generally, a SEP can be set as late as the due date (including extensions) of the taxpayer’s income tax return for the tax year.

That means he or she may be able to establish a SEP for the 2019 tax year in 2020 before the due date including extensions.

Here are the details: Continue Reading

COVID-19: DOL provides filing and disclosure relief

By Jerry Kalish on Posted in COVID-19, ERISA, Fiduciary Matters

This is what we have been waiting for. In our earlier post, we reported that the Internal Revenue Service (IRS) extended various deadlines for retirement plan filing and payment obligations. At the time of that publication, the Department of Labor (DOL) had not provided relief for ERISA filings.

On April 28, 2020, the DOL provided guidance issuing three publications that addressed the impact of COVID-19 on ERISA reporting and disclosures responsibilities. For now, we’ll focus on Disaster Relief Notice 2020-1 which provides relief on retirement plan deadlines Here is a summary:

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COVID-19 extensions for retirement plan filings and payments

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, Cash Balance Plans, COVIT-19, Defined Benefit Pension Plans

Grappling with COVIT-19 issues has certainly been difficult, but retirement plan filings and payments are still required. The Internal Revenue Service has provided relief for some of them by granting extensions. Here is a summary of those extensions:

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CARES Act provides access to participant retirement plan accounts

By Jerry Kalish on Posted in 401(k) Plans, 403(b) Plans, 457 Plans, COVID-19

The Coronavirus Aid, Relief, and Economic Security Act known as the “CARES Act” passed on March 27, 2020 provides $2 trillion in financial relief to individual taxpayers and loans and other concessions to businesses.

The Act also includes several provisions affecting retirement plans which we will cover in later blog posts.

For now, we’ll focus on two important provisions that can benefit participants in 401(k)and profit sharing plans:

  • The normal 10% early distribution penalty is waived on up to $100,000 in 2020 for Coronavirus-related distributions from employer retirement plans and IRAs. A three-year repayment period is available.
  • Loan limits for Coronavirus-affected participants in employer retirement plans are increased to the lesser of $100,000 or 100% of the vested account balance from the lesser of $50,000 or 50% of the vested account balance. The new limits are applicable through September 27, 2020.

These provisions are optional. Calendar year plans do not have to be amended until December 31, 2022 but must be administered in “good faith”.

Here are the details.

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SECURE Act: How to take credit (tax, that is) for your retirement plan

By Jerry Kalish on Posted in 401(k) Plans, Cash Balance Plans, SECURE Act

The $1.4 trillion appropriations package signed into law by President Trump on December 20, 2019 designed to fund federal agencies through September of this year contained the most significant legislative enhancements to retirement plans in over 10 years.

These law changes designed to encourage retirement savings are bundled up in one of those Congressional legislative acronyms,  the SECURE Act, which is political short hand for the Setting Every Community Up for Retirement Enhancement Act. I’ll be covering the most significant ones in later blog posts, but for now, here’s a summary of two tax credits you may find valuable. Continue Reading

Who owns a 401(k) participant’s personal information?

By Andrew S. Williams, Esq. on Posted in 401(k) Plans, 403(b) Plans, 457 Plans, Fiduciary Matters, Guest Post

Service providers for 401(k) and other retirement plans require access to personal data on participants including name, age, address, date of hire, compensation and possibly social security number to provide recordkeeping services. Are these plan service providers simply taking advantage of a business opportunity or are they improperly exploiting information that is a  plan asset that plan fiduciaries must protect?

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The Restatement Requirement for Defined Benefit Plans: FAQs for Employers Adopting a Pre-Approved Plan

By Jerry Kalish on Posted in Cash Balance Plans, Compliance, Defined Benefit Pension Plans, ERISA, Pension Protection Act of 2006

If you’re an employer who has adopted a pre-approved defined benefit pension plan, it’s time to amend and restate your plan. All defined benefit plans using pre-approved plan documents must restate their plan before April 30, 2020. It’s important that you understand why your plan document must be restated. What follows is a non-technical explanation in Question and Answer format.

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