In the era of electronic enforcement, fidelity bond issues easily revealed on Form 5500

The July 31 due date (unless extended) to file Form 5500 for 2017 calendar year ERISA plans is creeping up on us. And if history be our guide, there will be many plan sponsors who don’t have a fidelity bond or one that is insufficient. It’s one of those check the boxes that can easily become a red flag for the Department of Labor (“DOL”) to take a closer look at the plan.

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Stress testing S corporations for Reasonable Compensation

S corporations will be one of the major beneficiaries of the new tax law, the Tax Cuts and Jobs Act (“TCJA”), which added a new provision to the Internal Revenue Code. Owners of certain pass-through organizations can receive a 20% deduction on taxable income. But it’s not all good for S corporations who could face increased scrutiny from the IRS. Here’s why. Continue Reading

Still Standing After the New Tax Law: Employee Commuter Tax Benefits

The new tax law eliminated a number of employer deductions for so-called “fringe benefits”. Starting in 2018, employers can no longer deduct the cost of providing qualified mass transit and parking benefits, except as necessary for ensuring the safety of an employee. But employee pre-tax Commuter Benefit programs are still standing. Here’s the story:

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Entity Selection to Become Important Part of 2018 Tax Planning

The recently passed Tax Reform and Jobs Act made fundamental changes affecting individual and entity tax rates. As a result, tax advisors will be considering whether clients are using the appropriate form and how new entities should be structured.

If it sounds complicated, it can be, and best left to the tax experts. But here’s a infographic that can give you the big picture.

Choose Your Own Adventure: Which Business Entity is Right for You? #InfographicYou can also find more infographics at Visualistan

New tax law provides additional breathing room for repayment of retirement plan loans

Say what you will about 401(k) loans – and we have over the years – they are a fact of 401(k) life and were addressed in the recently passed Tax Cuts and Jobs Act (the “Act”). Before we get to the new rules, let’s start with the state of 401(k) plans. Recent data is difficult to come but a research report, An Empirical Analysis of 401(k) Loan Defaults, published by the Pension Research Council in 2010 can still provide us some insight.

For the three year period, July 2005-June 2008, one out of five active participants had loans; and, approximately 80% of 401(k) plan borrowers terminating employment defaulted on their loans – or approximately $600 million. So maybe a provision in the Act could be helpful to cut down the number and amount of defaults.

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Will 2016 Form 5500 reveal outdated fidelity bonds or none at all?

The 2016 Form 5500 deadline has come and gone for calendar year taxpayers, and a number of them revealed outdated fidelity bonds or retirement plans without bonds at all.

The fidelity bond requirement is high up on the Department of Labor’s compliance priorities so it’s not a stretch to assume that the Department of Labor monitors this item on Form 5500. 2016 is history but it’s not too late to meet this important compliance requirement. Here are the basics:

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Still time to set up a retirement plan for 2017

If you are a business owner/employer with a calendar fiscal year, you still have time to adopt a qualified retirement plan for 2017. Here’s what you have to do:

Before December 31, 2017:

  • Sign adopting resolutions and a plan document, and
  • Deposit a de minimis amount, e.g., $1,000 in a trust account to establish corpus.

After December 31, 2018:

  • Fund the balance of the deductible contribution no later than the time your tax return is filed including extensions, and
  • File Form 5500, if applicable

And if this is your first retirement plan, check with your accountant to see if you are eligible for the tax credit for pension plan start up costs.

“Decumulation”: It’s here now for individuals approaching retirement

“Decumulation” is a word that has now entered the lexicon of those individuals approaching retirement. The definition of which is the conversion of retirement plan assets accumulated during an employee’s working life into pension income to be spent during retired life.

It’s a new risk for the record number of those moving from the accumulation phase of their lives to the distribution phase. The actuaries call it “longevity risk”. But those of us in the financial service industry simply call it “running out of money”.

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Department of Labor targets retirement plans with missing participants

It’s a familiar story: you or your retirement plan’s third party administrator (TPA) need to make a benefit distribution to an ex-employee. But the employer’s records are out of date and the former employee cannot be located. Worse yet, the missing participant has attained age 70½ so the plan is required to make minimum distributions (RMDs) but cannot do so.

Can you sit back and wait for the missing ex-employee to come forward and claim their benefits? If they never show up, can you forfeit their benefits? Continue Reading