Take Advantage of ERISA Safe Harbors: They can help penetrate the ERISA fog.

Attorneys would define a Safe Harbor as a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. In our ERISA world, a Safe Harbor is a provision of the retirement plan law  that can  cut through the sometimes fog of ERISA and provide fiduciary protection to plan sponsors and at the same time make their retirement plans more efficient and effective.  Here is a brief description of some of them. Continue Reading

“Compensation” for Sole Proprietors, Partners, and LLC Members…It’s complicated.

Compensation for employees is some variation of taxable wages reported on Form W-2. For allocation purposes, the employer or payroll provider downloads the census and compensation data based on the plan’s definition of compensation into a spreadsheet at the end of the year. It’s a little more complicated, of course, but let’s leave it at that for purposes of this post. But if you’re a sole proprietor, partner in a partnership, or member of an LLC taxed as a partnership, it’s definitely more complicated. Here’s why.

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When your SIMPLE-IRA no longer fits, maybe it’s time for a 401(k) plan…and November 2 is almost here

Kids can certainly outgrow their clothes, and so can employers with their retirement plans. A SIMPLE-IRA may have worked in the beginning, but if you want to change to a 401(k) plan in 2019, November 2 is the deadline to take action.

Employers must provide notice to their employees by that date that 2018 will be the last year for the SIMPLE; and that it will be replaced by a 401(k) plan. Why change from a SIMPLE to a 401(k) Plan?  A SIMPLE is relatively inexpensive to administer, but here’s why 401(k) may be better for you. Continue Reading

Playing the game of 401(k) audit roulette: the odds are getting shorter.

If you’re in the retirement plan business, you’ve heard the term “audit roulette”.  It refers to the belief by some employers that the odds of their retirement plan getting audited by the IRS are in their favor. Well, those odds are getting worse. The IRS is taking technology to the next level using  “data driven decisions”.

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Don’t procrastinate in setting up a Safe Harbor 401(k) plan for 2018: October 1 deadline almost here

The conventional wisdom is that you can wait until the end of the year to put a retirement plan in place since you can still get the tax benefits for the whole year. Maybe for some purposes, but not for setting up a Safe Harbor 401(k) plan.

If you want to set up a new Safe Harbor 401(k) plan for 2018, it has to be done by October 1. What’s a Safe Harbor plan? It’s a special provision of the tax law that permits owners and other Highly Compensated Employees (HCEs) to maximize their contribution regardless of how much the Non-HCEs contribute. For 2018, the maximum is $18,500 plus a $6,000 catch if age 50 or older.

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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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