IMA CFO Roundtables – May 23 & 2410 May
Changing the Game for Retirement Plan Sponsors – What You Need To Know
May 23, 2012 – IMA CFO Breakfast Roundtable – Collier County
May 24, 2012 – IMA CFO Breakfast Roundtable – Lee County
Sponsored by HBKS Wealth Advisors
Most CFOs have some responsibility for their company’s qualified retirement plan. Therefore, a CFO’s understanding of how the U.S. Department of Labor’s new fee disclosure regulations will impact your company, employees, and plan’s operation is critically important.
Become informed and take action now or you may put your company’s qualified retirement plan at risk for committing a prohibited transaction, which may trigger interest, penalties and endanger the viability of the plan. A change of this scale has never occurred before in the pension industry and has the potential to be disruptive to the marketplace. On a national basis, as many as 483,000 retirement plans and 72 million participants will be affected.
These two regulations including ERISA Regulation 408(b)(2) which goes into effect on July 1st and ERISA Regulation 404(a)(5) which takes effect on August 30th will shine a spotlight on fees charged by service providers against plan assets that impact participant returns. Together, they require specific disclosures to both sponsors of retirement plans and participants. After plan sponsors receive these disclosures on July 1, they will have to make an assessment as to whether not these fees are reasonable. Additionally, for the first time ever, actual hard dollar fees taken from participant accounts for various services will be disclosed to participants beginning this year.
At this roundtable, Dean Piccirillo will discuss the most pertinent aspects of these regulations which require close attention by CFOs and plan sponsors, specifically those going into effect this summer. Mr. Piccirillo is a Principal and Senior Financial Advisor who also heads the Retirement Plan Unit at HBKS Wealth Advisors, a regional firm affiliated with top 100 accounting firm Hill, Barth & King.
There is no charge to attend, but reservations are required. Please click on one of the links at the top of the article for the Collier or Lee County event, or visit www.swflima.org.
Retirement Plan Fee Disclosure: Changing The Game For Plan Sponsors – What You Need To Know27 Apr
by R. Dean Piccirillo, CFP®, CRPS®, AIFA®
Principal/Senior Financial Advisor
HBKS Wealth Advisors
As many retirement plan sponsors are now aware, the Department of Labor’s three-pronged approach to fee disclosure for 401(k)s and other qualified plans, has brought about a series of changes that have marked the past several years. The first phase of these fee disclosures required disclosure from a plan sponsor to the regulator through Schedule C of Form 5500. This disclosure, through the tax return required to be filed by qualified plans, has been in place since January of 2009. The next two phases of the fee disclosure process will include those from service providers, such as retirement plan recordkeeping firms, third-party administrators, investment advisors, brokers and other service providers to plan sponsors, as well as disclosures that must be made from the plan sponsor to participants. Ultimately, it is the plan sponsor’s required disclosure to participants that may be the game changer for companies sponsoring retirement plans and for the industry.
In this article, I will highlight the most pertinent aspects of these regulations and those issues requiring plan sponsors’ close attention. Read more…
Guidance on Plan Rollovers into In-Plan Designated Roth Accounts30 Nov
On November 26th the Internal Revenue Service issued Notice 2010-84, providing guidance under Section 402A(c)(4) relating to rollovers from Section 401(k) to designated Roth accounts in the same plan.
The guidance, which also generally applies to rollovers from Section 403(b) plans applies to contributions after Sept. 27, 2010. The guidance is in the form of questions and answers for sponsors of these plans, and provides details on when amendments to the plan are required, the tax consequences of in-plan Roth rollovers, and what exceptions are permitted.
Specific Guidance for 401(k) Roth Rollovers
- For a participant in a 401(k) plan who is still working, an in-plan Roth rollover from the participant’s pre-tax elective deferral account is permitted only if the participant has reached age 59, has died or become disabled, or receives a qualified reservist distribution as defined in Section 72(t)(2)(G)(iii).
- The 20 percent mandatory withholding requirement does not apply to an in-plan Roth direct rollover
- In-plan Roth direct rollovers are not treated as a distribution in situations involving plan loans, spousal annuities, participant consent before an immediate distribution of an accrued benefit in excess of $5,000, and in situations involving elimination of optional forms of benefit.
- A plan that offers in-plan Roth rollovers must include a description of this feature in the written explanation the plan provides pursuant to Section 402(f) to an individual receiving an eligible rollover distribution.
- A participant who elects an in-plan Roth rollover cannot later unwind the in-plan Roth rollover, as can be done with rollovers to Roth IRAs.
- The taxable amount of the in-plan Roth rollover must be included in the participant’s gross income.
The guidance also stated that a plan amendment providing for in-plan Roth rollovers in a 401(k) plan is not required to be adopted by the end of the 2010 plan year. Instead, the deadline for adopting a plan amendment is extended to the later of the last day of the plan year in which the amendment is effective or Dec. 31, 2011, provided that the amendment is effective as of the date the plan first operates in accordance with the amendment.
James M. (Jim) Rosa, CPA, PFS is the Principal in charge of the Tax Department at Hill, Barth & King LLC. Jim has worked as a CPA helping clients in Fort Myers, Cape Coral and other Southwest Florida communities for the last 23 years. He has been with Hill, Barth & King LLC, a top 75 accounting firm, since 1986.
401(k) Investment Options: What is the Right Number?23 Jun
by R. Dean Piccirillo, CFP®, CRPS®, AIFA®
Principal/Senior Financial Advisor
HBK Sorce Financial LLC
Over the last few weeks, I have had the opportunity to review two different 401(k) retirement plans; each one having over seventy available investment options. Participants had to develop their own personal allocation by choosing from dozens of different investment options, many of which were in the same investment category or asset class. It seemed to me that this large number of choices for each participant had the potential to become an overwhelming task that could actually create a situation where a participant was likely to become less diversified, rather than more. (Read full article…)
The Potential Benefits of Health Savings Accounts24 May
During these rough economic times where expenses are increasing at a much faster rate than revenue is being collected, we are often asked for suggestions on how to reduce expenses. For many employers, the largest expense on their profit and loss statement is employee salaries and benefits. The cost of providing health insurance to employees proves to be a significant cost for many employers. One alternative that allows employers to still provide health insurance to their employees but at a reduced cost is to utilize Health Savings Accounts (HSAs).
First introduced in the Tax Relief and Health Care Act passed in December of 2006, HSAs enable businesses to buy insurance coverage with a higher deductible and accordingly, a lower premium. Additionally, employers and employees can make tax deductible contributions to HSAs. The HSA grows tax-free, and tax-free distributions may be used to pay for qualified out-of-pocket medical expenses. An added benefit is that the HSA becomes an investment vehicle. Unused funds roll over from year to year, and when the owner reaches age 59 ½ he/she can take distributions from the HSA as if it were an IRA.
Recently, favorable tax law changes have made HSAs even more attractive. For 2010, the health insurance plan must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage to qualify as a high-deductible plan. In the past, contributions to an HSA were limited by the deductible amount. That is no longer the case. For 2010, the maximum HSA contribution is $3,050 for self-only coverage (even if the deductible is only $1,200) and $6,150 for family coverage. Additionally, taxpayers 55 years old or older on December 31, 2010 can make an additional $1,000 contribution. Depending on the taxpayer’s federal income tax bracket, this equates to savings of 10% to 35% of the contribution amount.
Another favorable change for 2010 is the determination of the eligibility period. Previously, eligibility was determined on a monthly basis and the annual contribution amount had to be pro-rated. Accordingly, if a taxpayer only had a high deductible health plan for 6 months, then his/her contribution was limited to 50% of the annual limit. Now, if a taxpayer is eligible to make HSA contributions in the last month of the year, then he/she is deemed to have been eligible for the entire year and can contribute the full amount. Finally, current owners of flexible spending accounts (FSAs) or health reimbursement arrangements (HRAs) can roll over a distribution from these accounts into an HSA tax free. It is important to note, however, that the plan documents for the respective FSA and/or HRA need to be amended to allow for rollover contributions. Also, taxpayers may also have the option to make a one-time rollover from a traditional or Roth IRA into an HSA.
In evaluating whether HSAs can lower the overall cost of providing health care coverage for your employees, consider the impact of the higher deductible on the annual premium amount plus the cost of the HSA contribution.
This is just a brief overview of HSAs and the potential benefit they afford employers and their employees. We would welcome the opportunity to discuss with you in detail the pros and cons.
Tara N. Ruska, CPA is a Supervisor with Hill, Barth & King LLC in the Fort Myers, Florida office. Tara has worked as a CPA helping clients in Fort Myers, Cape Coral and other Southwest Florida communities for the past 10 years. She has been with Hill, Barth & King LLC, a top 75 accounting firm, since 2004. Tara can be contacted by phone at 239-482-5522 or email at truska@hbkcpa.com.
The Real Deal: Do You Know the True Cost of Your Group Variable Annuity?11 May
by R. Dean Piccirillo, CFP®, CRPS®, AIFA®
Principal/Senior Financial Advisor
HBK Sorce Financial LLC
I recently had the opportunity to provide a review to a prospective qualified retirement plan client. The plan assets were between 3 and 5 million and the underlying investments were separate accounts of a group variable annuity product. A variable annuity separate account will typically either invest its assets into a retail mutual fund or retain an outside money manager as a sub-advisor to manage the account’s assets.
There are some professional advisors working in the retirement plan arena that have a rather strong bias against group variable annuity products when being used as funding vehicles for qualified retirement plans such as 401(k)s. I am not personally one of those who feel that they should never be used. I have seen situations where these solutions have been a good fit for the plan sponsor. (Read full article…)
FAQ about the HIRE Act01 Apr
As a follow up to my “Hiring Incentives to Restore Employment Act (HIRE)” post on March 25, 2010, I am sharing the Q&A’s from the IRS website on the HIRE Act. Additionally, the IRS released a draft of the new IRS Form W-11 (416), the affidavit individuals must complete to confirm that they are qualified employees under the new law that provides tax incentives for businesses hiring new workers. You can find a PDF version of the new Form W-11 in the RESOURCES section of our site. The HIRE Act affects many of our clients in Fort Myers, Cape Coral and the surrounding Southwest Florida communities, and I would encourage all employers to become familiar with this new act.
These are Q&A’s from the IRS website on the HIRE Act:
Q: Who are qualified employees?
A: Qualified employees are individuals who begin employment with a qualified employer after February 3, 2010, and before January 1, 2011, who have been unemployed or employed for less than 40 hours during the 60-day period ending on the date such employment begins, and who are not family members of or related in certain other ways to the employer.
Q: Do the qualified employees need to do anything to make it possible for their employer to claim the payroll tax exemption?
A: Yes, qualified employees must certify by a signed affidavit, under penalties of perjury, that they have not been employed for more than 40 hours during the 60-day period ending on the date they started employment. The IRS plans to issue a model affidavit that can be used for this purpose.
Q: Is the 60-day period continuous, and can it span 2009-2010?
A: The 60-day period must be continuous and can span 2009-2010.
Q: Does the payroll tax exemption apply to wages paid to a qualified employee hired to replace an existing worker whose employment terminated?
A: The payroll tax exemption does not apply to wages paid to an employee who is hired to replace an existing worker, unless the existing worker terminated employment voluntarily or was terminated for cause.
Q: Does the payroll tax exemption apply to wages paid to an employee who was previously laid off and then rehired by the same or a related employer after a 60-day period?
A: Yes, an employer may apply the payroll tax exemption to wages paid to a rehired employee who is otherwise a qualified employee.
Q: If an employer lays an employee off because of lack of work and later, when work picks up, hires a new employee, can the payroll tax exemption apply to wages paid to the new employee?
A: Yes, if the new employee is a qualified employee (i.e., was employed for less than 40 hours during the prior 60 days).
Q: Does the payroll tax exemption apply only if the employer previously laid employees off?
A: No, the payroll tax exemption can apply to wages paid to any qualified employee.
Q: If an employer hires a recent graduate who has been in school for some or all of the 60 days preceding the start of his employment, does the payroll tax exemption apply to wages paid to the employee?
A: Yes, if the employee is a qualified employee. It is not necessary that the individual was previously employed and has lost his or her job to be a qualified employee.
Q: What is the payroll tax exemption?
A: The payroll tax exemption is an exemption from the employer’s 6.2 percent share of social security tax on all wages paid to qualified employees from March 19, 2010 (the day after the date of enactment of the HIRE Act) through December 31, 2010. The employee’s 6.2 percent share of social security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
Q: Which employers qualify for the payroll tax exemption?
A: Taxable businesses and tax-exempt organizations qualify for the payroll tax exemption. Such employers in U.S. possessions, such as Puerto Rico or the Northern Mariana Islands, that are subject to social security tax also qualify for the payroll tax exemption. Federal, State or local government employers generally do not qualify for the payroll tax exemption. However, public colleges and universities can qualify for the exemption.
Q: Does the payroll tax exemption apply to household employers?
A: No. The payroll tax exemption applies only to wages paid to a qualified employee performing services in the employer’s trade or business or in activities in furtherance of a tax-exempt organization’s exempt purpose.
Q: If an employer starts a new business, does the payroll tax exemption apply to wages paid to employees hired for the new business?
A: Yes, if they are qualified employees.
Q: If an employee laid off in 2009 has been receiving COBRA premium assistance, for which the employer has been taking the COBRA premium assistance credit, and the employer rehires the employee, can the employer take the payroll tax exemption under the HIRE Act for wages paid to the employee?
A: Yes, if the employee is a qualified employee.
Q: How does the employer claim the payroll tax exemption for wages paid to qualified employees?
A: The payroll tax exemption is claimed on Form 941, Employer’s QUARTERLY Federal Tax Return, beginning with the second quarter of 2010.
Q: How does the employer claim the payroll tax exemption for wages paid to qualified employees during the period March 19 through March 31, 2010 (the first quarter of 2010)?
A: The payroll tax exemption for wages paid during this period will be claimed on the employer’s Form 941 for the second quarter of 2010.
Q: Can an employer claim the COBRA premium assistance credit and the payroll tax exemption for new hires on the same employment tax return?
A: Yes.
Q: How does application of the payroll tax exemption to wages paid to a qualified employee affect the availability of the Work Opportunity Tax Credit with respect to that employee?
A: If an employer applies the payroll tax exemption to wages paid to a qualified employee, such wages paid to the employee during the one-year period beginning with the employee’s hiring date may not be taken into account for purposes of the Work Opportunity Tax Credit. An employer that wishes to claim the Work Opportunity Tax Credit with respect to a qualified employee can elect out of the payroll tax exemption with respect to wages paid to that qualified employee.
We will provide more information on the HIRE Act as well as other legislative changes affecting the tax law as developments occur. Please contact one of our CPAs in our Fort Myers, FL office if you have any questions regarding the HIRE Act and how it can help your business.
James M. (Jim) Rosa, CPA, PFS is the Principal in charge of the Tax Department at Hill, Barth & King LLC. Jim has worked as a CPA helping clients in Fort Myers, Cape Coral and other Southwest Florida communities for the last 23 years. He has been with Hill, Barth & King LLC, a top 75 accounting firm, since 1986.
The Fee War: The Impact of Fees on a Participant’s Benefits09 Mar
by R. Dean Piccirillo, CFP®, CRPS®, AIFA®
Principal/Senior Financial Advisor
HBK Sorce Financial LLC
Chris Carosa, of the Fiduciary News Blog, recently wrote about an ongoing industry conversation that he refers to as a “401(k) Fee War.” In this article, Chris references the significant attention being paid to mutual fund expenses for 401(k) investment options. As an industry observer, I too have noticed that the attention being paid to mutual funds fees as well as other asset-based charges assessed to participants has increased dramatically in recent months. (Read full article…)
Does Your Employee’s Financial Health Impact Your Bottom-line?23 Feb
Due in part to the housing crisis, high unemployment and the general economic downturn, many American workers are under a considerable amount of financial stress. The question for the small business owner is, “Does my employee’s financial health and related stress impact my company’s net income?”
A Real Impact on Productivity
If asked, most employers can think of situations in which the financial difficulties of their employees directly and adversely affected workplace productivity. On a personal level, any of us can certainly appreciate the stress that would be created in our own lives in the event of a spouse’s job loss or other reduction of family finances. Worry over looming debt, mortgage payments, and providing for our children’s needs could easily overtake our thoughts, causing a dramatic drop in the amount of time spent on productive business operations.
Numerous studies conducted within a variety of industries and fields indicate a direct connection between financial duress, work performance and overall productivity of employees. The Personal Finance Employee Education Foundation estimates that at any given time between 15 and 30% of the American workforce is under significant financial stress.
Increased “Presenteeism”
The financial stress suffered by employees is thought to lead to increased “presenteeism”. Presenteeism refers to time spent during regular work hours dealing with personal matters that are not directly related to the individual’s shanghai job. According to April 2009′s Human Resources Magazine, over 53% of employees experiencing financial stress spend time during work hours to attend to their financial issues. This time may be spent dealing with creditors, discussing personal financial situations with colleagues, and worrying about financial matters. It is not difficult to imagine how employees faced with significant financial challenges and the need to deal with them during the work day will have lower productivity.
Workplace Financial Education
One of the ways that many employers have chosen to address lost productivity from employee financial stress is by incorporating a financial literacy or financial education program as part of their training calendar. Many employers provide personal development education and training not directly related to their industry because they feel it is the right thing to do for their valued team members. After examining the studies related to lost workplace productivity due to employee financial stress, employers can also make an excellent business case for enhancing employee financial literacy.
Due, in part, to advances in technology that make communicating with employees much easier, financial literacy training can now take many forms. Employers who have embraced workplace financial education are making use of tools such as online training programs that employees can attend on their own time, providing books, and other materials on personal finance. They are also offering seminars and workshops on personal financial planning, both on and off company time.
There are other benefits associated with an employee financial literacy program including increased employee morale, more effective use of the benefits that are available to a company’s workforce, and even increased employee health. In future articles on this subject, we will explore these and other benefits along with the most effective methods employers are using in their financial education programs.
If you work for a company that has a financial education program in place or have responsibility for administering an employer sponsored financial literacy program, we would appreciate the opportunity to hear from you. Please tell us about your experiences with workplace financial education and its subsequent impact on your organization. You can find our contact information here on this blog.
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About the Author:
Dean is a Principal at HBK Sorce Financial LLC and a Senior Financial Advisor. He works closely with families helping them plan for their long-term financial objectives, manage their financial assets effectively and preserve their wealth for future generations. Dean also leads the firm’s Retirement Plan Unit working with most of HBK Sorce’s corporate and institutional clients sponsoring qualified retirement plans. You can learn more about Dean by visiting his professional blog at www.deanpiccirillo.com.
Disclosure:
Dean Piccirillo offers insurance products through HBK Sorce Insurance, LLC. Investment advisory services are offered through HBK Sorce Advisory LLC and securities are offered through Purshe Kaplan Sterling Investments (PKS), Member FINRA/SIPC. PKS is headquartered at 18 Corporate Woods Blvd., Albany, NY 12211. HBK Sorce Insurance LLC and HBK Sorce Advisory, LLC are not affiliated with Purshe Kaplan Sterling Investments. Mr. Piccirillo is not able to transact business in a state that he is not licensed or registered.
NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE, INCLUDING LOSS OF PRINCIPLE. NOT INSURED BY ANY STATE OR FEDERAL AGENCY.
About Hill Barth & King LLC
For over 60 years, Hill Barth & King’s CPAs and financial advisors have been helping families and businesses work toward and accomplish their personal and business objectives. In Southwest Florida our professionals have guided our clients in critical regional industries such as construction, real estate, medical and a variety of service related fields for decades. At HBK, we bring world-class tax, assurance, accounting and other business consulting services to our clients to help them achieve their personal and business planning goals.