Generated by All in One SEO Pro v5.0.1.1, this is an llms-full.txt file, used by LLMs to index the site. # Watkins Ross Consulting, Actuarial & Administration Firm in Grand Rapids, MI ## Posts ### [Articles](https://watkinsross.com/articles/) **Published:** December 12, 2022 **Author:** Watkins Ross Team **Excerpt:** What’s been going on in the retirement & health plan fields? Here we’ll discuss the latest information & best practices for managing your plans. --- ### [Utilizing a Pre-Approved Plan](https://watkinsross.com/articles/2017-02-08-utilizing-a-pre-approved-plan/) **Published:** February 8, 2017 **Author:** Watkins Ross Team **Content:** Many employers adopt a [pre-approved plan](https://www.irs.gov/retirement-plans/types-of-pre-approved-retirement-plans) for their employees’ retirement plan. Adopting a pre-approved plan means the IRS has already issued an opinion letter or advisory letter regarding the acceptability of the type of plan. There are different types of pre-approved plans. A Master and Prototype Plan includes an adoption agreement accompanied by a basic plan document. The adoption agreement is formatted with a series of questions with multiple plan options that the employer will select to compose their plan. A Volume Submitter plan is a sample plan in which the plan sponsor can choose from a selection of options regarding their specific plan provisions. The Volume Submitter plan is formatted to resemble an individually designed plan. ## YOU ADOPTED A PRE-APPROVED PLAN. NOW WHAT? Regardless of the type of pre-approved plan adopted, the employer is ultimately responsible for ensuring the plan is in compliance with all legal requirements. Your service agreement should outline the plan responsibilities for you and the pre-approved plan sponsor. Asking the following questions can help you understand your service agreement and what you are responsible for: - Who is responsible for updating the plan document for any law changes? - Who will administer the plan – the pre-approved plan sponsor or a third party administrator? - Who gives any required plan notices to the participants? - Who files required [forms and returns ](https://www.irs.gov/retirement-plans/form-5500-corner)with the IRS or the Department of Labor? - Who determines whether any nondiscrimination testing will be required? - Who conducts any required nondiscrimination testing, and when will the testing be done? - What information do you have to give to the pre-approved plan sponsor or third party administrator and when must you provide it? To learn more, check out the IRS’ [Tips for Employers Using Pre-Approved Plans](https://www.irs.gov/retirement-plans/preapproved-retirement-plans-adopting-employer#tips). Watkins Ross sponsors a Volume Submitter prototype formatted plan to be utilized by our clients. Additional information regarding our document services can be read at [WR Document Services](https://watkinsross.com/services/plan-documents/). Please contact us if you have questions regarding your plan provisions. For our clients that do not utilize our plan documents, we provide a document compliance review service to help you ensure your plan documents and amendments (if applicable) are in compliance with current IRS Regulations. **Categories:** Retirement Plans **Tags:** Business Tips, Plan Selection, Pre-Approved Plans --- ### [Cash Balance Plans Are On The Rise](https://watkinsross.com/articles/2017-08-09-cash-balance-plans-are-on-the-rise/) **Published:** August 9, 2017 **Author:** Watkins Ross Team **Excerpt:** Several factors have contributed to the popularity of cash balance plans and findings show an increasing diversity in the companies adopting them. **Content:** According to the new research released in the Kravitz Inc. [2017 National Cash Balance Research Report](https://cdn.cashbalancedesign.com/wp-content/uploads/2017/08/NationalCashBalanceResearchReport2017.pdf), the number of new cash balance plans adopted by employers increased 17% in 2015. The popularity of cash balance plans have continued to rise and now account for over 34% of all defined benefit plans (up from 2.9% in 2001). Cash balance plans allow high-income earners to save more for retirement. They have been a popular choice among medical/dental and law firms. However, the recent findings noted an increasing diversity of companies adopting cash balance plans. According to the Kravitz report, medical/dental and law groups account for about 40% of the cash balance market and are becoming increasingly popular across other industries including technology, retail and manufacturing. Market volatility and uncertainty over tax rates have not slowed cash balance plan growth. To the contrary, the IRS regulations allowing broader cash balance investment options have contributed to accelerated plan growth. As noted in the NAPA Net article [Cash Balance Plans Continue Solid Growth](https://www.napa-net.org/news/2019/2/cash-balance-plans-continue-solid-growth-report-finds/), “The 2006 Pension Protection Act helped paved the way for the growth of cash balance plans by clarifying their legality. More than 75% of existing cash balance plans were established within the past nine years, and while many still have assets under $500,000, this will shift over the next decade as business owners seek to maximize tax-deferred savings for themselves and optimize tax-efficient contributions to employees, according to the (Kravitz, Inc.) report.” Watkins Ross has been designing and administering cash balance plans to provide strategically targeted benefits and increased tax deferred savings since 1999. If you have additional questions or would like help determining if you should implement a cash balance plan, please contact David Paauwe, MSPA, EA at . **Categories:** Cash Balance Plans **Tags:** Cash Balance Plans, Retirement Trends --- ### [Protect Your Qualified Plan From RMD Failures](https://watkinsross.com/articles/2018-04-16-protect-your-qualified-plan-from-rmd-failures/) **Published:** April 16, 2018 **Author:** Watkins Ross Team **Excerpt:** Qualified retirement plans are subject to Required Minimum Distribution (RMD) rules. It's important to protect your qualified plan from RMD failures. **Content:** Qualified retirement plans are subject to Required Minimum Distribution (RMD) rules which, very generally, require that a minimum amount of benefit commence no later than April 1 following the year when a participant attains age 70 ½. It is important to protect your qualified plan from RMD failures to avoid potential tax consequences. One way the IRS and DOL check a plan for compliance with the RMD rules is through the Form 5500 filing question “has the plan failed to provide any benefit when due under the plan?” If your plan has RMDs that have not commenced as required, this question must be answered affirmatively; however, there is an exception in the case of participants that cannot be located for whom a reasonable search has been made. Furthermore, when a plan is audited by the IRS, the agent will check that the RMD rules have been followed. If an IRS agent discovers a failure, a correction will be necessary, and it’s possible there will be negative tax implications to the participant and administrative hassles to the plan sponsor to get it corrected. Often when a failure occurs, it is because the plan sponsor could not locate the participant. This is a valid concern, especially in defined benefit plans that have participants who have not been employed by the plan sponsor for many years. The IRS recently responded to this concern by issuing a field directive that outlines guidelines under which the IRS agent may overlook (i.e. not challenge) the failure. The IRS memo directs the agent to not challenge the RMD failure if the plan sponsor has: 1. searched plan and related-plan records, as well as publicly-available records for alternative contact information; 2. used any of the following search methods: commercial locator service, credit reporting agency, or a proprietary internet search locator tool; and 3. attempted contact through the U.S. Postal Service certified mail with the last known mailing address, and through other address or contact information such as email address and telephone numbers. The correction of an RMD failure requires great efforts by several parties that could be avoided if minimum distributions from the plan commence properly. To help protect a plan from RMD failures and the administrative cost and hassle that follows, a plan sponsor should adopt an internal system to 1. monitor ages of participants (including former employee participants), 2. contact those who are approaching Normal Retirement Age (and at the latest age 70 ½) to start the benefit payment process, and 3. document efforts made to locate missing participants, following the IRS guidelines. Initiating a process for tracking these participants will assist in complying with the RMD rules. And for defined benefit plans tracking terminated employees, it will also create a more efficient system of getting participants into pay status when benefits are due. For additional information regarding RMD rules for defined benefit plans, read [Required Minimum Distributions from Defined Benefit Plans](https://watkinsross.com/articles/2017-02-21-required-minimum-distributions-from-defined-contribution-plans/). Please [contact Watkins Ross](https://watkinsross.com/contact/) if you have questions or concerns regarding locating participants, starting an RMD, or correcting a failure. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans, Retirement Plans **Tags:** Plan Administration, Qualified Plans, RMD --- ### [Michigan Now Requires More Disclosure from Local Governments Regarding their Pension and Retiree Health Systems](https://watkinsross.com/articles/2018-08-27-michigan-now-requires-more-disclosure-from-local-governments-regarding-their-pension-and-retiree-health-systems/) **Published:** August 27, 2018 **Author:** Watkins Ross Team **Excerpt:** Michigan Public Act 202 requires more disclosure from local governments regarding their pension and retiree health systems. **Content:** Michigan Public Act 202 of 2017 was signed in December 2017, requiring local units of government (referred to as “unit” in this blog) to disclose information to the Michigan Department of Treasury with the intent of being more transparent to the community with the funded status and other information about their retiree health care and pension benefits. State government and state institutions of higher education are not subject to these new requirements. Some of the disclosure information will be available from various financial and actuarial reports that are already prepared each year for the units, some information is new with this law and will require the units to have additional work done by service providers, and finally there are actions required subsequent to the disclosure if certain parameters of funding are not met. Beginning July 1, 2018, the unit sponsoring retirement **health benefits** is required to: 1. pay at least the normal cost for certain employees, plus premiums for retirees; 2. submit an electronic summary of the retiree health care report (specific detailed requirements provided); 3. have an actuarial experience study done by the plan actuary at least every 5 years; and 4. have a peer actuarial audit performed, or replace the plan actuary, at least every 8 years. Note: A unit is exempt from items (3) and (4) if eligible for an alternative measurement method under GASB accounting standards. Beginning with years after December 31, 2017, local government units sponsoring retirement health systems and/or retirement pension systems are required to separately report the actuarial liability, funded status and actuarially determined contribution determined using Uniform Assumptions established by the Treasury. In addition, if certain funding measures aren’t met – based on the plan’s liability and actuarially determined contribution using GASB accounting assumptions – Corrective Action Plan will be required. For retirement **health systems**, a plan is considered underfunded if the system is a) less than 40% funded AND, b) if the unit is a city, village, township or county, the annual required contribution is greater than 12% of annual general fund operating revenues. For retirement **pension systems**, a plan is considered underfunded if the system is a) less than 60% funded AND, b) if the unit is a city, village, township or county, the annual required contribution is greater than 10% of annual general fund operating revenues. For both retirement health systems and pension systems, a unit will be considered underfunded if the unit has not submitted reports as required. For both retirement health systems and pension systems, if a unit is determined to have a system that is underfunded, it will be required to establish a corrective action plan. For fiscal years ending before December 31, 2017, the first reporting of funded status to the Treasury is due by six months after the end of the fiscal year, but no sooner than January 31, 2018. This blog is intended as a general overview of the legislation. The full document can be [read here](http://www.legislature.mi.gov/documents/2017-2018/publicact/pdf/2017-PA-0202.pdf). In addition, the Michigan Department of Treasury has issued a FAQ. To learn more and obtain assistance with the specific reporting requirements, please contact your pension and/or health actuary. **Categories:** Defined Benefit Plans, Health Plans **Tags:** Government Regulation, Michigan, Pension, Public Act 202 --- ### [Switch From Offering a Simple IRA to a 401(k) Plan](https://watkinsross.com/articles/2018-09-20-switch-from-offering-a-simple-ira-to-a-401k-plan/) **Published:** September 20, 2018 **Author:** Watkins Ross Team **Excerpt:** Do you or your clients have a SIMPLE IRA but could benefit from establishing a 401(k) plan? It's not too late to make the change for 2018. **Content:** Do you or your clients have a SIMPLE IRA but could benefit from establishing a 401(k) plan? There is still time left to make the change from offering a SIMPLE IRA to a 401(k) **this year**! Employers must [notify employees](https://www.irs.gov/retirement-plans/terminating-a-retirement-plan) **before** **November 2, 2018** that 2018 is the final year they are offering the SIMPLE IRA and that it will be replaced with a 401(k) plan. ## 401(k) Plan Advantages **Exclude Certain Classifications of Employees:** As long as the plan passes the required coverage and nondiscrimination testing, there is flexibility to exclude certain classes of employees. **Availability of Loans:** Participant loans can be included as a feature in a 401(k) plan. **Larger Contributions:** A 401(k) plan offers larger contribution amounts for employee deferrals, catch up contributions, and the opportunity to include a profit sharing contribution from the employer. **Favor Owners and Key Employees:** Implementing a cross-tested 401(k) plan may favor owners and key employees, especially if they are older than the general working population. **Easy Implementation:** The [experienced team](https://watkinsross.com/about-our-firm/) at Watkins Ross helps our clients implement new 401(k) plans with ease and confidence. We consult with clients to ensure the plan is designed to meet their goals. Contact [Sheila Freund](mailto:sfreund@watkinsross.com) or [David Bosch](mailto:dbosch@watkinsross.com) to learn more about switching from a SIMPLE IRA to a 401(k) plan. **Categories:** 401(k) Plans **Tags:** 401k Plans, Business Management, IRA, Plan Administration --- ### [OMB Completes Review of the Presidential Executive Order on Increasing Retirement Security in America](https://watkinsross.com/articles/2018-10-22-omb-completes-review-of-the-presidential-executive-order-on-increasing-retirement-security-in-america/) **Published:** October 22, 2018 **Author:** Watkins Ross Team **Content:** As outlined in our recent article, [Executive Order on Increasing Retirement Security in America](https://watkinsross.com/articles/2018-10-01-executive-order-on-strengthening-retirement-security-in-america/), President Trump executed this order to make it easier for businesses to join together to offer multiple employer plans, which are referred to as Association Retirement Plans (ARPs) in the order. It took the DOL less than a month to review and deliver the proposed rule to the Office of Management and Business (OMB) and, in turn, it has taken the OMB less than a month for their review. The next step of the process is the publication of the proposed rules; which could be a matter of days or weeks. As noted in the National Association of Plan Advisor’s (NAPA) article, [OMB Completes Review of Proposed MEP Rules, “The OMB review](https://www.napa-net.org/news/2019/2/omb-completes-review-proposed-mep-rules/) is the last stage before proposed rules are published and opened for public comment. After the comment period, the final rule would also get OMB review before becoming official. The comment period for Association Health Plans lasted 60 days.” **Categories:** Retirement Plans **Tags:** Government Regulation, Industry Info, OMB --- ### [Saver’s Tax Credit](https://watkinsross.com/articles/2023-07-07-savers-tax-credit/) **Published:** July 7, 2023 **Author:** Watkins Ross Team **Excerpt:** Maximize your retirement savings with the Saver's Tax Credit. Claim up to $1,000 ($2,000 for couples) on your 2023 tax return. Find out if you qualify! **Content:** If you elect to save for your retirement in a 401(k) or 403(b) plan in 2023, you may be eligible to claim a special tax credit of up to $1,000 ($2,000 for married couples) on your 2023 income tax return. **To qualify for the Saver’s Credit, you must:** - be 18 years of age or older - not be a full-time student - not be claimed as a dependent on someone else’s tax return - make contributions to a qualified IRA, 401(k) or other eligible retirement plan **In addition, you must meet one of the following financial criteria:** - File your taxes singly and earned $36,500 or less in 2023 - File your taxes as head of household and earned $54,750 or less in 2023 - File your taxes jointly and had a combined income of $73,000 or less in 2023 The tax credit ranges from 10% to 50% of each dollar you contributed, up to the first $2,000 you put into your 401(k) or 403(b). That’s between $200 and $1,000 directly off the income taxes you pay! If you and your spouse both contribute to a 401(k)/403(b) plan, you may both be eligible to receive a credit. The amount of your tax credit depends on the amount of your adjusted gross income (AGI) and the filing status you indicate on your tax return, as shown in the following chart: ## 2023 Saver’s Credit Guidelines AGI for Single Filersfor Head of Householdfor Married Filing JointlySaver’s Credit$0 to $21,750$0 to $32,625$0 to $43,50050% of the first $2,000 deferred ($4,000 if Married filing jointly)$21,751 to $23,750$32,626 to $35,625$43,501 to $47,50020% of the first $2,000 deferred ($4,000 if Married filing jointly)$23,751 to $36,500$35,626 to $54,750$47,501 to $73,00010% of the first $2,000 deferred ($4,000 if Married filing jointly)more than $36,500more than $54,750more than $73,000credit not availableMore information on the Saver’s Credit is available on the IRS website: *Be sure to consult a tax professional to determine whether you qualify and how to take advantage of the Saver’s Credit because there are limitations you should be aware of.* **Categories:** 401(k) Plans, 403(b) Plans **Tags:** Government Regulation, IRS, Tax Credits --- ### [Long Term Part Time (LTPT) Employees: The Impact to Your Plan Beginning in 2024](https://watkinsross.com/articles/2023-06-05-long-term-part-time-ltpt-employees-the-impact-to-your-plan-beginning-in-2024/) **Published:** June 5, 2023 **Author:** Watkins Ross Team **Excerpt:** Discover the SECURE Act's impact on plan eligibility and requirements for Long Term Part Time (LTPT) employees. Learn about changes, tracking hours, and employer contributions. **Content:** ## Is this Optional or Mandatory? This is a mandatory requirement. Historically, plan sponsors could require employees to work at least 1,000 hours during a year to become eligible to enter the plan. As a result, some part time, seasonal or temporary employees would never meet the eligibility criteria. The SECURE Act of 2019 (or SECURE 1.0) expanded coverage to allow those who had worked at least 500 hours in three consecutive years to participate under a plan’s salary deferral provision. The 2022 SECURE 2.0 Act has now shortened this wait to two years. These types of employees are considered Long Term Part Time (LTPT). If you wish to reduce the eligibility requirements for all participants to enter your plan earlier than 1 year with 1,000 hours, you will need to speak to your plan document provider and have them prepare an amendment by the end of 2023. ## When is this effective? SECURE 1.0 is mandatory for plan years beginning on or after January 1, 2024 and the SECURE 2.0 modifications are mandatory for plan years beginning on or after January 1, 2025. ### 2019 Secure 1.0: Starting with plan years on or after January 1, 2021, Plan Sponsors were required to track employees’ hours to satisfy this new rule. Employees who work at least 500 hours of service in 3 consecutive 12-month periods, beginning January 1, 2021 (so plan years beginning in 2021, 2022 & 2023 initially), must be allowed to make salary deferrals to a plan beginning on January 1, 2024. Service prior to 1/1/2021 is disregarded for purposes of eligibility but participants must still satisfy the plan’s age requirements. ### 2022 Secure 2.0: In 2022, the Secure Act 2.0 was passed and made some changes to the original Secure Act rules before they even went into effect: - The rule was also changed to reduce the service requirement from 3 consecutive years to two consecutive years with 500 hours beginning after December 31, 2024. - This rule does not apply to collectively bargained employees or nonresident aliens. - The rule was expanded to now include 403(b) plans. However, service before January 1, 2023 is disregarded for these plans for purposes of eligibility or vesting. While the new, two year rule is now in effect, the older three year rule still applies. This means employers need to allow employees who meet the older rule to defer in 2024. Under the two year rule, employees are allowed to start deferring in 2025. This makes it very important to have an accurate tracking method in place for employee hours. ### An Illustration: **Hours of Service for a Calendar Year 401(k) Plan** (*Service prior to 1/1/2021 is disregarded*) **Name****2021****2022****2023****2024****2025****Enters the plan on:**Edward550600610550500January 1, 2024Jane0650300580450N/A – must have 2 consecutive yearsMary400550650300525January 1, 2025John00750675710January 1, 2025David000675710January 1, 2026**Hours of Service for a Calendar Year ERISA 403(b) Plan** (*Service prior to 1/1/2023 is disregarded*) **Name****2021****2022****2023****2024****2025****Enters the plan on:**Kate550600610550500January 1, 2025Paul0650300580450N/A – must have 2 consecutive yearsThomas600400550500525January 1, 2025Lynn0510530450400N/A – must have 2 consecutive yearsEllen00750675710January 1, 2025## Special Rules for LTPT Employees: - Participants solely eligible due to the LTPT rules may be excluded from the nondiscrimination and coverage testing. - Employers are also able to exclude this group of participants from company match, profit sharing, Safe Harbor contributions and Top Heavy minimums. If as a Plan Sponsor you choose to include this group for any Employer contribution, their vesting is based on a service year of 500 hours, including years prior to 2021. This means that you will need to provide your TPA with historical data for these participants if you have not previously provided this information. - LTPT employees are considered participants, whether or not they defer, for the purpose of determining whether or not your plan is a large plan (i.e. 100 or more participants) and subject to audit requirements. - Once a LTPT employee enters the plan, they continue to be eligible even if their hours drop in future years. As an industry, we are aware that there will be some specific situations that are not addressed in the current language of these two acts and we expect additional guidance to be forthcoming, so please stay posted. **Categories:** 401(k) Plans, 403(b) Plans **Tags:** Compliance, Eligibility, Government Regulation, Long Term Part Time Employees, SECURE Act, Secure Act 2.0 --- ### [Secure 2.0 for Defined Benefit Plans](https://watkinsross.com/articles/2023-05-11-secure-2-0-for-defined-benefit-plans/) **Published:** May 11, 2023 **Author:** Watkins Ross Team **Excerpt:** Secure Act 2.0 has important updates for Defined Benefit Plans, including increased RBD age and reduced excise tax on missed RMDs. Stay up-to-date with these crucial changes to ensure your retirement plan is compliant. **Content:** Secure Act 2.0 was signed into law on December 29, 2022, as part of the Consolidated Appropriations Act of 2023. Secure 2.0 contains over 120 pages covering more than 90 statutory provisions. While a vast majority affect defined contribution plans, there are several that profoundly affect defined benefit plans. These are outlined below grouped by those effective in 2023 and those effective later. ## Effective for 2023 **Increases age for Required Beginning Date (RBD)** The original Secure Act (2019) increased the Required Beginning Date from 70 ½ to 72. Secure 2.0 further increased the RBD to 73 beginning in 2023 and to 75 beginning in 2033. In 2023, the RBD changes from 72 to 73. In 2033 it changes to 75. These changes require a plan amendment. A plan can keep the same RBD, for example, age 70 ½, for all participants regardless of their date of birth. **Reduces the excise tax on missed Required Minimum Distributions (RMD)** Secure 2.0 reduces the excise tax on missed or insufficient RMDs from 50% to 25%. The 25% may be further reduced to 10% if the RMD is paid by the end of the following calendar year. ## Effective Later **Eliminates the variable-rate premium (VRP) indexing** The PBGC premiums consist of a per-person flat-rate premium and a variable rate premium, subject to a VRP cap. The flat rate premium was $86 in 2021, $88 in 2022, and $96 in 2023. The VRP for each $1000 in unfunded vested benefits was $46 in 2021, $48 in 2022, and $52 in 2023. The VRP cap was $582 in 2021, $598 in 2022, and $652 in 2023. For plan years after 2023, there will be no VRP indexing so the VRP will be frozen at $52 per $1,000 in unfunded vested benefits. Indexing continues on the VRP cap and flat-rate premiums. **Increases the involuntary cash out** The amount of the lump sum that can be involuntarily cashed out changes from $5,000 to $7,000. This optional plan change is for distributions after 12/31/2023. **Requires additional information for Defined benefit annual funding notices** Secure 2.0 requires additional information to be provided for plan years starting after 12/31/2023. (For the 2024 calendar year plans, the enhanced notice would be due 4/30/2025). **Requires a significant increase in lump sum window disclosures** Plan Administrators must provide extensive information to participants and beneficiaries offered lump sums during a window period. The effective date for this requirement has not yet been established as DOL/IRS regulations must be delayed until at least December 29, 2023. **Extends the deadline for adopting amendment increasing benefit accruals** For plan years beginning after December 31, 2023, the deadline for an employer to adopt a discretionary amendment increasing benefit accruals is extended until its tax filing deadline (including extensions) for the year in which the amendment takes effect. **Extends window for 420 transfers** Defined Benefit plans could transfer excess assets to retiree health accounts by December 31, 2025. This period has been extended until December 31, 2032. **Requires participant election to receive electronic delivery of participant statements** An active participant in a defined benefit plan must receive a statement every three years. Effective for plan years beginning after 12/31/2025, a paper statement must be provided unless a participant affirmatively elects to receive electronic delivery of the statement. **Categories:** Defined Benefit Plans, Latest News **Tags:** Compliance, Consolidated Appropriations Act of 2023, Defined Benefit Plans, Government Regulation, Plan Administration, Secure Act 2.0 --- ### [An Inherent Weakness in the Completion Factor Approach to Calculating an Incurred But Not Reported (IBNR) Reserve](https://watkinsross.com/articles/2023-04-27-an-inherent-weakness-in-the-completion-factor-approach-to-calculating-an-incurred-but-not-reported-ibnr-reserve/) **Published:** April 27, 2023 **Author:** Watkins Ross Team **Excerpt:** Discover the inherent weakness of using the completion factor approach to calculate IBNR reserves in healthcare finance and how to avoid costly mistakes. **Content:** Incurred But Not Reported (IBNR) Claim reserves for a fiscal period are healthcare related costs that individuals have incurred due to an event such as Dr. appointments, hospital visits, etc. – that have or will generate invoices that haven’t yet been processed or adjudicated and, as such, have not shown up in the cash flow of a healthcare sponsoring organization. Because the events that gave rise to those invoices have taken place, they must be accounted for as a ‘reserve’ on the financial pages of the sponsoring entity for the period in which they took place. While there are different methods used to calculate reserves, most approaches involve determining a completion factor from a claim experience that is known. For example, if prior claim patterns are such that on average 30% of all claims for a given month are processed and known in the month in which they occur, then for the final month of a reporting period, if $30,000 of claims for that month are known and reported, one might assume fully incurred claims for that month of $100,000 (i.e. $30,000 / 0.30) will ultimately be reported, including $70,000 ($100,000 – $30,000) in the IBNR for that reporting period. Suppose that in our example above, only $20,000 of claims for that final month of the reporting period are known and reported. Using the completion factor approach would suggest the total for the month would ultimately be $67,000 (i.e., $20,000 / .30) – of which $47,000 is IBNR. This is about $23,000 less than the first reserve calculation, or about 33% – a meaningful difference. The second, lower IBNR, might be warranted if, in that situation, the lower reported claims were due to differences in claim experience for those two groups. However, what if the difference was due to some processing delays and not due to lower overall claim experience? The result would be an understatement of the IBNR. In addition to suggesting an IBNR $23,000 lower than the first estimate, it would also miss the $10,000 ($30,000 less $20,000) yet to be processed under normal circumstances. One step to take to avoid such a mistake would include calculating an average claims cost per member per month (pmpm) for prior months to make sure the last month’s results aren’t unusual. If the number of covered lives remains steady during the coverage period and significant deviations from the average pmpm cost are observed, then a moving average of the last six, or twelve months, might be used as a minimum basis for the final month’s total claim experience. In addition, an analysis could include looking at past years to note whether seasonal patterns emerge so no or little adjustment might be warranted. Another situation that could lead to incorrect results is the case where a very large, non-recurring claim event is in the data. This can likely cause a large overstatement. For example, if we take the illustrative data from above and suppose a large claim of $75,000 is included, in addition to the $30,000, then using the completion factor calculation approach, the estimated IBNR for that month would be $245,000 (i.e. $75,000 + $30,000) / .30 = $350,000, for an IBNR of $350,000 – $105,000 = $245,000. If the estimate for incurred claims (without the large claim) would normally be about $100,000, then it would make sense to look at the pmpm alternative for the month in question. Another potential distortion can occur if the number of check cycles to providers is greater than the average. For example, if an administrator reimburses providers bi-weekly, or 26 times per year, then in any given year, two months will have one cycle more than the other ten months. Thus, if the data happens to contain an additional cycle, the normal completion factor approach would – all other things the same – likely overstate the estimated fully incurred claims and the estimated IBNR. In some of these cases, a helpful step would be a call to the plan sponsor. Perhaps there has been a change in the third party-administrator and processing patterns under the new administrator are different. There could also be an interruption in processing services because the change in administrators has not gone smoothly. This could possibly suppress payments in the initial months and then inflate payments in later months as claims inventories are reduced. In both cases, claims patterns would not be reliable until administration of the plan ‘settled’. In cases like these, it’s prudent to consult with the administrator to learn of issues affecting the reported claims paid. Other interruptions in claims payments could be the result of employee strikes or, as in the case of COVID, employee absences and alternative working arrangements. Additionally, be mindful of the location and time of year for which the claim reporting is taking place. An IBNR calculation for a southwest Florida group in 2022 would have had to take a Hurricane into account as many businesses and facilities had to be shut down for several weeks – affecting both administrators and service providers. It has been said that IBNR calculations are a combination of art and science so care must be taken to have an open mind when performing and reviewing these reserve calculations. While it’s always desirable to have an ‘iron-clad’ documented formula, in many cases supportable reasoning and experienced judgment must be used. Looking for an experienced actuarial team to complete your IBNR calculations? [Connect with our highly-qualified consultants at Watkins Ross](https://watkinsross.com/contact/) to learn more about our health plan services. Christian Veenstra, ASA, MAAA, FCA President, Watkins Ross **Categories:** IBNR **Tags:** Claim Patterns, Claim Reserves, Completion Factor --- ### [What a Failed ADP/ACP Test Means](https://watkinsross.com/articles/2023-03-13-what-a-failed-adp-acp-test-means-2/) **Published:** March 13, 2023 **Author:** Watkins Ross Team **Excerpt:** Ensure your 401k retirement plan allows your employees to save the maximum amount allowed by understanding and utilizing ADP/ACP testing. **Content:** 401k plan nondiscrimination testing is complex (for a review of the ADP/ACP tests, please read our [401k Plan Nondiscrimination Testing article](https://watkinsross.com/articles/2023-02-15-401k-plan-nondiscrimination-testing-2/)). Many financial advisors and plan sponsors want to maximize retirement plan deferrals for the [Highly Compensated Employee (HCE) group](https://www.irs.gov/retirement-plans/plan-participant-employee/definitions#:~:text=For%20the%20preceding%20year%2C%20received,top%2020%25%20of%20employees%20when), yet feel stressed (and even panicked!) at the thought of failing ADP/ACP testing. ## Does a Failed ADP/ACP Test Actually Indicate Success? Failure is defined as a lack of success and we understand no one likes to fail. But, it’s important to remember the goal of a 401k retirement plan is to provide your employees with an opportunity to save the maximum amount legally allowed for retirement. When your retirement plan passes ADP/ACP testing, it indicates your HCE group probably could have contributed more than they did and consequently missed out on deferring those additional savings. A failed test, on the other hand, means your HCE group was able to defer the maximum amount legally allowed. It pays to view this excess as an overage and not a failure, as the “failed” test means you succeeded in maximizing HCE deferrals into the retirement plan that year. It’s also important to remember a failed test does not signal your retirement plan for an [IRS/DOL audit](https://www.irs.gov/retirement-plans/plan-sponsor/401k-resource-guide-plan-sponsors-what-if-you-are-audited). It merely indicates that HCE group contributions were disproportionately larger than the Non-Highly Compensated Employee (NHCE) group. As long as you correct the failure in a timely manner, your retirement plan remains in good standing with the IRS/DOL. ## Why ADP/ACP Tests Fail Before you toast to a failed test, it’s important to analyze why the test failed. For example, if the ADP test failed due to poor participation from the NHCE group, then [retirement plan strategies](https://watkinsross.com/articles/2023-01-09-retirement-plan-enrollment-best-practices/) can be discussed with your Third Party Administrator (TPA) to increase NHCE participation, such as implementing an automatic enrollment feature. By increasing the NHCE participation, you will increase the amount the HCE group can defer. A mid-year test can also be helpful and used to estimate if the retirement plan is going to pass or fail ADP/ACP testing for the year. The mid-year snapshot provides an opportunity to discuss the results with your TPA to determine if your retirement plan is optimized for your participants or if changes should be considered. You can also discuss adding a safe harbor feature to the retirement plan, which eliminates the need for ADP/ACP testing. [Contact the experienced Retirement Plan Administrators at Watkins Ross](https://watkinsross.com/contact/) to discuss retirement plan testing solutions specifically designed to optimize your employee retirement savings. Together let’s evaluate your current retirement plan goals and discover ways to improve your administration so you can avoid penalties, missed deferrals, and expensive fees. **Categories:** 401(k) Plans, Retirement Plans **Tags:** ADP/ACP, Compliance, Government Regulation, Plan Administration, Plan Testing, Retirement Plans --- ### [Defined Contribution Compliance Calendar](https://watkinsross.com/articles/2019-02-14-2019-defined-contribution-compliance-calendar/) **Published:** February 14, 2019 **Author:** Watkins Ross Team **Excerpt:** A qualified retirement plan must meet various requirements throughout the year, check out our defined contribution compliance calendar today! **Content:** A qualified retirement plan must meet various requirements throughout the year in order to retain the qualified status. If you are responsible for administering your company’s defined contribution plan, it’s critical not to miss a deadline! From processing failed ADP/ACP test refunds to delivering the participant fee disclosures, it can feel overwhelming. Let us help you stay on track by downloading our [defined contribution plan compliance calendar](https://watkinsross.com/wp-content/uploads/WR_2023_Compliance_Calendar.pdf "2023 DC Compliance Calendar"). *Note: The dates on this calendar pertain to a plan with a calendar plan year. However, if your plan utilizes an off-calendar plan year or you have questions regarding your specific plan provisions, please contact your Watkins Ross Retirement Plan Administrator.* If you administer your company’s defined benefit plan, then download our [defined benefit plan compliance calendar](https://watkinsross.com/wp-content/uploads/WR_2023_Compliance_Calendar.pdf "2023 DC Compliance Calendar"). Please contact your Watkins Ross administrator with any questions about the due dates for your specific plan. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Compliance, Defined Contribution Plans --- ### [What A Failed ADP/ACP Test Means](https://watkinsross.com/articles/2018-02-12-what-a-failed-adp-acp-test-means/) **Published:** February 12, 2018 **Author:** Watkins Ross Team **Excerpt:** If you want to maximize contributions for the Highly Compensated Employees, don't stress (or panic!) at the thought of failing the ADP/ACP testing. **Content:** 401(k) plan nondiscrimination testing is complex (for a review of the ADP/ACP tests, please read [401(K) Plan Nondiscrimination Testing](https://watkinsross.com/articles/2018-02-05-401k-plan-nondiscrimination-testing/)). Many financial advisors and plan sponsors want to maximize deferrals for the Highly Compensated Employee (HCE) group, yet feel stressed (and even panicked!) at the thought of failing the ADP/ACP testing. Failure is defined as a lack of success so, we get it, no one likes to fail. But, it’s important to remember that the goal of a 401(k) plan is to provide your employees with an opportunity to save the maximum amount legally allowed for retirement. The reality is, when your plan passes ADP/ACP testing, your HCE group probably could have contributed more than what they did, so they miss out deferring those additional savings. On the other hand, a failed test means your HCE group was able to defer the maximum amount legally allowed. You should really view this excess as an overage and not a failure since the “failed” test means you **succeeded** in maximizing the HCE deferrals into the plan during that year. It’s also important to remember that a failed test does not signal your plan for an IRS/DOL audit. It merely indicates that the HCE group contributions were disproportionately larger than the NHCE group. As long as you correct the failure in a timely manner, your plan remains in good standing with the IRS/DOL. However, before you toast to a failed test, it’s still important to analyze *why* the test failed. For example, if the ADP test failed due to poor participation from the NHCE group, then strategies can be discussed with your Third Party Administrator (TPA) to increase NHCE participation, such as implementing an automatic enrollment feature. By increasing the NHCE participation, you will increase the amount the HCE group can defer. Several strategies can be discussed with your TPA. For example, a mid-year test can be used to estimate if the plan is going to pass or fail ADP/ACP testing for the year. This snapshot provides the opportunity to discuss the results with your TPA to determine if your plan is optimized for your participants or if changes should be considered. You can also discuss adding a safe harbor feature to the plan, which eliminates the need for ADP/ACP testing. [Contact Watkins Ross](https://watkinsross.com/contact/) to discuss testing solutions to optimize your employee retirement savings. **Categories:** 401(k) Plans **Tags:** ADP/ACP --- ### [2019 Defined Benefit Plan Compliance Calendar](https://watkinsross.com/articles/2019-02-13-2019-defined-benefit-plan-compliance-calendar/) **Published:** February 13, 2019 **Author:** Watkins Ross Team **Excerpt:** If you are responsible for administering your company’s defined benefit plan, download our 2019 defined benefit plan compliance calendar. **Content:** It’s that time of year again to look ahead and think about the annual requirements for your qualified plan! Since a qualified retirement plan must meet various requirements throughout the year to retain the qualified status, it’s important you know when things are due. It’s critical to meet these deadlines if you are responsible for administering your company’s defined benefit plan. From making quarterly contributions to issuing the annual funding notice to participants, it can feel overwhelming. Let us help you stay on track by downloading our [2019 defined benefit plan compliance calendar](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross.pdf "defined-benefit-compliance-calendar-watkins-ross"). *Note: The dates on this calendar pertain to a plan with a calendar plan year (with off-calendar due dates in parentheses).* If you administer your company’s 401(k) plan or other defined contribution plan, then download our [2019 defined contribution plan compliance calendar.](https://watkinsross.com/wp-content/uploads/defined-contribution-compliance-calendar-watkins-ross.pdf "defined-contribution-compliance-calendar-watkins-ross") If you have questions regarding your specific plan provisions or due dates, please contact your Watkins Ross analyst. **Categories:** Defined Benefit Plans, Retirement Plans **Tags:** Compliance, Defined Benefit Plans --- ### [Further Assistance for Troubled Multiemployer Retirement Plans](https://watkinsross.com/articles/2022-11-09-further-assistance-for-troubled-multiemployer-retirement-plans/) **Published:** November 9, 2022 **Author:** Watkins Ross Team **Excerpt:** PBGC made several changes to the Final Rule issued on July 6, 2022. Learn about changes and benefits to retirement plans on the Watkins Ross blog. **Content:** The [Pension Benefit Guaranty Corporation](https://www.pbgc.gov/) (PBGC) has already approved financial assistance to 32 troubled multiemployer retirement plans under [the Interim Final Rule released in July 2021](https://www.govinfo.gov/content/pkg/FR-2021-07-12/pdf/2021-14696.pdf). The PBGC asserts that as of October 4, 2022, it has approved over $7.7 billion in assistance to retirement plans that cover over 154,000 workers, retirees, and beneficiaries. The PBGC received over 100 comments regarding the Interim Final Rule. Many of the comments dealt with the mismatch between the interest rate used to determine the amount of assistance and the earnings rate that could be assumed. The Interim Final Rule requires that 100% of the Special Financial Assistance Program (SFA) assets be segregated and invested only in high-quality fixed-income securities. This mismatch caused many retirement plans to project that they would run out of funds, including SFA funds, well before 2051, the target year in SFA calculations. To address this problem, the PBGC made several changes to [the Final Rule issued on July 6, 2022](https://www.govinfo.gov/content/pkg/FR-2022-07-08/pdf/2022-14349.pdf). Two of these changes will affect most of the retirement plans seeking assistance and go a long way to keep them solvent well past 2051: 1. A new two-rate method of determining SFA amounts 2. The ability to invest up to 33% of SFA funds in return-seeking investments ## New Two-Rate Method of Determining SFA The July 2022 Final Rule changes the SFA calculation method to use separate interest rates for a retirement plan’s SFA assets and non-SFA assets. The rate that applies to the existing assets is the same rate that applied under Interim Final Regulations. The rate that applies to the SFA assets is based on an average of segment rates (high-quality, fixed-income securities). For most retirement plans this second rate will be much lower. This lower rate will provide more SFA funds and prevent SFA calculation/investment return mismatches. A typical rate under the Interim Final Regulations was 5.0%; the likely SFA fund rate under the new method could be near 3.0%. Retirement plans that haven’t applied yet can apply under the Final Rule. Retirement plans that already received funds can submit a supplemented application. Plans with original rates close to or over 5.0% could receive a significant increase in SFA funds, while retirement plans with original rates lower than 5.0%, but still above the new rate, will get a more minor increase in SFA funds. Retirement plans with original rates that were already lower than the rate determined under the new methodology might not receive any additional SFA funds. ## SFA Investment Opportunities The second significant change to July 2022’s Final Rule is the ability to invest up to 33% of SFA funds in return-seeking investments (RSI). The remaining 67% must still be invested in high-quality, fixed-income securities. This investment change applies when an application is filed under provisions of the Final Rule. The timing of this rule change is very fortunate; from the date the first plan received SFA funds (January 14, 2022) until August 8, 2022, the S&P 500 fell over 11%. These retirement plans consequently avoided a possible loss and now can buy equities at a discount. There are several restrictions to this type of investment, such as equities traded on US exchanges only. These restrictions are outlined in the regulations. Motivated by new investment opportunities and SFA fund increases, 8 retirement plans filed supplemented applications on August 8, 2022, the first day for applications under the Final Rule. Four more plans were filed in the following two days. These two changes, along with several others in the Final Rule, will help troubled multiemployer retirement plans avoid insolvency altogether, not just until 2051. Plans have until December 31, 2026, to apply. Watkins Ross’ experienced retirement plan team is available to assist and help translate PBGC SFA options for your retirement plan. We collaborate with our clients to provide a comprehensive view of your retirement plans’ health and compliance. [Connect with us here](https://watkinsross.com/contact/ "Contact Us") to learn more about our [retirement plan services](https://watkinsross.com/services/#retirement-plans). **Categories:** Latest News, Multiemployer Plans **Tags:** Business Management, Final Rule, Financial Tips, Government Assistance --- ### [The Importance of Maintaining Retirement Beneficiary Forms](https://watkinsross.com/articles/2022-10-20-the-importance-of-maintaining-retirement-beneficiary-forms/) **Published:** October 20, 2022 **Author:** Watkins Ross Team **Excerpt:** It’s essential plan sponsors provide retirement beneficiary forms when enrolling a new employee in a retirement plan. Learn more on the Watkins Ross blog. **Content:** A new employee has a variety of forms to complete when hired. One of the most important forms new employees must complete is a beneficiary form for the company’s retirement benefit plans. It is essential the plan sponsor provide a beneficiary form to keep on file upon enrolling a new employee in a retirement plan. ## Why Are Retirement Beneficiary Forms Important? The default beneficiary for retirement benefits is typically a spouse. Some retirement plan documents automatically revoke spousal beneficiary designation upon divorce. If this is not specified in the plan document, however, former spouses will still be the designated beneficiary, much to the surprise of any surviving family members. For cases in which there is no spouse, up-to-date retirement beneficiary forms avoid the retirement account designating the estate of a deceased participant as a last resort. Reviewing the order of beneficiaries listed in the plan document is vital to ensure funds are distributed timely while in accordance with the participant’s intentions. Having inaccurate or outdated forms on file leads to confusion and extra time spent working to allocate the deceased participant’s account. ## Common Retirement Beneficiary Form Mistakes Participants who are automatically enrolled in a retirement plan may often be missed when it comes to completing necessary paperwork. For this reason, plan sponsors who automatically enroll their participants should also provide the retirement beneficiary form at the time of enrollment. Keeping a copy of the form on file allows for easy updates throughout the longevity of the participant’s employment. Another common error occurs when there is a change in marital status. When a divorce takes place and the retirement beneficiary form is not updated accordingly, the estranged spouse would be entitled to the funds. It’s important that enrolled participants are aware they must notify plan sponsors when major life events, such as a change in marital status, take place. Finally, it is a misconception that a participant’s legal will and testament takes precedence over retirement beneficiary forms. Wills are subject to state laws, while retirement plan documents are subject to federal laws. It is essential participants ensure all these documents are identical. ## Retirement Beneficiary Form Best Practices A plan sponsor should update or confirm beneficiary information annually, or after any known major life change such as marriage, divorce, or additional children. It is also beneficial to have both primary and contingent beneficiaries listed. Contingent beneficiaries receive retirement plan funds if the primary beneficiary passes before the participant. Beneficiary forms should include full names, birth dates, social security numbers, relationship to the participant, addresses, and a provision that new designations revoke all prior designations; it is better to have too much information than not enough. It has become increasingly easier for participants and plan sponsors to maintain updated retirement beneficiary forms now that online beneficiary elections have been legalized. While beneficiary forms may sometimes be completed online, a spouse still needs to consent to some designations via a notary or witnessed by a plan representative. It’s the retirement plan sponsor’s responsibility to have accurate and recent retirement beneficiary forms on file to ensure the beneficiary process flows smoothly and funds are allocated in line with the wishes of the deceased participant. Partnering with a dedicated team of retirement plan professionals to help maintain your retirement beneficiary forms is a simple, surefire way of meeting your employee benefit plan objectives. [Contact Watkins Ross here](https://watkinsross.com/contact/ "Contact Us") to learn more about [our retirement plan services](https://watkinsross.com/services/ "Our Services"). Together we can create a benefits system that achieves consistent compliance and forward-focused solutions. **Categories:** Plan Documents, Retirement Plans **Tags:** Business Management, Business Tips, Retirement Plans --- ### [Maintaining Retirement Plan and Participant Records: Who’s Responsible and for How Long?](https://watkinsross.com/articles/2022-07-12-maintaining-retirement-plan-and-participant-records-whos-responsible-and-for-how-long/) **Published:** July 12, 2022 **Author:** Watkins Ross Team **Excerpt:** Save your company time and money by maintaining complete records of your retirement plan and maintaining these records for the life of your plan. **Content:** Retirement plan record retention rules are found in both the [Department of Labor (“DOL”) Regulations](https://www.dol.gov/regulations) and the [Employee Retirement Income Security Act of 1974 (ERISA)](https://www.dol.gov/general/topic/retirement/erisa#:~:text=The%20Employee%20Retirement%20Income%20Security,for%20individuals%20in%20these%20plans.), plus there are statutes of limitation concerns in relation to retirement plan sponsor liability for just about everything administrative in a retirement plan. Very few retirement plan sponsors seem to have a record retention policy to provide guidance on what to retain, what to purge, and when to do it all. It is recommended that retirement plan sponsors keep these documents longer than required. It is also a good idea to establish a written record retention statement, especially if you are relying on electronic records and destroying the original paper records. ## Retirement Plan Document Retention Guidelines Retirement plan documents must be kept throughout the life of the plan as they are needed to determine the calculation of a participant’s benefit. This means **all** retirement plan documents, amendments, interim amendments, restatements, loan policies, QDRO policies, etc., must be retained, starting with the inception of the retirement plan, even after they have been superseded. It is essential the documents are appropriately adopted and signed. It is not uncommon for everyone involved in a retirement plan to just file unsigned documents away without ensuring they are fully executed. While unsigned documents are helpful in proving that intended actions took place for the plan, regulatory agencies still consider it a failure to properly file and retain forms when unsigned and dated. Additionally, the following retirement plan documents should be retained by the Retirement Plan Sponsor, as they will be the first items requested by the IRS for an examination or audit (and the DOL for an investigation): - Summary Retirement Plan Description - Modifications to the Summary Retirement Plan Description (also called a “Summary of Material Modifications”) - Corporate Actions – minutes, agendas, handouts from meetings, etc. - Service Agreements with service providers - Fidelity Bonds - Fee Disclosures required under ERISA § 408(b)(2) ## Retirement Plan-Level Documentation Retention ERISA provides that the following retirement plan documents must be retained for at least six years from the date the Form 5500 filing is due: - Federal Forms – including Form 5500 and related schedules, Form 8955 SSA, Forms 5330, 1096, 1099R, and Summary Annual Reports, along with audited financial statements. - Administrative Reports – including the annual census data, contribution calculations, and retirement plan testing. - All participant notices (safe harbor, auto-enrollment, QDIA, Summary Annual Reports, participant fee disclosure, black-out notices, etc.) ## Participant-Level Documentation Retention The following retirement plan participant documents must be retained indefinitely through the life of the plan and at least seven years after a plan is terminated: - Date of hire, rehire, and termination - Participant eligibility date - Participant compensation - Participant participation (deferral) election form - Contribution election forms - Participant’s designated beneficiary form - Records of any distribution requested and/or received by the participant - Rollover requests - Qualified Domestic Relations Orders - Retirement plan loan documentation - Records sufficient to permit benefits due to be determined ## Who is Responsible for Keeping Records? Maintaining the retirement plan’s complete records rests with the plan sponsor, not your third-party administrator. As such, best practices encourage that the retirement plan sponsor should have access to all relevant documents and maintain them on their network with a secure backup copy. In addition to having documents available if the government agencies review the retirement plan, the plan sponsor must remember that there is always a potential lawsuit in the background. If such a concern should arise, having the legal documents surrounding the retirement plan, as well as the facts about a participant’s employment, compensation, and benefits earned and paid, can make a big difference in the ability to defend the plan sponsor’s position. If you change third-party retirement plan administrators, be sure you have complete records and reports saved to your network and backups and obtain any records you do not have access to. The outgoing third-party administrator is not responsible for maintaining retirement plan records of prior client files for longer than six years. You may also be charged if you need to request copies of those records down the road. It is far less complicated if you maintain complete records of your retirement plan from the outset and maintain this practice for the life of your plan. Interested in reviewing your retirement plan documents with a professional, experienced retirement plan team? [Connect with Watkins Ross](https://watkinsross.com/contact/ "Contact Us") to learn more about our consulting, actuarial, and administrative retirement plan services. **Categories:** Retirement Plans **Tags:** Business Management, Business Tips, Records, Retirement Plans --- ### [Electronic Delivery of Participant Disclosure Materials](https://watkinsross.com/articles/2017-07-05-electronic-delivery-of-participant-disclosure-materials/) **Published:** July 5, 2017 **Author:** Watkins Ross Team **Excerpt:** The DOL and the IRS have established guidelines when e-mail or other electronic delivery methods are used to distribute retirement plan information. **Content:** Retirement plan participants must receive specific plan information annually. The [plan administrator](https://www.irs.gov/retirement-plans/plan-participant-employee/definitions) must use measures “reasonably calculated to ensure actual receipt of the material” when delivering this information. You will not satisfy the delivery requirement by making a document available or posting it on a bulletin board. You may use in-hand delivery to the employee’s worksite and first class mail, and you can use other classes of mail if return and forwarding postage are guaranteed and address corrections are requested. However, a growing number of plan administrators prefer electronic delivery to simplify the process and reduce costs. ## ELECTRONIC DELIVERY GUIDELINES The Department of Labor (DOL) and the Internal Revenue Service (IRS) established guidelines to help plan administrators determine when e-mail or other delivery methods are acceptable. - DOL Electronic Disclosure Safe Harbor allows electronic delivery by the Wired at Work and Affirmative Consent methods - DOL Interpretive and Technical guidance allows for use of the Assumed Consent and Continuous Access Website methods; and - [IRS Media Disclosure Guidance](https://watkinsross.com/articles/2017-07-05-irs-electronic-media-guidance/ "IRS Electronic Media Guidance") allows electronic delivery under a General Method and an Alternative Method. In general, the DOL Safe Harbor methods are applicable to all types of plan information, while the other methods are more restrictive. For more information about the DOL’s electronic delivery guidelines, check out the [DOL Electronic Disclosure Guidance](https://watkinsross.com/articles/2017-07-05-dol-electronic-disclosure-guidance/ "DOL Electronic Disclosure Guidance") blog. Electronic delivery of plan information is not all or nothing. For example, you may use e-mail to deliver information to employees with computer access at work and mail to the remaining plan participants. **DISCLOSURE REQUIREMENTS THAT CAN BE ELECTRONICALLY DELIVERED** For reference, below is a table detailing the delivery options applicable to various disclosures. **Categories:** Retirement Plans **Tags:** Environment, Plan Documents --- ### [401(K) Plan Nondiscrimination Testing](https://watkinsross.com/articles/2018-02-05-401k-plan-nondiscrimination-testing/) **Published:** February 5, 2018 **Author:** Watkins Ross Team **Excerpt:** To ensure a 401(k) plan is not favoring owners or highly paid employees, the IRS requires certain nondiscrimination testing is performed (ADP/ACP testing). **Content:** In order to ensure a 401(k) plan is not favoring owners or highly paid employees, the IRS requires the 401(k) nondiscrimination testing is performed. The Actual Deferral percentage Test (ADP) measures the employee deferral contributions and the Actual Contribution Percentage Test (ACP) measures the employer matching contributions. ADP/ACP testing must be completed annually. Both tests take the *average* contribution rates of the Highly Compensated Employee (HCE) group of participants and compare to the *average* contribution rate of the Nonhighly Compensated Employee (NHCE) group of participants. ## WHO ARE HIGHLY COMPENSATED EMPLOYEES (HCEs)? The IRS defines a Highly Compensated Employee (HCE) as an owner of **more than** 5% of the company in the current or previous plan year or an employee who received compensation in excess of an indexed compensation limit in the previous plan year. The IRS adjusts the compensation limit annually for cost-of-living increases but has remained $120,000 since 2015. Family attribution rules treat a spouse, child, parent or grandparent of someone who is a 5% owner as an HCE, regardless of that individual’s compensation or ownership. If the plan document allows, HCEs can be limited to the top-paid 20% group of employees when ranked by pay. Employees may move from the HCE group to the NHCE group (and vice versa) in different plan years, so this classification is determined annually. ## PASSING ADP/ACP TESTING In order to pass the tests, the HCE average contributions (deferrals or match) must be within a certain percentage of the average contributions of the NHCEs (usually within 2%). To run an ADP/ACP test, each eligible participant’s total **contribution** is divided by his **compensation** as defined in the plan document. The individual contribution ratios are then averaged for the separate HCE and NHCE groups. It is important to note that employees who are eligible but not contributing are included in the calculations with a 0% ratio which lowers the average percentage for that group. The ADP test does not include catch-up contributions. ## CORRECTING A FAILED TEST There are potentially two ways to correct a failed ADP/ACP test: 1. Return the excess contributions, including earnings, to HCEs. The distributions are first made to HCEs who deferred the highest dollar amounts, not the highest percentage, lowering the average percentage contribution until the test passes. The return of excess amounts must be done within 2½ months of the close of the plan year to avoid an IRS excise tax of 10%. The corrective distribution amount returned is taxable to the participant in the calendar year in which the distribution is received and a Form 1099-R is issued for tax reporting. 2. The employer makes an additional fully vested contribution. The contribution must be sufficient enough to increase the average rate of the NHCE group to the level needed to pass the ADP and/or ACP test. If failing the ADP/ACP tests concerns you, please check out [What a Failed ADP/ACP Test Means](https://watkinsross.com/articles/2018-02-12-what-a-failed-adp-acp-test-means/). Please [contact Watkins Ross](https://watkinsross.com/contact/) Retirement Plan Administrator if you have questions regarding your plan’s ADP/ACP testing. **Categories:** 401(k) Plans **Tags:** 401k Plans, Plan Testing --- ### [401(k) Plan Nondiscrimination Testing](https://watkinsross.com/articles/2023-02-15-401k-plan-nondiscrimination-testing-2/) **Published:** February 15, 2023 **Author:** Watkins Ross Team **Excerpt:** Avoid penalties and fees by ensuring your retirement plan meets IRS 401k plan nondiscrimination test requirements. **Content:** **By Mishelle Becker, QKA, Retirement Plan Administrator** The IRS requires regular [401k plan nondiscrimination testing](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-the-plan-failed-the-401k-adp-and-acp-nondiscrimination-tests) to ensure retirement plans do not favor owners or highly paid employees. The [Actual Deferral Percentage Test (ADP)](https://www.law.cornell.edu/cfr/text/26/1.401(k)-2) measures employee deferral contributions, while the [Actual Contribution Percentage Test (ACP)](https://www.law.cornell.edu/cfr/text/26/1.401(m)-2) measures employer matching contributions. ADP/ACP testing must be completed annually. Both 401k plan nondiscrimination tests take the average contribution rates of the Highly Compensated Employee (HCE) group of participants and compare them to the average contribution rate of the Non-Highly Compensated Employee (NHCE) group of participants. ## Who Are Highly-Compensated Employees (HCEs)? The IRS defines a [Highly Compensated Employee (HCE)](https://www.irs.gov/retirement-plans/plan-participant-employee/definitions#:~:text=For%20the%20preceding%20year%2C%20received,top%2020%25%20of%20employees%20when) as an owner of more than 5% of the company in the current or previous retirement plan year or an employee who received compensation in excess of an indexed compensation limit in the previous retirement plan year. The IRS adjusts the compensation limit annually for cost-of-living increases; the 2022 limit is $135,000 and will increase to $150,000 for 2023. Family attribution rules treat a spouse, child, parent, or grandparent of someone who is a 5% owner as an HCE, regardless of that individual’s compensation or ownership. If the retirement plan document allows, HCEs can be limited to the top-paid 20% group of employees when ranked by pay. Employees may move from the HCE group to the NHCE group (and vice versa) in different plan years, so the classification of employees is determined annually. ## Passing 401k Plan Nondiscrimination Testing HCE average contributions (deferrals or matches) must be within a certain percentage (usually within 2%) of the average contributions of NHCEs to pass 401k plan nondiscrimination testing. When running an ADP/ACP test, each eligible participant’s total contribution is divided by their compensation as defined in the plan document. The individual contribution ratios are then averaged for the separate HCE and NHCE groups. It is important to note that employees who are eligible, but not contributing, are included in the calculations with a 0% ratio which lowers the average percentage for that group. The ADP test does not include catch-up contributions. ## Correcting a Failed 401k Plan Nondiscrimination Test There are potentially two ways to correct a [failed 401k plan nondiscrimination test](https://watkinsross.com/articles/2018-02-12-what-a-failed-adp-acp-test-means/ "What A Failed ADP/ACP Test Means"): 1. Return excess retirement plan contributions, including earnings, to HCEs. The distributions are first made to HCEs who deferred the highest dollar amounts, not the highest percentage, consequently lowering the average percentage contribution until the test passes. Excess amounts must be returned within 2½ months of the close of the plan year to avoid an IRS excise tax of 10%. The corrective distribution amount returned is taxable to the participant in the calendar year in which the distribution is received and a Form 1099-R is issued for tax reporting. 2. The employer makes an additional fully vested contribution. The contribution must be sufficient enough to increase the average rate of the NHCE group to the level needed to pass the ADP and/or ACP test. Do you have questions pertaining 401k plan nondiscrimination testing? Watkins Ross’ experienced team of Retirement Plan Administrators specializes in assisting employers with retirement plan compliance. Together we can ensure your plan is up-to-date with the latest ADP/ACP testing requirements. [Connect with us here](https://watkinsross.com/contact/ "Contact Us") for more information. **Categories:** 401(k) Plans, Retirement Plans **Tags:** ADP/ACP, Compliance, Plan Testing --- ### [Cash-out Rules for Small Balances](https://watkinsross.com/articles/2014-09-22-cash-out-rules-for-small-balances/) **Published:** September 22, 2014 **Author:** Watkins Ross Team **Content:** If your defined contribution plan contains a cash-out threshold of $1,000.00, participants with account balances below $1,000.00 must be forced to take their money out of the plan. Participants with small balances must be given the appropriate distribution form(s), along with the Special Tax Notice. If a response is not received by the end of the notice period, which is at least 30 days but no more than 90 days, a check may be issued to the participant. If a terminated participant has a vested balance of less than $200, his or her account can be forced out without having to go through the notification process. Since many fees are based on participant counts and many plan notices (participant fee disclosures, summary annual reports, etc.) must be provided to former employees with balances, eliminating those balances can save the plan/plan sponsor money. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Cash-Out, Defined Contribution Plans --- ### [Automatic Rollover Rules](https://watkinsross.com/articles/2014-10-15-automatic-rollover-rules/) **Published:** October 15, 2014 **Author:** Watkins Ross Team **Content:** The Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) changed the cash-out rule to require that account balances between $1,000 and $5,000 must be rolled over to an individual retirement account (“IRA”). This only applies if the plan sponsor makes the appropriate election in the plan document and the participant does not elect another form of distribution. If your plan allows for mandatory rollovers, a written/signed agreement must be established with an IRA provider and policies and procedures must be in place to accommodate the rollovers. Participants must be given the appropriate distribution paperwork, including the 402(f) Notice of Special Tax Rules on Distributions. If a response is not received by the end of the notice period, which is at least 30 days but no more than 90 days, a check must be issued to the participant. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** 402(f) Notice, Cash-Out, EGTRRA, IRA, Plan Documents, Rollover --- ### [What is a Cross-Tested Plan?](https://watkinsross.com/articles/2015-06-24-what-is-a-cross-tested-plan/) **Published:** June 24, 2015 **Author:** Watkins Ross Team **Excerpt:** A cross-tested plan is a type of retirement plan which favors older, long-term employees who are closer to retirement age. **Content:** A cross-tested plan is a defined contribution plan or a defined contribution plan and cash balance plan combination which favors older, long-term employees who are closer to retirement age. Under this design, the employer contribution percent going to owners and/or highly compensated participants can be much higher than that which would be allowed under a traditional defined contribution plan (i.e. profit sharing plan). This is permitted because the contributions are tested on a projected benefits basis rather than a contribution basis (testing must pass in order to ensure that the plan does not discriminate against non-highly compensated participants). This may allow for more flexibility in contribution allocations depending on whether or not those participants you wish to benefit at a higher level are older than the remaining participants. If you are looking to maximize the employer contributions to a select group of participants while keeping costs lower than otherwise would be permitted under a traditional plan, a cross-tested allocation method may work for you. Please contact your retirement plan administrator to discuss if this is right for you. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Cross-Tested Plans, Defined Contribution Plans, Optimization --- ### [Safe Harbor Contributions for Defined Contribution Plans](https://watkinsross.com/articles/2018-03-19-safe-harbor-contributions-for-defined-contribution-plans/) **Published:** March 19, 2018 **Author:** Watkins Ross Team **Excerpt:** There are several types of safe harbor contributions for defined contribution plans. Here is a breakdown of each of the types available. **Content:** ## TYPES OF SAFE HARBOR CONTRIBUTIONS **[Click here to download this Safe Harbor Contribution information (including examples)](https://watkinsross.com/wp-content/uploads/Safe-Harbor-Contributions-for-Defined-Contribution-Plans.pdf)** 1. **SAFE HARBOR NONELECTIVE CONTRIBUTION** A safe harbor nonelective requires at least a 3% safe harbor contribution to all eligible plan participants. A nonelective contribution is often the most cost-effective option for plans that are top heavy and make additional annual employer contributions. 2. **BASIC SAFE HARBOR MATCHING CONTRIBUTION** A basic safe harbor matching formula requires a match rate of 100% of employee deferrals up to 3% of compensation plus 50% of employee deferrals between 3%-5% of compensation, for a maximum match of 4% of eligible compensation. 3. **ENHANCED SAFE HARBOR MATCHING CONTRIBUTION** An enhanced matching formula must also provide a benefit equal to or greater than the maximum allowable basic safe harbor matching contribution (i.e. 4%). For instance, a match equal to 100% of deferrals up to 4% of compensation meets the enhanced safe harbor matching requirements. 4. **QUALIFIED AUTOMATIC CONTRIBUTION ARRANGEMENT (QACA)** An automatic enrollment feature automatically enrolls any eligible employee that fails to make an affirmative enrollment election in the plan at a specified deferral rate. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Defined Contribution Plans, Safe Harbor --- ### [Attribution Rules – The Family Tree](https://watkinsross.com/articles/2018-03-26-attribution-rules-the-family-tree/) **Published:** March 26, 2018 **Author:** Watkins Ross Team **Excerpt:** You don’t get to choose your family, and the same holds true with family attribution rules; but a company's ownership is critical for accurate testing. **Content:** They say you don’t always get to choose your family, and the same holds true with family attribution rules. Understanding a company’s ownership is vital for accurate nondiscrimination and top-heavy testing. Ownership is a principal factor when determining the [highly compensated employees](https://watkinsross.com/articles/2018-02-05-401k-plan-nondiscrimination-testing/) (HCEs) and key employees when running these tests. While it may be easy to spot the employees who have direct ownership, it’s important to understand that some family members also have an indirect ownership, called attribution. Under the attribution rules, certain family members are considered “own” the same interest; effectively making them an owner without any actual ownership. In general, [Section 318 of the Internal Revenue Code](https://www.gpo.gov/fdsys/pkg/USCODE-2010-title26/pdf/USCODE-2010-title26-subtitleA-chap1-subchapC-partI-subpartC-sec318.pdf) says an individual shall be considered as owning the stock owned, directly or indirectly, by or for his spouse and his children, grandchildren, and parents. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans, Retirement Plans **Tags:** Attribution, Compliance, Plan Administration --- ### [Defined Contribution Plan Termination Procedure](https://watkinsross.com/articles/2018-04-30-defined-contribution-plan-termination-procedure/) **Published:** April 30, 2018 **Author:** Watkins Ross Team **Excerpt:** There are various reasons a company decides to terminate their defined contribution retirement plan, but specific steps must be followed. **Content:** There are various reasons a company decides to terminate their defined contribution retirement plan. As a general rule, you can terminate your plan at your discretion but specific steps must be followed. Our [Defined Contribution Plan Termination Procedure](https://watkinsross.com/wp-content/uploads/DC-Plan-Termination-Procedures-2020.pdf) provides detailed termination procedures but, in general, you must: 1. Terminate the plan by Adopting Resolution. 2. Distribute Notice to Affected Parties of Intent to Terminate. 3. File the plan for a final determination letter (optional, but recommended). 4. Perform final allocation and distribute plan assets. 5. After all assets have been liquidated, file final Form 5500 with the IRS. Please [contact Watkins Ross](https://watkinsross.com/contact/) if you are considering a plan termination to ensure all requirements and deadlines are met. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Defined Contribution Plans, Plan Administration, Plan Termination --- ### [Why an Unbundled TPA is Better for a Defined Contribution Plan](https://watkinsross.com/articles/2018-05-29-why-an-unbundled-tpa-is-better-for-a-defined-contribution-plan/) **Published:** May 29, 2018 **Author:** Watkins Ross Team **Excerpt:** Having one provider might seem like an effective and cost-saving solution, but having an unbundled TPA is better for several reasons. **Content:** If you have a qualified employer sponsored defined contribution retirement plan, you need 3 types of services: investment, recordkeeping and administrative. In a bundled arrangement, these services are provided by the same organization, usually the record keeper or investment platform. At first glance, having one provider might seem like an effective and cost-saving solution, but having an unbundled TPA (Third Party Administrator) is better for the following reasons: 1. **Better Plan Design** A TPA will work closely with the plan sponsor to design a plan that is custom tailored to fit the company’s goals and objectives. TPAs specialize in ERISA requirements and can recommend a sophisticated plan design with greater flexibility. 2. **Better Services** TPA firms generally employ highly educated and experienced staff who keep up to date with compliance and regulatory issues. A TPA has a greater interest in your plan, therefore plan sponsors receive proactive administration and guidance. 3. **Better Administration** The TPA’s job is to preserve the plan’s qualification status. Qualified plan rules are quite complex and include running compliance testing, reviewing and calculating contributions and preparing tax forms. A good TPA will review data, reduce errors and prevent compliance mistakes. 4. **Better Communication** A TPA can communicate changes in the law, recommend plan design changes, foresee future problems and offer creative solutions. When the employer calls the TPA with a question, they speak with a dedicated professional who is familiar with their plan. 5. **Better Fee Transparency** The TPA fees are transparent and the employer has the flexibility to decide if the fees will be paid through the plan (as part of the plan assets or from the participant accounts) or pay them outside of the plan and deduct the full amount as a business expense. Qualified defined contribution plans are most effective when they are designed to meet the objectives of the employer and their employees. Watkins Ross is an unbundled TPA servicing defined contribution plans (401(k), 403(b), ESOP, etc.), as well as actuarial and administrative support services for defined benefit plans and post-retirement medical plans. Please [contact us](https://watkinsross.com/contact/) if you are interested in receiving a quote for our unbundled TPA services or have any questions regarding our services. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Defined Contribution Plans, Plan Administration, TPA --- ### [Salary Deferral Limits in Defined Contribution Plans](https://watkinsross.com/articles/2018-07-02-salary-deferral-limits-in-defined-contribution-plans/) **Published:** July 2, 2018 **Author:** Watkins Ross Team **Excerpt:** The 2018 contribution limit for salary deferrals is $18,500 and includes both pre-tax and after-tax Roth deferrals. This limit is aggregated across plans. **Content:** When determining the salary deferral limits in defined contribution plans, it’s important to remember the following rules: ## CONTRIBUTION LIMITS ARE AGGREGATED ACROSS PLANS The 2018 contribution limit for salary deferrals is $18,500 and includes both pre-tax and after-tax Roth deferrals. This is an individual limit determined each calendar year and is aggregated across 401(k) plans, 403(b) plans, SIMPLE plans and SARSEP. ## WHY IS THIS IMPORTANT? This is important to remember for mid-year new hires or rehires. For example, if your plan allows immediate entry and you hire someone mid-year, you will need to verify how much they contributed during that calendar year to their prior plan to accurately calculate the amount they can contribute to your plan. ## AGE 50 CATCH-UP CONTRIBUTIONS The salary deferral limit is increased by $6,000 for participants who are age 50 or older by the end of the year. This means that participants age 50 or older by year-end can contribute $24,500 in 2018. ## ADDITIONAL INFORMATION Additional information about the salary deferral limits can be read in the IRS’ article [How much Salary Can You Defer if You’re Eligible for More Than One Retirement Plan](https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-youre-eligible-for-more-than-one-retirement-plan). Please contact your Watkins Ross associate if you have specific questions regarding the salary deferrals applicable to your plan and employees. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans **Tags:** Deferral Limits, Defined Contribution Plans, Plan Limitations --- ### [RMDs for Missing Participants in Defined Contribution Plans](https://watkinsross.com/articles/2018-07-23-rmds-for-missing-participants-in-defined-contribution-plans/) **Published:** July 23, 2018 **Author:** Watkins Ross Team **Excerpt:** Minimum distributions are required for certain participants age 70½. How do you handle RMDs for missing participants in defined contribution plans? **Content:** Under Internal Revenue Code 401(a)(9), minimum distributions are required for certain participants who attain age 70½. As the Plan Administrator, how do you handle RMDs for missing participants in defined contribution plans? A “missing participant” can be either one where there is not a valid address or contact information or, an individual who is unresponsive to communications from the plan sponsor. The Required Beginning Date (RBD) for *non-owners* is the later of the April 1 of the calendar year following the calendar year in which an employee reaches age 70½ *or* the April 1 of the calendar year following the calendar year in which employee *terminates* employment. An *owner’s* RBD is the April 1 of the calendar year following the calendar year in which employee attains age 70½. For additional information about the RMD rules, read [Required Minimum Distributions from Defined Contribution Plans](https://watkinsross.com/articles/2017-02-21-required-minimum-distributions-from-defined-contribution-plans/). An RMD failure puts the plan at risk for its qualification status. Fortunately, the IRS issued a Memorandum for Employee Plans (EP) Examinations on October 19, 2017 for plans that are unable to make a RMD distribution due to the plan’s inability to locate the participant. The memorandum states that during an audit EP examiners shall not challenge a qualified plan for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan has taken the following steps: - Searched plan and related plan, sponsor and publicly-available records or directories for alternative contact information - Used a commercial locator service; a credit reporting agency; or a proprietary internet search tool for locating individuals; and - Attempted contact via the United States Postal Service (USPS) certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers). If the above steps are not followed, then examiners may challenge a plan for violation of the RMD requirements. Therefore, plan sponsors should keep documentation of their search efforts as proof these steps were taken. As noted in the IRS instructions for [Fixing Common Plan Mistakes – Failure to Timely Start Minimum Distributions](https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-failure-to-timely-start-minimum-distributions), if participants or beneficiaries do not receive their minimum distribution timely, they (not the plan) are subject to a 50% penalty tax. However, the IRS may waive the penalty if reasonable cause can be shown and steps are being taken to correct the error. Please contact Watkins Ross if you have specific questions pertaining to your plan participants’ RMDs. **Categories:** 401(k) Plans **Tags:** Defined Contribution Plans, RMDs --- ### [National TPA Day](https://watkinsross.com/articles/2018-10-16-national-tpa-day/) **Published:** October 16, 2018 **Author:** Watkins Ross Team **Content:** John Hancock has declared October 16, 2018 the fourth annual National TPA Day as a way to acknowledge what TPAs do to make 401(k) plans work the way they should. We love helping our clients understand and implement retirement plans designed to meet their goals. As a TPA, we offer: - customized plan designs to meet your corporate goals; - communicate legislative and regulatory changes; - compliance expertise; - delivering high-level consulting the technical aspects of a retirement plan. Please [contact us](https://watkinsross.com/contact/) if you have any questions about how we can help you implement the right plan for your company. **Categories:** 401(k) Plans **Tags:** TPA --- ### [Safe Harbor Plan Amendments](https://watkinsross.com/articles/2018-10-29-safe-harbor-plan-amendments/) **Published:** October 29, 2018 **Author:** Watkins Ross Team **Excerpt:** Do you or your clients have a 401(k) plan that could benefit from amending to include a safe harbor provision? **Content:** Do you or your clients have a 401(k) plan that could benefit from amending to include a safe harbor provision? There is still time left to make the change this year! Generally, the plan must be amended **on or before** **November 30, 2018** to implement the change. ## ADVANTAGES ### ADVANTAGES TO UTILIZING SAFE HARBOR CONTRIBUTIONS: - Automatically pass the ADP/ACP nondiscrimination testing - Automatically satisfies top-heavy testing if the safe harbor contribution is the only Employer contribution made - Allows all employees to contribute the maximum allowable amounts to their 401(k) ($18,500 plus $6,000 if age 50, for 2018) ### TYPES OF SAFE HARBOR CONTRIBUTIONS: - Basic match contribution - Enhanced match contribution - QACA basic and enhanced contributions – this feature also incorporates an automatic contribution arrangement with a minimum 3% deferral rate that is escalated annually 1% up to 6% but no more than 10% - 3% Non-elective contribution Please note: IRS requires all of the above contributions to be fully vested along with no last day or service requirement; however, if the QACA safe harbor contribution is utilized, the Employer may elect to fully vest after two (2) years of service. To read more about each type of safe harbor contribution, check out our blog, [Safe Harbor Requirements for Defined Contribution Plans.](https://watkinsross.com/articles/2018-03-19-safe-harbor-contributions-for-defined-contribution-plans/) ### IMPORTANT DATES FOR EXISTING PLANS: - Your plan generally must be amended **on or before November 30**to implement or change the safe harbor provision - Safe Harbor Notice must be provided to all employees **on or before December 1** - Safe Harbor Notices are required annually – 30-90 days prior to the beginning of a plan year. ### IMPORTANT DATES FOR NEW PLANS: - New plan must be in place for at least 3 months (e.g. October 1st– this provides all eligible participants a chance to defer) - Safe Harbor Notice must be provided to all employees **on or before September 1** - Safe Harbor Notices are required annually – 30-90 days prior to the beginning of a plan year ## DISADVANTAGES ### DISADVANTAGES OF A SAFE HARBOR 401(K) PLAN: - Employer has committed to providing a safe harbor contribution for the plan year; however, IRS does provide circumstances in which the safe harbor contributions can be reduced or suspended - IRS requires specific annual deadlines and requirements - It can be relatively expensive, depending on the salaries of your employees Typically, the benefits of utilizing the safe harbor contribution provision outweigh the disadvantages. If you would like to discuss implementing or changing a safe harbor feature, please contact [Jill Northup](mailto:jnorthup@watkinsross.com) or [Sheila Freund](mailto:sfreund@watkinsross.com). We recommend clients discuss this issue with their legal counsel, financial advisor and CPA/accountant, so if you have interested clients, and questions arise, please contact us. **Categories:** 401(k) Plans, 403(b) Plans, Profit Sharing Plans **Tags:** Plan Changes, Safe Harbor --- ### [2018 Census Request Reporting](https://watkinsross.com/articles/2018-10-31-2018-census-request-reporting/) **Published:** October 31, 2018 **Author:** Watkins Ross Team **Excerpt:** The 2018 census request is a tool for plan administrators to report the employee data required for annual testing and other important business changes. **Content:** Can you believe we’re already in the last quarter of 2018? This means it’s time to think about completing the 2018 census request for calendar plan years! Whether you’ve done this for years or you’re new to the process, it’s important to remember why we ask for this data. **The census request is a tool for plan administrators to report the employee data required for annual testing and other important business changes that occurred in the prior year.** Reporting accurate information is critical since missing/incorrect ownership and employee data (including compensation, hours, termination dates, etc.) may affect test results. And, an inaccurate test could lead to complicated corrections and possible penalties. ## WHAT DO I REPORT? The [Census Request Overview ](https://watkinsross.com/articles/2015-12-03-census-request-overview/)provides detailed explanations regarding compensation (one of the most important pieces of information reported!). It also covers contributions reported, your employees’ data, highly compensated & key employees, and mergers/acquisitions. ## ANY QUESTIONS? Asking questions now may avoid fixing an inaccurate test later. So, if you have questions regarding the information you should report on the census, contact your Watkins Ross associate. **Categories:** Defined Benefit Plans, Retirement Plans **Tags:** Census Request --- ### [Bipartisan Budget Act of 2018](https://watkinsross.com/articles/2018-11-05-bipartisan-budget-act-of-2018/) **Published:** November 5, 2018 **Author:** Watkins Ross Team **Excerpt:** The Bipartisan Budget Act of 2018 impacts hardship distributions from defined contribution plans. **Content:** The Bipartisan Budget Act of 2018 is a federal law regarding the US spending and budget that was signed into law by the President on February 9, 2018. ## Impacts on Hardship Distributions **from Defined Contribution Plans** For plan years beginning January 1, 2019, the Bipartisan Budget Act of 2018: - Eliminates the 6-month suspension requirement after a hardship. - Eliminates the requirement that a participant obtain a plan loan to qualify for a hardship. - Expansion of sources available for a hardship can include earnings on elective deferrals, as well as amounts attributable to Qualified Nonelective Contributions (QNECs) and Qualified Match Contributions (QMACs). This expansion also includes ADP test safe harbor contributions. However, it does not appear to include Qualified Automatic Contribution Arrangement (QACA) safe harbor contributions. Although the above changes seem relatively easy to implement, questions have been raised; including how the above will affect recordkeeping, transition rules, plan amendments, and employee/employer communications. We are waiting for additional guidance from the IRS regarding these questions. Once IRS guidance has been received and the amendment is available, we will contact our clients that utilize the WR Volume Submitter Adoption Agreement to further explain the amendment process. Qualified plans that provide for a hardship provision will need to be amended by the last day of the plan year beginning on or after January 1, 2019 (e.g., adopt the amendment by December 31, 2019 for a calendar year plan). Additionally, IRS just released new safe harbor special tax notices applicable to all retirement plans to use with distribution packages. There are separate notices for [Roth](https://watkinsross.com/wp-content/uploads/Sample-402f-Roth-Notice.pdf) and [non-Roth](https://watkinsross.com/wp-content/uploads/Sample-402f-Non-Roth-Notice.pdf) distributions. All special tax notices should be updated to reflect the latest changes made by IRS. A sample of each Notice is attached. Please contact [Jill Northup](mailto:jnorthup@watkinsross.com) or [Sheila Freund](mailto:sfreund@watkinsross.com) if you have questions regarding the above issues. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans **Tags:** Government Regulation, Industry Info --- ### [Finding Missing Participants in Your Defined Contribution Plan](https://watkinsross.com/articles/2018-11-26-finding-missing-participants-in-your-defined-contribution-plan/) **Published:** November 26, 2018 **Author:** Watkins Ross Team **Excerpt:** Finding missing participants can be frustrating but employers carry the responsibility to provide disclosures to them just as often as active employees. **Content:** When participants terminate employment many often leave their defined contribution accounts with their former employers. Over time, many simply forget they even had an account. In these cases, they are still participants even though they are not actively contributing to their accounts. Finding missing participants can be frustrating and time-consuming, but employers and plan sponsors have the fiduciary responsibility to provide communication, statements and disclosures to them just as often as active employees. Lately, the [Department of Labor (DOL) and IRS have been closely monitoring how employers are dealing with missing participants](https://www.irs.gov/retirement-plans/missing-participants-or-beneficiaries) and increasing their enforcement activity. Missing participants include participants and beneficiaries who are either unresponsive to requests sent by the plan, or whose mail is returned to the employer or plan sponsor as undeliverable. The DOL has been ramping up its audits of retirement plans with missing participants and putting pressure on plan sponsors to locate former employees or their beneficiaries so they can receive the benefits they’re owed by the plan. Finding these participants can be frustrating, however, an employer’s fiduciary obligation under ERISA requires that they take all reasonable measures necessary to locate a missing terminated participant with an account balance and distribute that account balance when efforts to secure a distribution election have failed. The DOL and IRS have therefore published the following guidance for locating missing participants. Failure to use these search methods can be a breach of fiduciary duty under ERISA. ## Finding Lost or Missing Participants - **Use Certified Mail:** Send a certified letter to the participant’s last known address. If the participant signs for it, you have confirmation of receipt and verification the mail was delivered. - **Check Related Records:** Review other company and plan related records for an updated information. Your company’s health insurance or payroll provider may have a more up-to-date mailing address. You may also want to ask current employees if they know how to get in touch with the missing participant. - **Check with a Designated Beneficiary:** If the missing participant has completed beneficiary information you may be able to contact the designated beneficiaries to obtain current contact information. You should also check employee records for an “in case of emergency” contact. This person may know how to reach the participant. - **Use Free Electronic Search Tools:** There are several free internet search options including popular social network sites, search engines and public record databases such as those for licenses or real estate holdings. You can also **try contacting missing participants through their cell phone number and email address since they are less likely to change this information.** We recommend that you verify and update both of these things as part of your employee exit interview. Before an employee leaves, HR can also verify the participant’s current address and remind them about their 401(k) accounts. **Make sure all your efforts to locate missing participants is well documented. Records of steps taken to actively search for missing participants can be used to defend against possible DOL claims.** ## Additional Search Methods If an employer or plan sponsor is unable to find the missing participant using the above search steps, you must consider additional search methods that may involve fees, such as fee-based internet searches, commercial locator services, credit reporting agencies, information brokers and investigative services. The DOL suggests that plan fiduciaries should consider relevant facts and circumstances to determine if other action should be taken. One factor to consider is the size of the account balance in question. Records should be kept documenting your decision to pursue or not pursue a particular approach. The additional costs associated with these search methods can be charged to the lost participant’s account so some methods would only be reasonable for large account balances. Please contact your Watkins Ross administrator if you have questions about locating missing participants in your defined contribution plan. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans **Tags:** Defined Contribution Plans, Plan Administration --- ### [Year-End Bonuses and Compensation (Defined Contribution Plans)](https://watkinsross.com/articles/2018-12-05-year-end-bonuses-and-compensation-defined-contribution-plans/) **Published:** December 5, 2018 **Author:** Watkins Ross Team **Excerpt:** Your plan document will dictate if bonuses are excluded from the definition of compensation and special rules for the treatment of deferrals on bonuses. **Content:** It’s that time of year when many companies will give year-end bonuses to employees. When running these through your payroll, be sure you know if you need to deduct employee deferral elections from the bonus. Your plan document will state whether or not bonuses are excluded from the definition of compensation and special rules for the treatment of deferrals on bonuses. Compensation errors are common among retirement plans. In fact, it’s listed as one of the[ Top 10 errors found in audits.](https://www.irs.gov/retirement-plans/top-ten-failures-found-in-voluntary-correction-program) To ensure you are operating your plan in accordance with your plan document, you should take the following steps: 1. Read your plan document. It seems simple, yet failure to read and understand how your plan defines the definition of compensation could cause expensive errors. 2. Make sure your HR and payroll people know what compensation should and should not be included for contributions. This is especially important if you have a new plan, new HR representative, new payroll provider or a change has been made to your plan document. 3. Do an internal audit. Review your payroll files to verify contributions are being calculated correctly. The earlier a mistake is caught, the easier and cheaper it is to fix. Accuracy of the year-end compliance work is incredibly important. Since the testing may entail multiple definitions of compensation and complex testing procedures, it is essential to submit [accurate census information](https://watkinsross.com/articles/2015-12-03-census-request-overview/) since this could dramatically impact the test results. If your plan excludes bonuses, overtime, fringe benefits, etc. from compensation, make sure your payroll is deducting deferral contributions from the correct compensation. Additionally, make sure you are allocating employer contributions such as match or profit sharing on the correct compensation amount. As the plan sponsor, you are responsible to ensure the plan is being administered according to the plan document provisions. Therefore, if your plan document doesn’t reflect how you are actually handling payroll, talk to your document provider to see if your plan can be changed. If you have questions about your plan’s definition of compensation, please contact your Watkins Ross Retirement Plan Administrator. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans **Tags:** Defined Contribution Plans, Year End --- ### [Year-End Required Minimum Distributions (Defined Contribution Plans)](https://watkinsross.com/articles/2018-12-05-year-end-required-minimum-distributions-defined-contribution-plans/) **Published:** December 5, 2018 **Author:** Watkins Ross Team **Excerpt:** Failure to take your required minimum distribution could result in tax penalties, such as a 50% excise tax on the amount that was not withdrawn.  **Content:** If you or your employees must take year-end required minimum distributions (RMD) from your defined contribution plan by December 31, there are a few rules to consider: - If you have a RMD from a 401(k) plan, the RMD amount must be calculated separately. You cannot lump the amount together with another plan account or IRA. RMDs must be taken from each plan individually. - RMD’s are **not** eligible for a rollover. If you are taking a distribution from a qualified plan, you should first take your RMD in cash, and then rollover the remainder of your account. If you roll your entire account balance to an IRA without taking your RMD, you have an excess contribution to the IRA account. This can be corrected with no taxes consequences if you contact your IRA custodian and have the excess amount removed, with earnings, by October 15th of the following year. If the excess contribution is not removed, you incur a 6% excise tax penalty per year until corrected. - If the account holder died during the year, the RMD must still be made. In the following year, the RMD will be recalculated based on the age of the beneficiary. Failure to take your RMD could result in tax penalties, such as a 50% excise tax on the amount that was not withdrawn. If you cannot locate a participant that is due an RMD, read [RMDs For Missing Participants in Defined Contribution Plans.](https://watkinsross.com/articles/2018-07-23-rmds-for-missing-participants-in-defined-contribution-plans/) For more information, read the IRS’ [Retirement Plan and IRA Required Minimum Distributions FAQs.](https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions#5) **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans **Tags:** Defined Contribution Plans, Distributions, Year End --- ### [Changes to Hardship Rules](https://watkinsross.com/articles/2018-12-27-changes-to-hardship-rules/) **Published:** December 27, 2018 **Author:** Watkins Ross Team **Excerpt:** Regulatory changes as a result of the Tax Cuts and Jobs Act of 2017 and the Bipartisan Budget Act of 2018 may impact certain provisions of your 401(k) Plan. **Content:** Recent regulatory changes as a result of the Tax Cuts and Jobs Act of 2017 (“Tax Cuts Act”) and the Bipartisan Budget Act of 2018 (“Budget Act”) may impact certain provisions of your 401(k) Plan. Many of these changes will become effective the first day of the plan year that begins in 2019. The most significant changes are designed to ease the complexity of hardship withdrawals from 401(k) plans: 1. Suspension of Ability to Make Salary Deferrals during 2019. You may eliminate the 6-month suspension requirement for any hardship distribution taken during the 2019 Plan Year. Effective January 1, 2020, this provision will be mandatory. 2. Application of Suspension Requirements for Pre-2019 Plan Year Hardship Distributions. If you have a participant who has received a hardship distribution prior to the beginning of the 2019 Plan Year, you may eliminate the deferral suspension effective January 1, 2019. 3. Earnings on Source Accounts. If you elect to, earnings on pre-tax salary deferrals and Roth deferrals may now be included in amounts available for a hardship withdrawal. 4. Need to Obtain All Available Loans. You may elect to no longer require a participant to take a non-taxable loan from the Plan prior to requesting a hardship withdrawal. This provision is only applicable if your Plan allows for loans. 5. Sources for Hardship Distributions. If you elect, hardship distributions can now be allowed from Safe Harbor Employer contributions (i.e. match or nonelective), Qualified Nonelective Contributions (QNEC) and/or Qualified Matching Contributions (QMAC). This provision is only applicable if your Plan includes these money sources. If your Plan allows for hardship withdrawals, it should be amended accordingly for the above changes by your document service provider. Please contact your Watkins Ross administrator with specific questions about your Plan. **Categories:** 401(k) Plans, 403(b) Plans **Tags:** Compliance, Hardship --- ### [Who Retains The Beneficiary Forms?](https://watkinsross.com/articles/2019-02-19-who-retains-the-beneficiary-forms/) **Published:** February 19, 2019 **Author:** Watkins Ross Team **Excerpt:** A beneficiary form determine who is entitled to the defined contribution retirement plan benefits upon the death of a participant. Is your form current? **Content:** Beneficiary designation forms are used to determine who is entitled to the defined contribution retirement plan benefits upon the death of a participant. While participants complete these forms upon entering a plan, it’s often overlooked if the participant has a change in status through marriage, divorce, etc. Maintaining updated beneficiary forms is crucial to maintaining your qualified retirement plan. So, the question becomes, who is responsible to retain the beneficiary forms? The Plan Administrator/Sponsor is typically responsible for retaining the beneficiary designation forms; however, many may not realize it is their responsibility when the participants enroll electronically. It’s important that the Plan Administrator is aware of their responsibility to avoid potential legal disputes. As noted in Ilene Ferenczy’s article, [Who’s Got My Beneficiary Designation … Or Who Lost It??,](http://ferenczylaw.com/solutions-in-a-flash-whos-got-my-beneficiary-designation-or-who-lost-it/) a dispute can easily arise when a previously divorced participant forgets to update the beneficiary form after remarrying. The intent is often for the children to be the beneficiary, but the new spouse may have the rights. If there is a dispute over who the beneficiary is, the plan could end up in litigation. *“When a participant dies, you don’t want your historically bad recordkeeping procedures to cause more grief for his or her loved ones. Help your participants plan for the future by encouraging them to fill out beneficiary designations, and then make it a priority to keep those forms safe.”* (Ilene Ferenczy, [Who’s Got My Beneficiary Designation … Or Who Lost It??)](http://ferenczylaw.com/solutions-in-a-flash-whos-got-my-beneficiary-designation-or-who-lost-it/) Please contact your Watkins Ross plan administrator if you have questions regarding your plan’s beneficiary designation forms. For information about locating missing beneficiaries in your defined contribution plan, read [Finding Missing Participants in Your Defined Contribution Plan](https://watkinsross.com/articles/2018-11-26-finding-missing-participants-in-your-defined-contribution-plan/). **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Cash Balance Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans, Retirement Plans **Tags:** Beneficiary Forms, Plan Administration --- ### [ADP/ACP Testing Deadline](https://watkinsross.com/articles/2019-02-25-adp-acp-testing-deadline/) **Published:** February 25, 2019 **Author:** Watkins Ross Team **Excerpt:** Corrective distributions must be processed by March 15 for a failed ADP/ACP test for a calendar plan year. Take these steps to prepare. **Content:** March 15 is a well-known date in the defined contribution world. This is the ADP/ACP testing deadline; meaning this is the date that corrective distributions must be processed for a failed ADP/ACP test (Actual Deferral Percentage/Actual Contribution Percentage test, respectively) for a calendar plan year (01/01-12/31). ## What can you do to prepare? Make sure you have submitted accurate data to your TPA to complete the testing. Incorrect or missing data can prolong the process and require costly and time-consuming corrections. This is important to remember when you are sending the year-end data to your TPA and when you’re administering the plan throughout the year. Plan errors (in reporting or in practice during the year) can result in penalty and interest costs. You will also incur additional administrative charges from your TPA to correct the mid-year plan errors or any testing completed using incorrect data. ## What happens if your test fails? You have 2.5 months after the end of the plan year to correct the excess contributions. “If the employer doesn’t distribute/recharacterize excess contributions by 2 ½ months (six months for certain EACAs) after the plan year of excess, the employer is liable for a 10 percent excise tax on excess contributions.” (IRS, [401(k) Plan Fix-It Guide](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-the-plan-failed-the-401k-adp-and-acp-nondiscrimination-tests)) **Should you panic if your testing fails?** No. Sit back, take a deep breath and read our blog, [What A Failed ADP/ACP Test Means](https://watkinsross.com/articles/2018-02-12-what-a-failed-adp-acp-test-means/). You may be surprised to find out that a failed test isn’t necessarily a bad thing because it indicates your highly compensated employees deferred the maximum amount allowed by law. The 2020 corrective distributions are due on March 16, 2020. To stay up-to-date on the plan deadlines for your defined contribution plan, download our [2020 Defined Contribution Compliance Calendar.](https://watkinsross.com/wp-content/uploads/defined-contribution-compliance-calendar-watkins-ross.pdf) **Categories:** 401(k) Plans **Tags:** ADP/ACP, Deadline, Plan Testing --- ### [Initial Required Minimum Distributions (Defined Contribution Plans)](https://watkinsross.com/articles/2019-03-11-initial-required-minimum-distributions-defined-contribution-plans/) **Published:** March 11, 2019 **Author:** Watkins Ross Team **Excerpt:** Are you meeting the initial required minimum distributions of your contribution plan? Learn more about what conditions need to be met with Watkins Ross! **Content:** In general, participants in a defined contribution plan are required to receive minimum distributions after turning age 70.5 if they have separated from service **or** are a 5% owner in the company (regardless if the owner is actively employed). The initial Required Minimum Distribution (RMD) must begin by April 1 in the year following turning age 70.5 with the subsequent RMDs due by December 31. Age 70.5 is calculated as 6 months after the day the participant turned age 70. For example, a retired participant that turned age 70 on June 30, 2018 reached age 70.5 on December 30, 2018; therefore, the initial RMD is due April 1, 2019. The following RMD would be due December 31, 2019 and then each 12/31 thereafter. However, if this same participant had a July 1 birthday, he/she would turn age 70.5 on January 1, 2019 and, therefore, could choose to receive the first RMD until April 1, 2020, with the next RMD on December 31, 2020. April 1 is quickly approaching, so now is the time to verify if you or any of your employees must receive an initial RMD on April 1, 2019. For additional information about Initial Required Minimum Distributions, please refer to our other resources: [Year-End Required Minimum Distributions (Defined Contribution Plans)](https://watkinsross.com/articles/2018-12-05-year-end-required-minimum-distributions-defined-contribution-plans/) [RMDs For Missing Participants in Defined Contribution Plans](https://watkinsross.com/articles/2018-07-23-rmds-for-missing-participants-in-defined-contribution-plans/) Please contact your Watkins Ross Retirement Plan Administrator with questions regarding your specific plan participants. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Defined Contribution Plans, RMDs --- ### [2019 IRS Operational Compliance List](https://watkinsross.com/articles/2019-03-28-2019-irs-operational-compliance-list/) **Published:** March 28, 2019 **Author:** Watkins Ross Team **Excerpt:** The 2019 IRS Operational Compliance List has been posted! This guide helps plan sponsors understand the compliance changes effective in the upcoming year. **Content:** Attention qualified retirement plan sponsors: The IRS has posted the 2019 [IRS Operational Compliance List.](https://www.irs.gov/retirement-plans/operational-compliance-list) The intent is to assist plan sponsors in being aware of compliance changes effective in the upcoming year with regard to their qualified retirement plans. The list includes new rules for hardship distributions, retirement plan relief for hurricane victims, and extension of past relief under 401(a)(4) nondiscrimination testing for closed defined benefit plans. Also, did you know you should be reviewing your retirement plan at least twice a year for compliance? Read more at, [Review Your Retirement Plan](https://watkinsross.com/articles/2019-05-20-review-your-retirement-plan/). Please contact your Watkins Ross representative with any questions. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans, Retirement Plans **Tags:** Business Management, Compliance, IRS, Plan Administration --- ### [2020 Plan Limits Released](https://watkinsross.com/articles/2019-11-07-2020-plan-limits-released/) **Published:** November 7, 2019 **Author:** Watkins Ross Team **Excerpt:** The 2020 Cost-Of-Living Adjustments affecting employee benefit plans include the annual limits for Social Security Taxable Wage Base. **Content:** The IRS recently announced the 2020 Plan Limits affecting employee benefit plans. These include the annual limits for Social Security Taxable Wage Base and Retirement Plan Dollar Limitations. Review the [2020 Plan Limits](https://watkinsross.com/wp-content/uploads/cost-of-living-plan-limitations-watkins-ross.pdf) here. If you have questions regarding the limits that apply to your plan, please contact your Watkins Ross team member. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Plan Limitations --- ### [CARES Act – Suspension of Loan Payment Provision](https://watkinsross.com/articles/2020-08-17-cares-act-suspension-of-loan-payment-provision/) **Published:** August 17, 2020 **Author:** Watkins Ross Team **Content:** If adopted by the plan, this applies to all qualified employees still working as well as qualified furloughed employees and those on a temporary leave of absence. Loan payments due between March 27, 2020 and December 31, 2020 may be delayed for 1 year and extends the 5-year repayment period accordingly. This applies to any loans on the books as of March 27, 2020 or any new loans taken between March 27, 2020 and December 31, 2020. Following the end of the suspension period, the loan will be re-amortized to adjust the remaining payments (plus interest accrued during the suspension period) over the remaining period of the loan, plus the suspension period. Please contact your Watkins Ross administrator if you have questions about how this applies to your plan. **Categories:** 401(k) Plans **Tags:** CARES Act --- ### [It is Time Again to Rewrite Your Defined Contributions Plans](https://watkinsross.com/articles/2020-09-04-it-is-time-again-to-rewrite-your-defined-contributions-plans/) **Published:** September 4, 2020 **Author:** Watkins Ross Team **Content:** IRS has recently announced that employers with pre-approved defined contribution plans (401(k), profit sharing and money purchase) will need to have their plan documents rewritten within the next two years. The deadline to do so is July 31, 2022. IRS goes through this process every six years. If you utilize the WR pre-approved defined contribution plan, we will be providing you with a draft adoption agreement for you to review. We recommend that we schedule a call to discuss your current plan provisions. We believe this is an excellent opportunity to ensure your plan is meeting your needs and the needs of your employees. Please contact your Watkins Ross administrator if you have any questions. **Categories:** 401(k) Plans **Tags:** Business Management, Defined Contribution Plans, Plan Administration --- ### [SECURE Act: Plan Amendment Options](https://watkinsross.com/articles/2020-12-14-secure-act-plan-amendment-options/) **Published:** December 14, 2020 **Author:** Watkins Ross Team **Content:** The SECURE Act was signed into law on December 20, 2019. Your plan will require an amendment prior to the end of your 2022 plan year. Below are provisions that you will be able to elect in the plan amendment: - Qualified Birth or Adoption Distribution (“QBAD”): A Participant may request a distribution of up to $5,000 (per child or Eligible Adoptee) as a QBAD. This $5,000 limit shall be reduced by QBADs made with respect to the same child or Eligible Adoptee by other plans maintained by the Employer or a related employer described in Code §414(b), (c), (m), or (o). A QBAD must be made during the 1-year period beginning of the date on which a child of the Participant is born or on which the legal adoption of an Eligible Adoptee by the Participant is finalized. An “Eligible Adoptee” is an individual, other than a child of the Participant’s spouse, who has not attained age 18 or is physically or mentally incapable of self-support. If your Plan permits rollover contributions, a Participant receiving one or more QBADs from this plan may make one or more contributions in an aggregate amount not to exceed the amount of such QBADs. The Plan will treat such contributions as rollover contributions. - Distribution of Required Minimum Distributions (“RMDs”) required to be made after December 31, 2019: An Affected Participant’s Required Beginning Date (“RBD”) shall not be earlier than April 1 of the calendar year following the year the Affected Participant attains age 72. For purposes of determining an Affected Participant’s RBD, an Affected Participant will be treated as a more than 5% owner if he or she was a 5-percent owner (as defined in Code §416(i)(B)) as to the Plan Year ending in the calendar year the Participant attains age 72. If an Affected Participant (born after June 30, 1949) dies prior to the Participant’s RBD, and the Participant’s sole Designated Beneficiary is the Participant’s surviving spouse, then the RMDs to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 72, if later. - If you sponsor a Money Purchase Plan or Defined Benefit Plan, in-service distributions may be amended from age 62 to age 59 ½. If you utilize our document services, WR will be adopting the IRS required interim amendment on your behalf and communicate with you directly. If another provider prepares your plan document, please forward a copy of the amendment to your Watkins Ross representative, when available. **Categories:** 401(k) Plans **Tags:** Plan Changes, SECURE Act --- ### [The Importance of Beneficiary Forms](https://watkinsross.com/articles/2015-01-21-the-importance-of-beneficiary-forms/) **Published:** January 21, 2015 **Author:** Watkins Ross Team **Content:** It’s an easy detail to overlook. Participants occasionally overlook the importance of updating their beneficiary form. It is even more important to update their form if their status has changed, such as divorce, marriage, etc. Maintaining updated beneficiary forms annually is crucial in maintaining your defined contribution plan. **Categories:** Latest News **Tags:** Beneficiary Forms, Plan Administration --- ### [Defined Benefit: Fast Facts & Planning Tips](https://watkinsross.com/articles/2016-04-14-defined-benefit-fast-facts-planning-tips/) **Published:** April 14, 2016 **Author:** Watkins Ross Team **Content:** The National Retirement Planning Coalition has designated April 11-15 as the 2016 National Retirement Planning week. In celebration, each day this week Watkins Ross will share some fast facts and planning tips on the various types of retirement plans we service. Thursday’s focus: ## FAST FACTS - In 2015, the average cost to provide a traditional defined benefit plan for an employee was $3.98 per working hour. - New ASC and GASB disclosure rules regarding a defined benefit plan’s funded status significantly impacts the financial statements of plan sponsors who maintain underfunded plans. - In 2013, the total number of traditional defined benefit plans covered by PBGC was just over 22,600, which is slightly less than 50% of the number of plans covered in 1997 and approximately only 20% of the number covered in 1985. - More than half of all defined benefit plan sponsors have a frozen (or partially frozen) plan and approximately one-third anticipate freezing their plan in the next two years. - In 2009, the Social Security Administration issued a report on the effect of freezing defined benefit plans and subsequently instating enhanced defined contribution plan accruals. The study showed that this combination would typically result in lower anticipated retirement plan incomes for baby boomers (most significantly late wave boomers); however, post-baby boomers may have higher benefits under this approach. ## PLANNING TIPS ### 1. SHIFT THE PARADIGM Once a defined benefit plan is frozen, the plan sponsor should no longer consider it an employee benefit plan but rather a debt to be planned for, managed, and repaid. ### 2. DON’T RUN…”DE-RISK” As defined benefit plan sponsors understand the impact risk factors like market volatility, longevity, and changing interest rates may have on the funded status of their plans, they can take steps to reduce the adverse impact these factors have on their plan, while also improving the plan’s funded status and reducing administration and funding costs to the plan sponsor. This process is known as de-risking. While not all de-risking strategies are appropriate for all defined benefit plans, most plans will benefit by implementing one or more such strategies. ### 3. FIGURE OUT A PATH TO GLIDE ON A Glide Path for a defined benefit plan is an investing road map to progressively reduce the investment risk and maintain the plan’s funded status as that status improves. When combined with liability driven investing (LDI), a Glide Path can smooth out the volatility and increase the predictability of a plan’s funding. ### 4. CONSIDER THE PAYOFF OF PAYOUTS By offering a onetime lump sum payout option to participants with vested deferred benefits in a defined benefit plan, sponsors reduce PBGC and administrative costs while also limiting financial and demographic risks to their plan’s funded status. ## WHAT NOW? ### WORK TOGETHER Implementing a comprehensive de-risking strategy and getting a defined benefit plan on the road to financial health requires coordination and communication between the plan sponsor, the financial managers of the assets, and the plan’s actuaries so that all parties understand how to frame potential outcomes and evaluate alternatives in a risk management context, all while considering the correlations with the risks that affect the sponsor’s core business. #### To learn how to ensure the financial health of your defined benefit plan, contact the team at Watkins Ross. **Categories:** Defined Benefit Plans **Tags:** Business Tips, Defined Benefit Plans, Plan Selection --- ### [The SECURE Act and Part-Time Employees](https://watkinsross.com/articles/2020-11-19-the-secure-act-and-part-time-employees/) **Published:** November 19, 2020 **Author:** Watkins Ross Team **Content:** If your plan requires employees to work 1,000 hours in a 12-month period to become eligible, you’ll soon need to start watching hours more closely. Having this 1,000-hour rule generally excludes those employees who work part-time, seasonal or temporary. The SECURE Act signed in December 2019 has made changes for plan years beginning after December 31, 2020. Long-term part-time (LTPT) employees must now be allowed to make salary deferrals to a plan. In order to be eligible, these LTPT employees must complete at least 500 hours of service in three consecutive 12-month periods and have attained age 21. Plans will need to start tracking these hours beginning January 1, 2021. This means the earliest a LTPT employee can begin making deferrals is January 1, 2024. This does not apply to union or 403(b) plans. It’s important to note the following: - Hours prior to January 1, 2021 are not taken into account for purposes of determining eligibility. - LTPT employees will only be allowed to defer, and may still be excluded from becoming eligible for employer contributions such as match or profit sharing. - LTPT eligible employees are excluded from nondiscrimination and coverage testing, safe harbor contributions and in applying the top-heavy minimums. The SECURE Act also modified the vesting rules. Based on current guidance, if a plan sponsor chooses to provide these LTPT employees with an employer contribution, vesting service accrues at 500 hours each year, including years prior to 2021. It’s important to start thinking now about how this new rule will affect your plan, and prepare for how you will track hours. An amendment will be required by the last day of the plan year beginning on or after January 1, 2022 (December 31 for calendar year plans). Please contact your Watkins Ross representative if you have questions about your plan provisions. **Categories:** 401(k) Plans, Retirement Plans **Tags:** Part-Time Employees, SECURE Act --- ### [Retirement Plan Enrollment Best Practices](https://watkinsross.com/articles/2023-01-09-retirement-plan-enrollment-best-practices/) **Published:** January 9, 2023 **Author:** Watkins Ross Team **Excerpt:** Ensure your company possesses the retirement plan enrollment processes, forms, standards, and records required to avoid costly penalties. **Content:** January 1st is possibly the biggest enrollment period for retirement plans. After communicating to an employee that they are eligible for the plan, it’s important to be sure each employee completes the necessary forms. An enrollment form should be provided to each eligible employee so they have the opportunity to sign up for the retirement plan. Your company should have procedures in place for maintaining good enrollment records. These are especially important in case of an audit. ## Important Retirement Plan Enrollment Record Considerations Every employee should have a form or record on file of their retirement plan enrollment. Even if an employee declines to participate, you must keep records that you offered the enrollment and that they elected to opt out. Obtain a signed deferral election form for every newly eligible employee; this will offer verification that the enrollment was offered. If your retirement plan offers online enrollment, be sure you save copies of electronic notifications. Follow-up with employees who have not submitted their election. Retain good notes by saving copies of emails or memos sent to employees as further documentation of this communication. If your retirement plan incorporates an automatic enrollment feature, it’s imperative to have strong processes in place to determine who needs to be enrolled in a timely fashion and who will be responsible for doing so. Automatic enrollment requires an advanced and annual notice which must be provided. You should document when these notices were distributed. ## Retirement Plan Investment Options You should also double-check the employee has completed investment options. Even if they elect not to defer, if the company offers an employer contribution, investments will need to be selected. If your retirement plan has a Qualified Default Investment Alternative (QDIA) in place, be sure you have distributed the necessary notice that describes the QDIA and what happens when an employee does not make investment selections. ## Retirement Plan Deferral Election Changes Finally, check your retirement plan document or written administrative procedures to determine how often changes can be made to deferral elections. Many plans allow changes on a payroll-to-payroll basis, but if your plan has stricter rules, such as monthly, quarterly, or semi-annually change allowances, you will need to know at what times during the year employees can make changes. It is important to note employees can elect to defer 0% at any time. Making sure you have an enrollment election on file for every eligible retirement plan participant will eliminate any questions in the future in case of an audit or simply if the employee has questions later. Failure to offer enrollment to eligible participants or begin an employee’s deferral election is an operational error and may result in costly corrective procedures. It’s equally important to annually verify retirement plan beneficiary information; [read more about the importance of maintaining retirement beneficiary forms by clicking here](https://watkinsross.com/articles/2022-10-20-the-importance-of-maintaining-retirement-beneficiary-forms/). Watkins Ross partners with our clients by providing a dedicated team of [retirement plan professionals](https://watkinsross.com/services/#retirement-plans) to help navigate the complexities, rules, and regulations of retirement plan administration. Whether you’re seeking to improve your retirement plan enrollment process or simply have questions about the rules and regulations that pertain to your unique situation, Watkins Ross can help you meet your corporate objectives and reduce costly penalties. [Connect with our experienced retirement plan team here](https://watkinsross.com/contact/) for more information. **Categories:** Retirement Plans **Tags:** Business Management, Business Tips, Industry Info, Plan Administration, Retirement Plans --- ### [Retirement Plan Procedures, Practices, and Internal Controls](https://watkinsross.com/articles/2022-12-15-retirement-plan-procedures-practices-and-internal-controls/) **Published:** December 15, 2022 **Author:** Watkins Ross Team **Excerpt:** With the New Year right around the corner, now is a good time to review your retirement plan’s policies, procedures, and internal controls. **Content:** With the New Year right around the corner, now is a good time to review your retirement plan’s policies, procedures, and internal controls. Having strong internal controls and documenting procedures is important to safeguarding retirement plan compliance and ensuring you are operating your retirement plan properly. Documentation standards and internal practices also allow retirement plan sponsors to readily detect and prevent costly errors, consequently reducing risk and liability. Below are some general year-end retirement plan review guidelines: ## Employee Eligibility & Communication - What is the process for determining when an employee is eligible for retirement plan benefits? - Who is responsible for maintaining personnel records for retirement plan participants? - How are employees notified they are eligible for the retirement plan? - Who is responsible for distributing retirement plan notices to the employees and how are notices distributed? ## Contributions - How does an employee elect to make retirement plan contributions or make a change? - Who communicates retirement plan employee elections to payroll? - How are employee contributions remitted and deposited? - Who verifies the correct definition of compensation is being used when calculating retirement plan contributions? - Are contributions and deposit amounts verified and how often? - How are employer contributions determined and who ensures the correct contribution is made? ## Retirement Plan Distributions - How are retirement plan distributions requested, reviewed, and approved? - Who determines if an employee is eligible for a distribution? - How is vesting verified? - Who is responsible for completing and filing Form 1099-R? ## Retirement Plan Design & Administration - Is your retirement plan document updated regularly and timely? - Who determines Highly-Compensated Employees and Key Employees? - How is Controlled Group or Affiliated Service Group status determined? - Who completes the annual retirement plan testing? - Who is responsible for completing and filing annual forms? One last item to consider is the process of handling documentation and information distribution when retirement plan administrative employees retire, are terminated, or change jobs internally. Retirement plan records and information should be organized, saved, and easily identified for new employees taking over retirement plan administration responsibilities. The IRS states it is the plan sponsor’s responsibility to properly administer retirement plans; the IRS provides an [excellent checklist for retirement plan sponsors on their website.](https://www.irs.gov/pub/irs-pdf/p4531.pdf) If you’re seeking assistance with your year-end retirement plan administration review process or procedure development, look no further than the experienced actuaries at Watkins Ross. Our retirement plan team will review your plan documents to determine any gaps in procedure, compliance, or risk so you can start the new year confidently error-free. Learn more about [Wakins Ross retirement plan services by visiting our website](https://watkinsross.com/services/#retirement-plans) or [reaching out to our team here](https://watkinsross.com/contact/) for more information. **Categories:** Retirement Plans **Tags:** Business Management, Compliance, Industry Info, Retirement Plans --- ### [What Is a Top-Heavy Retirement Plan?](https://watkinsross.com/articles/2022-09-16-what-is-a-top-heavy-retirement-plan/) **Published:** September 16, 2022 **Author:** Watkins Ross Team **Excerpt:** What is a top heavy retirement plan and which action steps must be taken to stay IRS-compliant? Learn more on the Watkins Ross blog. **Content:** The IRS requires several annual nondiscrimination tests for defined contribution retirement plans, and the top-heavy test is one of those. A retirement plan is top-heavy when, as of the last day of the preceding plan year (the determination date), the total value of the plan assets of key employees exceeds 60% of the total value of the plan assets. A key employee is defined as either: 1. A more than 5% owner 2. A more than 1% owner with compensation greater than $150,000 3. An officer with compensation greater than $200,000 for 2022 As the top-heavy determination is based on retirement plan assets and balances, it is possible to become top-heavy even after a year in which no contributions are made. IRS top-heavy rules aim to ensure that lower-paid employees are receiving at least a minimum benefit in cases when the majority of retirement plan assets are owned by key employees. If the employer maintains more than one retirement plan, the plans must be combined for top-heavy determination. ## What Does It Mean to Be Top-Heavy? When a retirement plan is top-heavy, employers need to allocate a minimum contribution. This contribution is based on the contributions of key employees; the minimum is the lesser of 3% of total compensation for the entire plan year or the highest percentage of compensation contributed for a Key employee. Typically, the minimum contribution is 3% of compensation. Employee elective deferrals do not count towards this minimum. All non-key employees who were eligible to participate in the retirement plan (whether they deferred or not) and are employed on the last day of the plan year must receive the top-heavy minimum contribution. A minimum hour requirement cannot be imposed on this contribution. ## How to Avoid Top Heavy Minimum A safe harbor retirement plan may use safe harbor contributions towards satisfying the top-heavy minimum contributions. For example, a 3% nonelective safe harbor will fully satisfy the top-heavy minimum; while this option still contributes 3% of compensation to all employees, this is more predictable throughout the year and can help the retirement plan with other testing requirements, including ADP/ACP tests. However, if all key employees defer less than 3% of compensation, the top-heavy minimum can be limited to the highest deferral rate. For example, if all key employees defer only 1%, the top-heavy minimum will be 1% for all non-key employees. Similarly, if no key employees defer to the retirement plan, the top-heavy minimum can be 0% as well, in effect eliminating any employer contribution requirement. Are you seeking additional information about your retirement plan or wondering if your plan is subject to top-heavy retirement plan requirements? [Contact the experienced retirement plan actuaries at Watkins Ross](https://watkinsross.com/contact/) for a professional look into your retirement plan benefits. Together we’ll evaluate your retirement plan(s) for IRS compliance and ensure your benefit structure avoids unnecessary risk, requirements, and fees. **Categories:** Retirement Plans **Tags:** Business Tips, Financial Tips, Retirement Plans --- ### [The New IRS Pre-Examination Retirement Plan Compliance Program](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/) **Published:** August 9, 2022 **Author:** Watkins Ross Team **Excerpt:** Can a new IRS pre-examination retirement plan pilot program assist your business? Learn more about program requirements on the Watkins Ross blog. **Content:** On June 3, 2022, the IRS announced a pilot pre-examination retirement plan compliance program beginning in June 2022. Under the pilot program, the IRS will notify a qualified retirement plan sponsor by letter that their retirement plan has been selected for an upcoming examination. The retirement plan sponsor has 90 days to review retirement plan documents and operations for compliance with Code requirements and respond to the IRS. A retirement plan sponsor that receives a letter notifying of an upcoming IRS examination should strongly consider taking advantage of the IRS’s pilot program. If the retirement plan sponsor has questions, a name and phone number for the person at the IRS to contact will be provided in the letter. If the retirement plan sponsor does not respond within the 90-day window, the IRS will contact the retirement plan sponsor to schedule an examination of the retirement plan. To take advantage of the program, the retirement plan sponsor must provide the IRS with information showing either compliance or correction. The retirement plan sponsor’s response should show one (or more, if applicable) of the following: - The retirement plan is fully compliant with the issue the IRS has raised - The retirement plan was not compliant, but the issue is being or has been corrected - The retirement plan sponsor has identified and has corrected or is proposing to correct issues other than those raised by the IRS The IRS will review the information. If the IRS agrees with the retirement plan sponsor’s assertion that the retirement plan is compliant with the issue raised or that full and proper self-correction is possible (and has been completed or is in process), the IRS will issue a closing letter with no further contact. For mistakes that are not eligible for self-correction, the retirement plan sponsor may request a closing agreement, which will require payment of a sanction amount determined using the Voluntary Correction Program (VCP) fee structure. If, however, the IRS disagrees with the correction method, the retirement plan sponsor has requested a closing agreement in relation to the identified issue (i.e., self-correction is not permitted), or the retirement plan sponsor has identified other compliance issues, the IRS will determine whether to move forward with the examination (either on a full or limited scope). The IRS’s stated goal with the pilot program is to reduce taxpayer burden and reduce the amount of time spent by retirement plan sponsors and the IRS on retirement plan examinations. At the end of the pilot program, the IRS intends to evaluate the pilot pre-examination retirement plan program’s effectiveness and determine if the program should continue to be part of the IRS’s overall compliance strategy. Seeking more information about whether or not your retirement plan operations and documents adhere to IRS Code requirements? [Connect with experienced retirement plan consultants and actuaries at Wakins Ross](https://watkinsross.com/contact/) to learn more about our retirement plan services. **Categories:** Retirement Plans **Tags:** Compliance, Government Regulation, IRS, Retirement Plans, Sponsors --- ### [IRS Update - Retirement Plan Documentation Deadline](https://watkinsross.com/articles/2022-06-16-irs-update-retirement-plan-documentation-deadline/) **Published:** June 16, 2022 **Author:** Watkins Ross Team **Excerpt:** The IRS retirement plan documentation deadline is fast approaching. Read more about your retirement plan liability on the Watkins Ross blog. **Content:** In July 2020, the IRS announced employers with pre-approved defined contribution retirement plans (401(k), profit-sharing, and money purchase plans) will need to have their retirement plan documents rewritten within the next two years. **The deadline to do so is July 31, 2022.** The IRS goes through this process every six years. ## If your current retirement plan document has been drafted by your legal counsel: As the Plan Administrator of your retirement plan, you should contact your legal counsel to ensure your document has or will be restated accordingly. If the document has already been provided to you, you must execute the document with dates and signatures by July 31, 2022; otherwise, your document will not be compliant and you may need to correct it under an approved IRS correction program. It is important to remember any time you wish to make a change to your retirement plan document that you consult with your legal counsel. In most cases, your retirement plan document will require an amendment to incorporate any changes you wish to make. Any document updates must also be provided to us as your third-party administrator. The updates ensure we are properly administering your retirement plan. ## If you are on the Watkins Ross prototype document: If you are using our Retirement Plan Document Services, we may have already completed your restatement. If not, be assured that we are in the process of finalizing them. Please be sure that you have returned all signature pages to us for our files before the July 31, 2022 deadline. Have questions about your retirement plan documents and how IRS requirements impact your pre-approved defined contribution retirement plans? [Connect with Watkins Ross](https://watkinsross.com/contact/) today for a personalized look into your retirement plan structure, documentation, and IRS requirements. **Categories:** Retirement Plans **Tags:** Deadline, Government Regulation, IRS, Retirement Plans --- ### [Processing Retirement Plan Participant Contributions](https://watkinsross.com/articles/2022-05-19-processing-retirement-plan-participant-contributions/) **Published:** May 19, 2022 **Author:** Watkins Ross Team **Excerpt:** The US Department of Labor requires all employers follow a strict set of rules regarding retirement plan participant contributions to avoid costly errors. **Content:** Department of Labor (DOL) rules require that employers deposit retirement plan participant deferrals as soon as administratively possible. For small retirement plans (under 100 participants), this is typically a timeline of 7 business days. Large retirement plans (100 or more participants) must be as soon as reasonably possible, but absolutely no later than the 15th business day of the following month. However, if a large retirement plan shows that a typical deferral deposit can be done within, for example, 3 business days, that will be the deadline, as the Retirement Plan Sponsor has demonstrated the ability to do so. Procedures should be in place to ensure retirement plan deposits for employee deferrals and loan payments are made within the appropriate timeframe. When late retirement plan deposits occur, lost interest must be calculated and deposited on each late contribution and loan payment and deposited on behalf of the employees involved. In addition, there is a 15% excise tax on the interest amount which must be filed along with Form 5330. Per your Retirement Plan Document, participants may make changes to their deferral amounts throughout the Plan Year. This may be per paycheck, or quarterly, for example. Keep your retirement plan participants informed of upcoming deferral change days. When entering retirement plan deferral and employer contributions, it is of utmost importance to ensure the money is going to the correct participant’s account and to the correct money source (i.e., pre-tax, Roth, match, etc.). Each money source may have its own vesting schedule and distribution rules, so it is imperative that retirement plan deposits are categorized correctly. When funds are deposited into the retirement plan incorrectly, this can also lead to additional contributions from the employer to correct the issue. For example, if Retirement Plan Participant A’s deferrals are deposited into Retirement Plan Participant B’s account, and subsequently distributed, the employer must make a contribution to Retirement Plan Participant A’s account to make them whole. Another example involves profit-sharing contributions with a vesting schedule that are deposited as a safe harbor match, which is immediately vested. Suppose Retirement Plan Participant A receives such a deposit and subsequently takes a distribution. The profit-sharing money, incorrectly coded as a safe harbor match, will be fully available to Retirement Plan Participant A, rather than following the vesting schedule. Retirement Plan Participant A will be overpaid, and the employer will need to pay additional funds into the forfeiture account to correct this error. If you find an error has been made with your retirement plan participant contributions, please [contact your Watkins Ross administrator](https://watkinsross.com/contact/). The sooner we can catch and correct retirement plan errors, the lower the correction cost will be. **Categories:** Retirement Plans **Tags:** Business Management, Department of Labor, Legal & Laws, Plan Deposits, Retirement Plans --- ### [Retirement Plan Compensation Considerations](https://watkinsross.com/articles/2022-04-19-retirement-plan-compensation-considerations/) **Published:** April 19, 2022 **Author:** Watkins Ross Team **Excerpt:** Avoid retirement plan compensation definition miscalculations by following these simple steps from Watkins Ross’ experienced retirement plan actuaries. **Content:** A common operational failure for retirement plans is when plan sponsors fail to apply the correct definition of compensation for retirement plan testing and benefit allocation purposes. Using an incorrect compensation total can impact the average deferral percentage (ADP) and actual contribution percentage (ACP) tests, leading to an inaccurate “pass”, or triggering a refund of excess deferral or contribution unnecessarily. It can also impact correct calculations of employee deferral, employer match, and profit-sharing amounts. To ensure the correct compensation total is used, refer to your retirement plan document. It is important to note whether certain types of compensation are excluded for different plan purposes, limiting compensation with regards to statutory limits, and computing compensation based on the correct period. Some examples of compensation types are salary, overtime, bonus, commissions, and fringe benefits. It is important to note how each type of compensation is used for each plan purpose. The IRS has a [401(k) Fix-It Guide](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-you-did-not-use-the-plans-definition-of-compensation-correctly-for-all-deferrals-and-allocations) along with suggestions for avoiding mistakes. ## How To Avoid Retirement Plan Compensation Definition Mistakes - Perform annual reviews of the retirement plan operations. - If the retirement plan document is amended, check the definitions against the old document, noting any differences. Have a centralized person or department responsible for maintaining all plan documents. - If you amend your retirement plan document, communicate those changes to everyone involved in the plan’s operation. Retirement plan sponsors should develop an internal communication mechanism to timely and accurately advise plan administrators and outside service providers (outside plan consultant, actuary and/or third-party administrator/record keeper) of changes. - Provide proper training of in-house personnel who determine compensation to understand the plan document. - Know what your third-party retirement plan administrators have agreed to provide. They may be relying on you for information, such as compensation and deferral amounts used in their work. Retain a copy of your third-party administrator service contract including any updated contracts; and keep a summary of what’s being supplied to the plan by the third-party administrator, actuary, or consultant. Keep this service contract and summary with the person responsible for maintaining all plan documents. - Try to simplify your retirement plan’s definition of compensation and use the same definition for multiple purposes. Seeking assistance with your company’s retirement plan documents and definition of compensation? Avoid miscalculations by [connecting with the experienced retirement plan actuaries at Watkins Ross](https://watkinsross.com/contact/). Together we can review your retirement plan documents, perform annual retirement plan reviews and assessments, and ensure your retirement plan documents meet both IRS and organizational requirements. **Categories:** 401(k) Plans, Retirement Plans **Tags:** 401k Plans, Business Tips, Financial Tips, Retirement Plans --- ### [Enrolling New Participants in Your Retirement Plan](https://watkinsross.com/articles/2022-03-14-enrolling-new-participants-in-your-retirement-plan/) **Published:** March 14, 2022 **Author:** Watkins Ross Team **Excerpt:** Looking to enroll new participants in your retirement plan? Visit the Watkins Ross blog to learn about retirement plan eligibility, deferrals, and forms. **Content:** The first step for enrolling new participants in your retirement plan is to determine their eligibility and entry date. Per your retirement plan document, determine the age and service requirements to enter the retirement plan. Once employees have met all retirement plan entry requirements, they will join the retirement plan on the next retirement plan entry date per your retirement plan document. It is possible that a rehired former retirement plan participant re-joins the retirement plan immediately upon the rehire date. Your retirement plan document will outline the rehire procedures. We recommend you contact your Watkins Ross administrator for assistance when you have a rehired employee. The Retirement Plan Sponsor is responsible for monitoring eligibility and notifying employees. During the Retirement Plan Year, you should continually update your list of employees to determine if anyone has met the requirements to become a participant. Once an employee becomes eligible to participate, you should: - Inform the employee that they are now eligible to participate in the retirement plan - Have the employee complete a Beneficiary Form and an Enrollment Form - Distribute Required Participant Notices (including fee disclosures) - Give the employee a copy of the Summary Plan Description (SPD) within 90 days of the date they become a Participant You must keep copies of the beneficiary and enrollment forms in your records. You should also ensure you maintain accurate address and contact information for each participant. It is recommended to do this at least annually. Failure to implement elective deferrals or allow an eligible employee to participate may result in corrective contributions to be made by the employer. Fortunately, the Internal Revenue Service (IRS) has provided relief for these errors via the Employee Plans Compliance Resolution System (“EPCRS”). The EPCRS is a system of IRS-approved corrections that allow sponsors of retirement plans to resolve various types of failures and still continue to maintain the plan’s tax-favored status. Usually, the failure may be corrected by making a contribution equal to 25% of the missed deferral (plus any missed matching contributions and earnings). However, if the error is caught within the first 3 months, this corrective contribution is not necessary. You must provide a notice to the affected participants within 45 days of the date on which the proper deferrals started occurring and provide the enrollment materials immediately. Once you notice something has gone wrong, please notify Watkins Ross immediately. The sooner we can catch and correct an error, the lower the correction cost will be. Looking to enroll new participants in your retirement plan? [Connect with Watkins Ross today](https://watkinsross.com/contact/) to receive a personalized look into your retirement plan enrollment requirements. Our experienced retirement plan administrators are available to help guide you through the proper documents, notifications, and deferral timelines you need to avoid IRS penalties. **Categories:** Retirement Plans **Tags:** Enroll, New Participants, Retirement Plans --- ### [What Are Controlled Groups and Controlled Group Rules?](https://watkinsross.com/articles/2022-02-10-what-are-controlled-groups-and-controlled-group-rules/) **Published:** February 10, 2022 **Author:** Watkins Ross Team **Excerpt:** Learn more about controlled groups, retirement plan rules, brother-sister controlled groups, and attribution rules in Watkins Ross’ latest article. **Content:** Controlled group rules exist to prevent business owners from subdividing their company into two separate companies – one employing highly compensated employees (HCEs) with a retirement plan and the other employing non-highly compensated employees (NHCEs) with a lesser plan or no retirement plan at all. A controlled group is a group of companies that have shared ownership and, by meeting certain criteria, are eligible to combine their employee bases into one 401(k) plan. A simple example is a parent-subsidiary group in which the parent corporation owns 100% of its subsidiary or subsidiaries. However, there are many more complicated rules that make this analysis less straightforward. There are brother-sister controlled groups, for example. These generally consist of a group of companies that have five or fewer owners who are individuals, trusts, or estates that satisfy an 80% common ownership test and a 50% identical ownership test. There are also “Attribution” rules. Under these rules, the ownership interest of certain family members is added to the direct ownership of an individual. For example, if a husband and wife each have a 40% ownership stake in a company, each spouse would be considered to own 80% (40% direct + 40% attributed) of the company for controlled group purposes. Attribution rules are as follows: ![](https://watkinsross.com/wp-content/uploads/attribution-rules-1.jpeg "attribution-rules-1 - Watkins Ross")Since nondiscrimination and coverage tests for qualified retirement plans must be run on a controlled group basis it is extremely important that those running the annual tests be informed of any common ownership between companies, and any family groupings. If there is any doubt regarding controlled group status, it is recommended that the advice of an attorney be sought. Failed tests must be corrected within the prescribed time frame as failure to do so could result in IRS disqualification of the plan. Are you wondering how to navigate controlled group rules within your company? [Connect with the Watkins Ross Client Management Team](https://watkinsross.com/contact/) to obtain a detailed look at your company’s retirement plan structure. With the help of our experienced actuaries, Watkins Ross can provide the information you need to avoid penalties and disqualification. **Categories:** 401(k) Plans, Health Plans, Retirement Plans **Tags:** Attribution Rules, Business Management, Controlled Groups, Retirement Plans --- ### [402(g) Limit on Elective Deferrals – It’s Personal](https://watkinsross.com/articles/2022-01-10-402g-limit-on-elective-deferrals-its-personal/) **Published:** January 10, 2022 **Author:** Watkins Ross Team **Excerpt:** Code section 402g limits the amount you can defer to a 401k plan. Did you know it applies at an individual level, not a plan level? Read on to learn more. **Content:** Code section 402(g) limits the amount an individual can defer to a 401(k) plan during a calendar year, and it applies at an individual level, not at a plan level. An individual’s elective deferrals are the sum of all pretax and Roth deferrals to a 401(k) plan plus any salary reductions under a 403(b) plan, a SAR-SEP, and SIMPLE-IRA. Because the 402(g) limit is a personal limit, the total contributions to all plans for the year are used to determine whether the maximum is exceeded. Code section 401(a)(30) requires that the deferrals to a 401(k) plan for any participant not exceed the 402(g) limit. Therefore, if a participant defers more than the 402(g) limit within a single 401(k) plan, the plan’s tax qualification may be threatened. If a participant does exceed the applicable Code section 402(g) limit for the calendar year, the excess amount must be distributed and must be included in the individual’s gross income. Please note that if you are at least age 50 at any time during the calendar year, you may exclude any catch-up contributions that you are eligible for in determining whether or not the 402(g) limit has been exceeded. Do you have additional questions regarding your elective deferrals? [Connect with a Watkins Ross actuary](https://watkinsross.com/contact/) today to discuss your retirement plans and determine whether or not you need to take extra steps to avoid penalties. **Categories:** 401(k) Plans, Retirement Plans **Tags:** 402(g) Forms, Elective Deferrals --- ### [To Bond, or Not to Bond, That Is the Question](https://watkinsross.com/articles/2021-12-17-to-bond-or-not-to-bond-that-is-the-question/) **Published:** December 17, 2021 **Author:** Watkins Ross Team **Excerpt:** Pension and/or Other Post-Employment Benefit plan sponsors are considering issuing taxable Pension Obligation Bonds to close retirement plan funding gaps. Let’s discuss the benefits and risks of doing so. **Content:** Many public employer sponsors of pension and/or Other Post-Employment Benefit (OPEB) plans are considering issuing taxable Pension Obligation Bonds (POB) as a way of closing any funding gaps that might exist in their retirement plans. Not only does using the proceeds of such bonds for retirement plan funding immediately improve the funded status of that plan, but there exists the possibility of arbitrage – that is, proceeds from the bonds could, once deposited into the retirement plan, reap the expected rate of return on those plan assets in excess of the bond rate. One obvious risk associated with such a funding strategy is the possibility that the targeted return on plan assets is not achieved. But how big is this risk and how significant is it? After all, wouldn’t a plan sponsor have to make up the shortfall whether or not a POB was used as a funding device? A second, maybe not as dire but still of some consequence, risk would be investment returns significantly in excess of the targeted return. In such a situation, a contribution less than what is being required to repay the bond could be generated making the total cost to the employer higher if issuing a bond than it would have been had a bond not been issued and used for plan funding. In such cases, excess assets would be accumulating in the retirement plan and would not otherwise be accessible for other projects while bond financing continues. As an example, suppose stochastic asset return modeling were done in conjunction with projecting plan liabilities in order to assess the risk that cash demands from the plan sponsor would be more or less if issuing POB in order to improve plan funding. Certainly, the likelihood that plan assets perform less well than the cost of financing the bonds would be of key importance. However, the risk associated with asset performance significantly higher than expected or needed could be valuable information as well. Having information about that risk could then lead to conversations about the proper level of risk-seeking assets in the plan if some value of excessive returns is lost when funding with a POB. Another set of outcomes of interest to the plan sponsor would be worse case scenarios. That is, what is the largest shortfall scenario generated with and without a bond? Or, will funding patterns be more stable with a POB or is asset volatility exacerbated when bond proceeds are co-mingled with plan assets? Having as much relevant information as possible when considering whether or not to fund one’s retirement plan using Pension Obligation Bonds serves not only the plan trustees and fiduciaries but is in the best interest of all stakeholders including plan participants, investment managers, taxpayers, and bondholders. Are you wondering how POBs can potentially influence your public employer pension or OPEB plan? [Connect with Watkins Ross today](https://watkinsross.com/contact/) to receive a customized look into your individual plan details by one of our qualified actuaries: **Christian R. Veenstra**, FCA, ASA, MAAA, EA President [616-742-9244](tel:616-742-9244) **Troy A Schnabel**, MAAA, ASA Enrolled Actuary [616-742-9242](tel:616-742-9242) **Categories:** Retirement Plans **Tags:** Bonds --- ### [In-Service Distributions from Defined Benefit Plans](https://watkinsross.com/articles/2021-11-24-in-service-distributions-from-defined-benefit-plans/) **Published:** November 24, 2021 **Author:** Watkins Ross Team **Excerpt:** The Bipartisan American Miners Act of 2019 allows in-service distributions for retirement plan participants to commence at age 59 ½. However, in a defined benefit plan, to receive in-service lump sum distributions at age 59 ½, the distribution must satisfy certain thresholds. Read on to learn more about defined benefit plan lump sum distribution requirements. **Content:** In December 2019, the [Bipartisan American Miners Act of 2019 (BAMA)](https://www.congress.gov/bill/116th-congress/senate-bill/27/text) was signed into law and allowed in-service distributions for plan participants to commence at age 59 ½. The previous age requirement to allow these distributions was age 62. This provision is voluntary for plan sponsors and must be reflected in the current plan document to allow for age 59 ½ distributions. For a defined contribution plan, such as a [401(k)](https://watkinsross.com/services/401k-plans/) or [403(b)](https://watkinsross.com/services/403b-plans/), an in-service distribution at 59 ½ is a fairly straightforward process. However, in a [defined benefit plan](https://watkinsross.com/services/defined-benefit-plans/), such as a pension, an age 59 ½ in-service lump sum distribution must satisfy one of three thresholds before a Highly Compensated Employee or Highly Compensated Former Employee ([as defined by the IRS](https://www.irs.gov/retirement-plans/identifying-highly-compensated-employees-in-an-initial-or-short-plan-year)) can receive their lump sum in-service distribution: - After the payment of the lump sum, the value of the plan assets equals or exceeds 110% of the value of the plan’s current liabilities; - The value of the benefits paid to the participants are less than 1% of the plan’s current liabilities; or - The value of the benefits payable to a participant does not exceed $5,000. These safeguards are in place to ensure that the plan has sufficient assets to pay out other plan participants in the event of a significant lump sum in-service distribution from an owner or principal within an organization. However, many owners or principals are not aware of this provision when they implement a new plan. They are expecting the option to take their lump sum in-service distribution at age 59 ½ with the ability to roll this benefit to their existing defined contribution plan or IRA, continue to defer taxation on these monies, and be able to invest this benefit as aggressively as they would like. Since a defined benefit plan can be underfunded or overfunded at any specific point in time, most lump sum in-service distributions for Highly Compensated Employees are contingent on satisfying the 110% threshold mentioned above. In the event that the plan does not satisfy the “110% test”, the plan sponsor could make an additional plan contribution to get to the 110% threshold and allow the lump sum in-service distribution. Otherwise, the participant’s benefit will be restricted to an amount equal to the payments that would be made under the Single Life Annuity that is actuarially equivalent to the participant’s accrued benefit. [Contact the team at Watkins Ross](https://watkinsross.com/contact/) with questions about whether or not your defined benefit plan and status qualify for lump sum distributions. **Categories:** 401(k) Plans, 403(b) Plans, Defined Benefit Plans, Retirement Plans **Tags:** Defined Benefit Plans, Distributions --- ### [Financial Assistance to Troubled Multiemployer Pension Plans](https://watkinsross.com/articles/2021-10-21-financial-assistance-to-troubled-multiemployer-pension-plans/) **Published:** October 21, 2021 **Author:** Watkins Ross Team **Excerpt:** On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA), which includes relief for multiemployer pension plans. **Content:** On March 11, 2021, President Biden signed the [American Rescue Plan Act of 2021](https://www.congress.gov/bill/117th-congress/house-bill/1319/text) (ARPA), which includes much-needed relief for multiemployer plans. Many plans are already insolvent, with the PBGC paying the plan’s benefits at the lower PBGC guaranteed benefit amount. In addition, 12 plans have cut benefits to avoid going insolvent. The PBGC’s multiemployer program was itself projected to go insolvent in 2025, causing further cuts to the participants they were paying. ## ARPA Financial Assistance Program ARPA creates a financial assistance program for distressed Multiemployer plans to be administered by the PBGC. It also appropriated funds for the program in remarkably uncapped amounts that will likely exceed $86 billion. It will assist an estimated 200 of the most financially troubled plans out of the approximately 1,400 existing multiemployer plans. The Special Financial Assistance (SFA) will be paid as a simple lump sum payment that is projected to keep a plan solvent thru 2051 without a reduction in benefits. Plans that are eligible for the Special Financial Assistance (SFA) are those that are critical and declining, meaning they pay a lot more out in benefits and expenses than they gain in contributions and earnings and so they project to be insolvent in the not so distant future. Other plans that qualify for the SFA are already insolvent plans, which means the PBGC pays their benefits at the lower PBGC maximum guaranteed benefit level. The last group of plans that qualify are plans that cut benefits to avoid becoming insolvent. A requirement to receive the SFA is that any benefits that were cut must be retroactively restored, so retirees and beneficiaries will receive either a single large payment or a monthly installment paid over 5 years. ## Apply For Assistance Plans applying for assistance are required to go thru an application process with the PBGC that includes the requested amount of SFA. This amount is the difference between the projected benefit payments and expenses over 30 years and the current assets and present value of future expected contributions over 30 years. The assumptions for the projections are typically those the plan relied on when completing the latest zone certification done before January 1, 2021. Any proposed assumption change will be studied carefully by the PBGC for reasonableness. The PBGC won’t allow any interest rate assumption changes. A list of the plans that have applied for SFA, the amount of SFA requested, and the application status can be found [here, ](https://www.pbgc.gov/american-rescue-plan-act-of-2021)and then clicking the “status of applications” box at the right. For more information about the American Rescue Plan of 2021, visit our article [here](https://watkinsross.com/articles/2021-04-01-the-american-rescue-plan-of-2021-pension-plan-benefits/). Contact the team at [Watkins Ross](https://watkinsross.com/contact/) with any questions. **Categories:** Latest News, Multiemployer Plans, Retirement Plans **Tags:** Government Assistance --- ### [Best Practices for Missing Plan Participants](https://watkinsross.com/articles/2021-09-16-best-practices-for-missing-plan-participants/) **Published:** September 16, 2021 **Author:** Watkins Ross Team **Excerpt:** In January 2021, the Department of Labor (DOL) released new guidance on dealing with former employees or missing plan participants. **Content:** In January 2021, the [Department of Labor (DOL)](https://www.dol.gov/) released new guidance on dealing with missing participants – former employees with a retirement account balance. For whatever reason, the cannot be located to deliver withdrawal paperwork or cash-out checks. The DOL lists out ways plan sponsors should be searching for these missing participants. This includes using free online search engines, searching social media, and checking other employer records for alternative contact information. The DOL is beginning to crack down more on how plans handle missing participants so they can access their retirement funds. ### Best Practice – Create a Document First, best practices for plan sponsors include creating a document to outline the lost participant search procedure. Following a written policy, which provides for several methods of attempted contact, can show the DOL that the plan is making its best good-faith effort to track missing participants. An essential step in creating a plan procedure is to document the implementation of the process. Then, documenting each attempt at locating missing participants is important. ### Best Practice – Include an Address Update Form Next, another practice to implement is including an address update form in any exit interview paperwork and updating addresses with all plan participants at least yearly. In this case, preventing a former participant from becoming missing is much more efficient than trying to track someone down years down the line. ### Conclusion In conclusion, while not every missing participant is found, implementing multiple search opportunities will help in the long run if the DOL pushes more on these cases. As the quote goes: “The best time to plant a tree is twenty years ago; the second-best time is now”. Start implementing different search methods or preventative measures now, as in twenty years this will be the best time. While the best practices outlined by the DOL do not yet have the force and effect of law, this is a good idea of what the DOL will be implemented in the future. For more information, read the DOL’s press releases [here.](https://www.dol.gov/newsroom/releases/ebsa/ebsa20210112) As always, [contact us at Watkins Ross](https://watkinsross.com/contact/) for additional clarification. **Categories:** Retirement Plans **Tags:** Missing Participants, Plan Administration --- ### [Understanding Your Retirement Plan's Force-out Provisions](https://watkinsross.com/articles/2021-08-09-understanding-your-retirement-plans-force-out-provisions/) **Published:** August 9, 2021 **Author:** Watkins Ross Team **Excerpt:** Are you aware of your plan’s force-out provisions? How force-out’s are handled is a plan document issue and must be followed. **Content:** Are you aware of your plan’s force-out provisions? If not, now would be an excellent time to find out. What force-out limit does your plan contain? When you find out, send out the appropriate paperwork to terminated participants. How force-outs are handled is a plan document issue, and like any other plan provision, must be followed. [The Economic Growth and Tax Relief Reconciliation Act of 2001](https://www.congress.gov/bill/107th-congress/house-bill/1836) (“EGTRRA”) changed the cash out rule. It requires that account balances between $1,000 and $5,000 must be rolled over to an individual retirement account (“IRA”) if the plan sponsor has so chosen. The participant also may have elected another form of distribution. If your plan allows for mandatory rollovers, you must establish a written/signed agreement with an IRA provider. Additionally, policies and procedures must be in place to accommodate the rollovers. Participants must be given the appropriate distribution paperwork, including the 402(f) Notice of Special Tax Rules on Distributions. The rollover must be processed if no response is received by the end of the notice period (at least 30 days but no more than 90 days). Likewise, terminated participants with a balance of less than $1,000.00 must be forced out of the plan if they do not make an affirmative election. If the distribution is more than $200.00, the appropriate Federal and State withholding will apply. ## Understand Your Plan’s Additional Fees You may be paying additional fees for terminated participants. Many plan-related base fees on the number of participants with account balances. Certain plan disclosures/notices must be given to terminated participants, and once a plan exceeds 100 participants, an outside, independent audit must be performed, which can be quite costly. So, in addition to complying with your plan document on force-outs, it is fiscally responsible to force-out the appropriate terminated participants. Contact [Watkins Ross](https://watkinsross.com/contact/) if you need assistance with your employee 401(k) plans. *Written by Marybeth Jorgensen* **Categories:** 401(k) Plans **Tags:** Plan Administration, Retirement Plans --- ### [Getting 401(k) Participants Back in the Game in a Post Pandemic World](https://watkinsross.com/articles/2021-06-23-getting-401k-participants-back-in-the-game-in-a-post-pandemic-world/) **Published:** June 23, 2021 **Author:** Watkins Ross Team **Excerpt:** There is no doubt the coronavirus has impacted decisions many workers made during 2020. Read on to recover your 401(k) post pandemic. **Content:** There is no doubt the coronavirus pandemic has impacted financial decisions many workers made during 2020. As the primary means of saving for retirement, 401(k) post pandemic balances were adversely hit by the impact of these decisions. Some employees tapped into their savings by taking a loan or distribution from their accounts. Even more, they cut back or eliminated their contributions, as did their employers in an attempt to weather the storm. Markets began tumbling precipitously in March of 2020, and some participants panicked and took their savings out of the market. With the volatility and uncertainty of the economic and political climates, they were unwilling to get back in and potentially cost themselves the opportunity to recuperate the losses they incurred more quickly. As we approach the halfway point of 2021, [more and more Americans are getting vaccinated](https://www.npr.org/sections/health-shots/2021/01/28/960901166/how-is-the-covid-19-vaccination-campaign-going-in-your-state), businesses are reopening or increasing output, and unemployed or working remote employees are returning to the workplace. In the midst of the “new normal,” plan sponsors have been taking stock of how the pandemic has impacted their 401(k) plan participants, and many are asking, “how can we help our employees get back on track to a secure financial future?” The simple answer is *to help employees save more*, but what are some practical steps that employers can take to make that happen? ## What to Do With Your 401(k) Post Pandemic The first step in dealing with the emotional consequences that the negative financial impacts on savings may have had on participants so that they feel comfortable investing in their financial future. In particular, fear of the markets and the stress of their volatility needs to be addressed. Plan sponsors can work with their financial advisors and recordkeepers to demonstrate how markets have recovered from past crises (including this one) and provide examples of how “staying the course” has continually worked for savers in the past. Unless a participant’s fears of being in the market are addressed, nothing else a sponsor does to help them save will matter. Part of getting participants comfortable saving for retirement post pandemic is reminding them of and highlighting some of the safety nets that are already in place or available to them on a voluntary basis as an employee of the company. Benefits such as health insurance, short- and long-term disability, paid leave, child care reimbursement, supplemental health insurance, and life insurance are a vital components in an employee’s financial wellbeing. A thorough understanding of these benefits can give employees confidence that some “emergencies” are already being addressed which gives them the confidence they need to save more for retirement. Fringe benefits cannot address all financial emergencies. One thing that the pandemic brought to light was the lack of emergency savings that workers have available. In fact, at present, many workers could not even weather a $1,000 emergency expense. Consequently, more and more employers are allowing their employees to make employee after-tax (not Roth 401(k)) contributions to the 401(k) plan on a per payroll basis as a way for employees to build up an emergency fund in the 401(k) plan. These contributions can be voluntary or required and need not be subject to the same withdrawal restrictions as regular and Roth 401(k) contributions are. Most importantly, they can be withdrawn at any time on a tax free basis (the earnings would be subject to taxation). Employees can quickly establish or rebuild an emergency fund by saving just a little bit every paycheck via these after-tax contributions. In addition, employers can match these after-tax contributions the same way they match regular 401(k) contributions (formula can be identical or different), thereby helping employees save for retirement while the employees save for an emergency. ## How to Help Your Employees Save For an Emergency Post Pandemic This approach to emergency savings has a number of advantages. First, it happens automatically and relatively painlessly. Second, because the funds are in the 401(k) plan, they are not as susceptible to spur of the moment emotional decisions or use of a debit card and as a result, more likely to be available in a financial emergency. Third, the cost and fees of investing a small amount or maintaining a small balance is substantially less with significantly more conservative investment alternatives than would be available in a standard savings account. Fourth, it may expose employees who do not currently save for retirement to the 401(k) plan and increase their motivation to begin participating. Finally, once a suitable level of emergency funding is reached, these contributions can easily be converted to 401(k) contributions (regular or Roth) and those funds not used for an emergency are already in a retirement savings vehicle. Plans that are using this approach are seeing a couple of significant benefits. First, when an employee knows they have an emergency fund, they feel more comfortable saving for retirement. Second, the demand to access retirement savings via loan or hardship distribution is significantly reduced. ## How to Address Emotional Road Blocks in 401(k) Plans Post Pandemic Having addressed some of the emotional roadblocks to saving for retirement, employers can also take other steps to help participants rebuild their account balances at a faster pace. One group of participants in particular that sponsors should communicate with is participants who took out coronavirus related loans. These loans need to be repaid in three years and helping these participants plan to get the loan paid off ASAP will not only ease their tax burden but also help them rebuild their account. For obvious reasons, some employers found it necessary to suspend employer matching contributions given the economic uncertainty of the pandemic. 2021 would be an excellent time to reinstate or even increase the match and highlight it for the employees. The immediate and guaranteed return of a matching contribution on an employee’s 401(k) deferral may be just the carrot an employee needs to get them to restart their savings. ## How to Leverage Automatic Enrollment in Your 401(k) Plans Perhaps the most impactful tool an employer can bring to bear on a current plan’s participant savings rates is implementing automatic enrollment. Automatic enrollment doesn’t need to be complicated, and many employers had already implemented it in their plan for new hires. By “restarting” the 401(k) plan (perhaps with a restarted or increased match) and automatically enrolling ALL participants at a meaningful level (5% or more), participants can get their savings back on track and begin the road to rebuilding their savings. Finally, in developing a plan to get participants saving again, plan sponsors need to keep in mind they don’t need to go it alone. They can consult with their plan professionals (attorney, TPA, etc.) to determine which, if any, of these changes might make sense for their employees and plan. Financial advisors and recordkeepers are invaluable resources in developing and rolling out a communication and education strategy (and perhaps even a financial wellness program) that will engage participants and give them the confidence they need to start saving again. Employees need to know that every little bit they save helps and that over time small steps forward will get them back on the road to securing their financial future. Contact [Watkins Ross](https://watkinsross.com/contact/) if you need assistance with your employee 401(k) plans. **Categories:** 401(k) Plans **Tags:** 401k Plans --- ### [Common Mistakes to Avoid in Your Employee Benefit Plan](https://watkinsross.com/articles/2021-05-14-common-mistakes-to-avoid-in-your-employee-benefit-plan/) **Published:** May 14, 2021 **Author:** Watkins Ross Team **Excerpt:** Employee benefit plans are required to meet a number of requirements. In this article, we review the most common mistakes. **Content:** Managing employee benefit plans can be a challenge. Benefits can be complicated. If you make mistakes, it could mean costly fines or even criminal punishments. Here are common employee benefit plan mistakes and advice on how to avoid them. ## TIMELY DEPOSITS OF PARTICIPANT DEFERRALS [Department of Labor](https://www.dol.gov/) rules require that the employer deposit participant deferrals as soon as they can reasonably segregate from the employer’s assets as outline below: - For a small plan (fewer than 100 participants): The plan sponsor has 7 business days following when the sponsor withheld the deposit amounts. - For a large Plan (100 or more participants): The general rule is that the deferrals be deposited as soon as is reasonably possible after payday. However, in no event can the deposit be later than the 15th business day of the following month. The DOL is focusing on the earliest time the funds can be reasonably separated. If the employer can separate and deposit the contributions prior to these deadlines, they must do so. They are looking for deposits made with at least the same frequency and timing as your payroll tax withholding. Please be sure to deposit employee deferrals and loan payments within the appropriate timeframe. When late deposits occur, lost interest must be calculated on each late contribution and loan payment and deposited on behalf of the employees involved. Also, there is a 15% excise tax on the interest amount which must be paid along with filing a Form 5330. Late deposits must also be reported on the 5500 Tax Form. ## ENROLLING PARTICIPANTS IN EMPLOYEE BENEFIT PLANS Another common error when managing employee benefit plans is the failure of the employer to inform an employee of his eligibility to start contributing to the plan when he or she meets the plan’s eligibility requirements. Fortunately, the Internal Revenue Service (IRS) has provided relief for these errors via the Employee Plans Compliance Resolution System (“EPCRS”). The EPCRS is a system of IRS approved corrections that allow sponsors of retirement plans to resolve various types of failures and still continue to maintain the plan’s tax-favored status. Usually contributing equal to either a 50% or 25% of the missed deferral (plus any missed matching contributions and earnings) may correct the error. However, if the error is caught within the first 3 months, this corrective contribution is not necessary. Instead, you must provide a notice to the affected participants within 45 days of the date on which the proper deferrals started occurring and provide the enrollment materials immediately. ## MAKING DEPOSITS TO THE CORRECT SOURCES AND PARTICIPANT ACCOUNTS When entering your deferral and employer contributions, it is imperative to make sure the money is going into the correct participant’s account and the correct source of money. It is very easy to make a deposit meant for Jane Doe into John Doe’s account. When this happens, it takes extra time to fix the mistake. Often these mistakes are not identified until many months later when working on the annual valuation. In the meantime, the wrong participant could have had a loss to the account, or have been issued a distribution. When this happens, the correction from one account to another cannot be made and the plan sponsor will need to make the correct participant whole by contributing additional funds. Additionally, when funding the employer contribution such as a profit sharing, match or safe harbor, it is important to be sure to deposit the amounts into the correct source, or “bucket” of money. For example, a profit sharing contribution that is entered into a safe harbor source, or vice-versa, creates complications when balancing assets at year end. If a terminated participant is issued a distribution and money is in the wrong source, the participant may be paid out incorrectly based on vesting. If funds that are on a vesting schedule are deposited into a source that is 100% vested, the participant is overpaid. The employer will need to pay additional funds into the forfeiture account to correct the error. ## AVOID MISTAKES IN YOUR EMPLOYEE BENEFIT PLAN In summary, these types of employee benefit plan errors will cost the employer additional costs in fees and corrections. You should establish internal procedures for checks and balances when making your contributions and enrolling participants. We suggest you also check with your fund company, as they may have resources to assist with your enrollment and deposit process. Contact [Watkins Ross](https://watkinsross.com/contact/) if you need help deciphering your employee benefit plan. **Categories:** Defined Benefit Plans **Tags:** Business Tips, Plan Administration --- ### [The American Rescue Plan of 2021: Pension Plan Benefits](https://watkinsross.com/articles/2021-04-01-the-american-rescue-plan-of-2021-pension-plan-benefits/) **Published:** April 1, 2021 **Author:** Watkins Ross Team **Excerpt:** The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021. It contains many provisions affecting pension plans. **Content:** Will the [American Rescue Plan Act of 2021](https://www.congress.gov/bill/117th-congress/house-bill/1319/text) benefit your pension plan? The American Rescue Plan Act of 2021 (ARPA) became law on March 11, 2021. It contains many provisions affecting pension plans. How it will affect your pension plan depends on your plan’s financial health. ## AMERICAN RESCUE PLAN ACT OF 2021: MULTIEMPLOYER PLANS For a Multi-Employer Plan in poor and declining financial health, the new law goes far in assisting. The ARPA includes a modified version of the Butch Lewis Act. This is also referred to as the Emergency Pension Plan Relief Act of 2021 (EPPRA). EPPRA restores financial health to roughly 185 plans or about 15% of all multiemployer plans. EPPRA also provides funds to make benefit payments for the next 30 years including making whole payments that were suspended. This one-time payment does not need to be paid back; however, some strings are attached such as investment guidelines on the cash infusion. According to current projections, the cost of this relief is $86 billion. ### How to Qualify for the One-Time Payment - Be in critical and declining status - Have suspended benefits with Treasury approval under MPRA - Have a funded status under 40% and significantly more retirees than active participants - Be insolvent There is some relief for multiemployer plans not in one of these categories. However, primarily funding relief relies on improving economic conditions and a favorable investment climate if the plans are to improve financial health. The new law allows a temporary delay in the designation of multiemployer plans as in endangered, critical, or critical and declining status. Additionally, allows the plan to keep the same status as the prior year. It allows for an extension of the existing Funding Improvement and Rehabilitation plans. EPPRA allows enhanced asset smoothing and allows actuarial losses due to Covid-19 (investment, mortality, or other) to be amortized over 15 years. What is uncertain at this time is what will happen with Employer Withdrawal Liability. The PBGC has the freedom to write the regulations and guidance and may require that Employer Withdrawal Liability be calculated for the next 10-15 years, ignoring the one-time cash payment under EPPRA. ## AMERICAN RESCUE PLAN ACT OF 2021: SINGLE EMPLOYER PLANS Single Employer Plans struggling to make the minimum required contributions will find two provisions of the new law that will greatly reduce their contribution burden. This allows plan sponsors to allocate scarce resources to other enterprises or payroll. ### Provision 1 is Interest Rate Relief ARPA provides that the segment rates for determining a plan’s minimum funding fit within a narrow corridor around the 25-year averages. This new corridor is narrower than the corridor under HATFA and MAP21. ARPA provides for a corridor of 95% – 105% around the 25-year averages. It stays this narrow until 2026 when it starts to widen by 5% a year until it gets 70%-130%. The law also imposes a 5% floor on the 25-year averages, which means that no segment rate will be lower than 4.75 (95% of 5%) at least until 2026. While these provisions go into effect for 2020. A plan sponsor may elect to defer the implementation until 2021 or 2022. Since higher interest rates will lower the plan’s funding liability, it will also raise the plan’s AFTAP for the year, possibly affecting the plan’s IRC Section 436 benefit restrictions. Because of this provision, the law allows the plan sponsor may elect to defer the law for all purposes or defer for only determining the AFTAP. ### Provision 2 is Extended Amortizations ARPA replaces 7-year amortizations with 15-year amortizations for all future years after a “fresh start” where all existing amortizations and installments are reduced to zero. Then, a 15-year amortization of the unfunded liability will be set up. Each year following, a new 15-year amortization of the new gains or losses will be created. This provision of the law goes into effect in 2022. However, a plan sponsor may elect the “fresh start” as early as 2019. Single employer plans in better financial straits will find the above law changes allows them more flexibility. Keep in mind that contributing significantly less to their plan, while allowed, could hinder competing objectives such as reducing PBGC premiums, funding to terminate the plan, or funding a benefit increase. ## AMERICAN RESCUE PLAN ACT OF 2021: CONTACT US However, these changes do provide flexibility concerning determining the timing of their contributions by making requiring a much smaller minimum required contribution one year and a potentially much higher contribution much higher than the minimum made in the following year. Contact [Watkins Ross](https://watkinsross.com/contact/) if you need help deciphering this act and how it affects you. **Categories:** Defined Benefit Plans, Latest News **Tags:** Pension --- ### [What Business Deductions Can I Take In 2020? Set Up a Retirement Plan!](https://watkinsross.com/articles/2021-03-11-what-business-deductions-can-i-take-in-2020-set-up-a-retirement-plan/) **Published:** March 11, 2021 **Author:** Watkins Ross Team **Excerpt:** The SECURE Act permits businesses to adopt a qualified retirement plan by the due date of the employer’s tax return, including extensions. **Content:** Despite the pandemic, many small businesses saw profits in 2020. As they begin calculating their final tax liability, they now realize that their liability exceeds expectations. They ask themselves the question, what other business deductions can I take in 2020? Consequently, additional deductions hold real value. One such deduction hides within the [Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”)](https://www.congress.gov/bill/116th-congress/house-bill/1994/text). This plan allows employers to make a major adjustment to their income after the end of the tax year. ## How the SECURE Act Impacts Businesses Beginning in 2020, the SECURE Act permits businesses to adopt a qualified retirement plan by the due date of the employer’s tax return, including extensions. Businesses and their advisors may wish to explore how a new plan could serve as an effective tax planning tool as some businesses are also finding that they have more cash on hand than anticipated. Consider the case of Jon Doe, LLC. Jon turned 58 years old in 2020 and has never had a retirement plan for his business. Prior to 2020, Jon could not adopt a new retirement plan if he hadn’t done so by December 31. This year, Jon can review his 2020 tax liabilities until September 15, 2021 and determine if a retirement plan makes sense. If Jon had a particularly good year, he may be able to implement a retirement plan (or plans) for 2020. By doing this, he could reduce his taxable income by over $250,000! Keep in mind that even if a business currently sponsors a retirement plan, the SECURE Act allows them to “add” an additional plan after the end of the tax year. Consider the case of a partnership that currently sponsors a cross-tested safe harbor 401(k) plan. A business that is a good candidate for a cross-tested 401(k) plan is usually a good candidate for a cash balance plan as well. If there is extra cash on hand, the business may wish to implement a cash balance plan for 2020. A 5-member partnership could see their overall taxable income reduced by over $1,000,000. ## Using the SECURE Act for Client Retention Tax and financial advisors’ awareness of this new SECURE Act provision may also serve as an important client retention and acquisition tool through informing clients of this new provision and its tax and financial ramifications. Businesses should note a couple of provisions not changed by the SECURE Act. First, while the extended due date of some tax returns is October 15, defined benefit plans must be funded by September 15 and therefore must be in place no later than that date. Second, employee contributions to 401(k) plans can only be made in the year to which they pertain. [Retirement plan](https://watkinsross.com/services/#retirement-plans) professionals at [Watkins Ross](https://watkinsross.com/) can design and implement a new plan for you or your client using this new provision to your financial advantage. Feel free to contact us at (616) 456-9696. **Categories:** Retirement Plans **Tags:** Business Tips, Retirement Plans --- ### [401(k) Retirement Plan Audit](https://watkinsross.com/articles/2020-09-10-401k-retirement-plan-audit/) **Published:** September 10, 2020 **Author:** Watkins Ross Team **Content:** ## Why does my 401(k) retirement plan need an audit? The 401(k) plan audit is mandated by the Employee Retirement Income Security Act (ERISA) and is intended to make sure a plan is being run correctly. The audit seeks to; (1) review 401(k) plan documents and (2) verify the 401(k) plan is compliant with the IRS and DOL rules. ## When is an audit required on a 401(k) retirement plan? When a 401(K) plan has 100 or more eligible participants on the first day of the plan year, it’s considered a “large plan” for DOL and IRS reporting purposes, which requires an annual audit. While 100 eligible participants is the general threshold for large-plan status, there is what is commonly referred to as the 80-120 rule. Plans that have between 80 and 120 eligible participants at the beginning of the plan year are permitted to file their Form 5500 in the same way they did the year prior. For example, a plan that had 70 participants on January 1, 2018 and filed as a small plan for 2018, and then grew to 115 participants by January 1, 2019, may elect to file as a small plan again—and avoid an audit—for the 2019 plan year. An audit would not be triggered in this example until the eligible participants exceeded 120 as of the first day of the plan year. The number of eligible active employees are counted even if they have never elected to participate and don’t have an account. Therefore, it is possible for you to meet the audit requirement if you have, for example, 121 eligible participants as of January 1st, but only 25 active participants. Former employees who have left their 401(k) funds in the plan are also included in the participant count. ## What deadlines apply to my Audit and Form 5500 filing? When a 401(k) plan audit is required, the audited financial statements will need to be completed and submitted with the Form 5500 to the IRS. The **Annual Report** is generally due within seven months from the end of the plan year, though there is an option to extend your corporate tax filing due date to nine and a half months from the end of the plan year. For example, if your 401(k) plan year ends December 31st, the audit would need to be completed by July 31st of the following year. If an extension is filed, the deadline would then move to September 15th of the following year. *These are also the deadlines for funding contributions to the plan for the prior plan year if you wish to claim these as deductible contributions.* For the **Form 5500 filing**, the audited financial statements will need to be completed and submitted with the Form 5500 to the IRS within seven months from the end of the plan year. If an extension is filed, the Form 5500’s due date can be extended an additional two and a half months and allows the financial statement due date to be extended as well. For example, if your 401(k) plan year ends December 31st, the filing would need to be completed by July 31st of the following year. If an extension is filed, the deadline would then move to October 15th of the following year. ## What do Auditors review during an audit: The first things an auditor will review as part of a 401(k) plan audit are the company’s documentation and compliance. An analysis will be conducted to make sure the plan is operating within the guidelines of the plan-related documents. The plan will also be reviewed to ensure it follows specific Department of Labor and IRS regulations. After this, the plan’s financial statements, any disclosures, and Form 5500 will be reviewed to make sure the financial information is reported correctly. ## What to expect with your audit: To ensure a smooth process, plan sponsors should keep comprehensive records and plan ahead by reviewing the auditor-requested items in advance of the audit start date. Here is a listing of some of the items the auditor will be asking to review: - Plan documents, adoption agreements and amendments - IRS opinion letter on the plan document - Summary Plan Description (SPD) and any modifications - Agreements with service providers - SOC report covering third-party administrator internal control processes - Employee census (list of all paid employees for the year including key demographic data) - A listing of contributions remitted to the plan, by pay period - Trust and recordkeeping reports - Distributions, loans or other plan activity - Proof of insurance coverage for employee crime (Fidelity Bond) - Prior Form 5500 filings and draft of current year Form 5500 - Independent appraisal for company stock or other non-traditional investments held by the 401(k) if applicable Please reach out to your Watkins Ross administrator as soon as you receive and Audit Letter to review items we can assist you with, and identify the timeframe for your needs. **Categories:** 401(k) Plans **Tags:** 401k Plans, Audits --- ### [Internal Revenue Service Provides Temporary Relief and Other Guidance on Mid-Year Reductions of Safe Harbor Contributions to 401(k) Plans due to COVID-19](https://watkinsross.com/articles/2020-08-10-internal-revenue-service-provides-temporary-relief-and-other-guidance-on-mid-year-reductions-of-safe-harbor-contributions-to-401k-plans-due-to-covid-19/) **Published:** August 10, 2020 **Author:** Watkins Ross Team **Content:** On June 29, 2020, the Internal Revenue Service (the “IRS”) issued [Notice 2020-52](https://content.govdelivery.com/accounts/USIRS/bulletins/2932642) that provides temporarily relief to plan sponsors that amend their safe harbor Section 401(k) or 401(m) plans (“Safe Harbor Plans”) mid-year to reduce or suspend employer safe harbor matching or nonelective contributions due to the COVID-19 pandemic. To qualify for the relief, a Safe Harbor Plan would need to be amended between March 13, 2020 and August 31, 2020. ## Background Under current IRS regulations and related guidance, a Safe Harbor Plan may be amended mid-year to reduce or suspend the employer’s safe harbor matching or nonelective contributions only if all of the following requirements are met: - The employer either (i) is operating under an economic loss for the year (which is generally a facts and circumstances test), or (ii) included a statement in the original safe harbor notice given to participants before the start of the plan year (“Original Notice”) that the employer may reduce or suspend contributions mid-year and that the reduction or suspension will not apply until at least 30 days after participants are provided notice of the reduction or suspension (“Required Reservation”). - All eligible participants are provided with a supplemental notice that explains (i) the consequences of the amendment that reduces or suspends the future safe harbor contributions, (ii) the procedures for participants to change their cash or deferred elections, and (iii) the effective date of the amendment (“Supplemental Notice”); - The reduction or suspension of safe harbor contributions is effective no earlier than the later of the date the amendment is adopted or 30 days after eligible employees are provided the Supplemental Notice; - Participants must be given a reasonable opportunity (including a reasonable period after receipt of the Supplemental Notice) prior to the reduction or suspension of safe harbor contributions to change their 401(k) elections; - The plan must be amended to provide that the ADP test and the ACP test (if applicable) will be satisfied for the entire plan year using the “current year testing method” (i.e., the plan can no longer use the safe harbor to satisfy such testing for the year); and - The plan must make the pre-amendment safe harbor contributions through the effective date of the amendment. ## Temporary Relief and Other Guidance Provided Under Notice 2020-52 Due to unprecedented circumstances resulting from the COVID-19 pandemic, Notice 2020-52 provides the following additional temporary relief from the general prohibition on mid-year reductions or suspensions of safe harbor contributions: - For a plan amendment adopted between March 13, 2020 and August 31, 2020, a plan will not be treated as failing to satisfy the requirement that the employer either is operating under an economic loss for the year or included the Required Reservation in the Original Notice given to participants. - For a plan amendment that reduces or suspends safe harbor nonelective contributions adopted between March 13, 2020 and August 31, 2020, the plan will not be treated as failing to satisfy the requirement that participants be provided the Supplemental Notice at least 30 days prior to the effective date of the reduction or suspension, so long as (i) the Supplemental Notice is provided to participants no later than August 31, 2020, and (ii) the plan amendment is adopted no later than the effective date of the reduction or suspension of safe harbor nonelective contributions. This relief does not apply to mid-year reductions or suspensions of safe harbor matching contributions. - The temporary relief described above also will apply on similar terms to Section 403(b) plans that apply the Section 401(m) safe harbor rules to satisfy the nondiscrimination rules applicable to such plans. Separately, Notice 2020-52 clarifies that, because contributions made on behalf of highly compensated employees (“HCEs”) are not included in the definition of safe harbor contributions, a mid-year change that reduces only the contributions of HCEs is not considered a suspension or reduction of safe harbor contributions that requires an employer to satisfy the rules described above. However, such a mid-year change would be a change to the content of plan’s Original Notice, and pursuant to prior guidance issued in IRS Notice 2016-16 an updated safe harbor notice and an election opportunity must be provided to HCEs to whom the mid-year change applies. Many employers have implemented or are considering changes to their 401(k) plan matching and nonelective contributions in light of the economic situation related to the COVID-19 pandemic. There are a number of considerations with any of these changes and employers should consider them carefully with counsel. IRS Notice 2020-52 provides welcome guidance in this regard for employers considering changes to Safe Harbor Plans. **Categories:** 401(k) Plans, 403(b) Plans **Tags:** Government Assistance, IRS, Safe Harbor --- ### [New Guidance for the Definition of a Qualified Individual](https://watkinsross.com/articles/2020-07-29-new-guidance-for-the-definition-of-a-qualified-individual/) **Published:** July 29, 2020 **Author:** Watkins Ross Team **Content:** If your plan elected any of the CARES Act provisions to allow for coronavirus-related distributions or the expanded loan provisions, there has been a change to who may be considered a “qualified individual”. Participants defined as a qualified individual include: - Individual diagnosed with the Coronavirus with a CDC approved test - Individual whose spouse or dependent has been diagnosed with the Coronavirus with such test - Individual who, because of the Coronavirus, suffered adverse financial consequences due to: - Quarantine - Furlough or layoff - Reduced work hours - Individual who cannot work due to lack of childcare due to the Coronavirus - Individual who is a business owner/operator who has closed the business or reduced hours because of the Coronavirus The IRS has recently expanded the definition of a qualified individual to include an individual who experiences adverse financial consequences as a result of: - Having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19; - The individual’s spouse or a member of the individual’s household experiencing any of the following: being quarantined, being furloughed or laid off, having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or - Closing or reduction of hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19. For purposes of applying the expanded definitions, a “member of the individual’s household” means someone who shares the individual’s principal residence. You should make your participants aware of the new guidelines. If any participants were previously denied a distribution or loan, they may now be eligible to take advantage of these options. Click here to access a sample [Qualified Individual Certification](https://watkinsross.com/wp-content/uploads/06-2020-IRS-Model-Qualified-Individual-Certification.docx) to provide to Participants. **Categories:** 401(k) Plans **Tags:** Compliance, Qualified Plans --- ### [Required Minimum Distribution (RMD) Law Changes to the SECURE Act and the CARES Act](https://watkinsross.com/articles/2020-04-27-required-minimum-distribution-rmd-law-changes-to-the-secure-act-and-the-cares-act/) **Published:** April 27, 2020 **Author:** Watkins Ross Team **Content:** The SECURE Act was recently passed effective 1-1-2020 and, since then, there has been a lot of communication regarding the passage of the CARES Act due to Covid19. Both of these acts affect how RMD’s are to be processed in 2020, 2021 and onward. The following is a clarification as to how the Required Minimum Distributions (RMD’s) will be handled. ## SECURE Act: The RMD age for all participants, including owners, has been increased from 70 ½ to 72. However, this applies only to participants who attain age 70 ½ after 2019. Therefore, if the participants turned 70 ½ in 2019 or earlier, they are unaffected and should continue to take their RMD’s. But if the participants attained age 70 ½ in 2020 or later, they won’t need to start taking RMDs until after attaining age 72. As under prior law, if the participant is still working after attaining age 72, and does not own over 5% of the employer, the participant can postpone taking RMDs until after they have retired. This will require a plan amendment at a later date. ## CARES Act – supersedes SECURE Act for 2020 only: Suspension of Required Minimum Distributions for Defined Contribution Plans only. These are 401(a) – Profit Sharing, Money Purchase, 401(k), 403(b) and 457 plans (Defined Benefit plans are still required to process 2020 RMD’s). All Defined Contribution Plan RMD’s will cease for 2020 – including those for 1st year recipients as well as those that are already receiving RMD’s. Any participant who has already taken an RMD in 2020 can roll it back into the Plan or their own IRA within 60 days of taking the distribution. If the individual qualifies for a coronavirus**–** related distribution, by satisfying one of the criteria, they would have the three-year period provided under the CARES Act to repay the distribution to the Plan or their IRA. Please note that a participant can still elect to request an RMD; to do so they should use the regular RMD form. Please check with your investment firm to determine their procedure regarding automatic recurring RMD’s. It is uncertain at this time if the suspension of RMD’s for 2020 will require a plan amendment. At this time, RMD’s are scheduled to begin again in 2021. **Categories:** Latest News **Tags:** CARES Act, Government Regulation, RMDs, SECURE Act --- ### [Impacts of the SECURE Act on Defined Benefit Plans](https://watkinsross.com/articles/2020-03-24-impacts-of-the-secure-act-on-defined-benefit-plans/) **Published:** March 24, 2020 **Author:** Watkins Ross Team **Content:** The market drop of December 2018 seems like ages ago, considering recent market volatility, Coronavirus, and the missing March Madness. However, the December 2018 drop did result in lower AFTAPs for many calendar-year plans. Unless your plan’s AFTAP has been certified for 2020, the effective AFTAP is going to decrease 10% on April 1, 2020. If the January 1, 2019 AFTAP percentage is in the eighties, it will fall below 80%. This may result in your plan being unable to pay full lump sums and you being required to send notices to all affected participants within 30 days. On December 20, 2019, President Trump signed the Further Consolidated Appropriations Act, 2020, which includes the Setting Each Community Up for Retirement Enhancement (SECURE) Act. There are provisions within both of these Acts that are of interest to defined benefit plan sponsors. ## Inservice Distributions Under the new provisions, plans may be amended to allow in-service distributions as early as age 59 ½ (previously, the earliest age was 62). This law change could allow more opportunities for de-risking, especially for a frozen plan. This change is important to keep in mind since the PBGC per participant premiums rose from $80 to $83 in 2020 and the variable rate on unfunded liabilities rose from 4.3% to 4.5%. If the current market drop lasts thru the end of the year, more plans will be at the PBGC per-participant cap. If your plan is at the cap, for each participant that is paid out or an annuity is purchased for, your plan will save $644 in PBGC premiums each year following the year they were paid out. The savings each year increases with inflation. ## Nondiscrimination Testing Relief The original temporary relief for closed plans was passed in December 2013 and then renewed annually. The closed plan relief allowed plans to pass discrimination testing as long as they were frozen before December 13, 2013 and had passed discrimination testing at the time they were frozen. The SECURE Act now makes the relief permanent and also gives more flexibility in passing nondiscrimination by making it easier to aggregate a defined contribution plan with a frozen defined benefit plan. ## Minimum Participation Test Relief The Act also provides participation test relief. The Minimum Participation Test under IRC Section 401(a)(26) requires a plan to cover the minimum of 50 employees or 40% of all employees. The relief applies to a plan that has been frozen or only provides accruals to a closed class of participants: 1. The plan must have passed minimum participation on the effective date of closure or freeze. 2. The closure or freeze amendment must have been adopted before April 5, 2017, or, if adopted later, the plan cannot have any substantial increase in coverage or benefits in the five years prior to the closure or freeze. ## Required Beginning Date Pushed Back Distributions from your plan must begin no later than a participant’s Required Beginning Date (RMD). A participant’s required beginning date is April 1 of the calendar year following the later of 1. the year the participant attains age 70 ½, and 2. the year the participant terminates employment. However, for participants that are more than 5% owners, the required beginning date is April 1 of the calendar year following the year the participant attains age 70 ½. The SECURE Act increases the required minimum distribution age from 70 ½ to 72. The new law applies to participants who attain 70 ½ after December 31, 2019. ## Increased Late Filing Fees Lastly, it is now even more important not to miss your plan’s IRS filing deadlines. The daily late fees, as well as the maximum fees, have been increased tenfold. This includes the Form 5500, the Form 8955-SSA, and the lesser known Form 8822-B (the form required for plan sponsors to register a change in plan name or plan administer name/address). It is possible to get the fees waived by the IRS if there is a reasonable explanation for the delay, but it’s best not to rely on the IRS’ good mercy. If you have questions regarding the SECURE Act or how it impacts your specific plan, please reach out to the Watkins Ross team. **Categories:** Defined Benefit Plans **Tags:** Defined Benefit Plans, SECURE Act --- ### [Cash Balance Plans - Pitfalls of Using an Investment Rate of Return as the Plan's Interest Crediting Rate](https://watkinsross.com/articles/2019-10-28-cash-balance-plans-pitfalls-of-using-an-investment-rate-of-return-as-the-plans-interest-crediting-rate/) **Published:** October 28, 2019 **Author:** Watkins Ross Team **Excerpt:** There are a number of potential issues a plan sponsor may face if they use the investment rate of return as the plan’s interest crediting rate. **Content:** In 2015, the IRS released final regulations pertaining to the acceptable interest rates that can be used for interest credits in a cash balance plan. One of these acceptable rates is to allow the plan’s interest crediting rate to equal the investment rate of return on the plan assets. The advantage to such an arrangement is that the plan’s liabilities and plan assets should (in theory) always be the same which means the plan is never overfunded or underfunded. This allows the annual contribution to the plan to be equal to the total of the annual principal credits to the plan participants. However, there are a number of potential issues that a plan sponsor may face if they use the investment rate of return as the plan’s interest crediting rate. Here are a couple of the most significant issues: 1. **Passing the nondiscrimination in the amount of benefits test under Internal Revenue Code(IRC) Section 401(a)4**. Under this test, annual principal credits are accumulated to the plan’s normal retirement testing age using the plan’s interest crediting rate and converted to a monthly accrual. Using a fixed interest rate for accumulating the benefits to the plan’s normal retirement testing age provides predictability for these accrual rates. However, if the plan’s actual rate of return was 10% for a specific year, all principal credits for that plan year are accumulated to the plan’s normal retirement testing age at 10%. This may significantly increase the accrual rates for the plan participants and could adversely affect the nondiscrimination testing for that plan year. 2. **Minimum participation testing problems under Internal Revenue Code Section 401(a)26**. Under IRC Section 401(a)26, a cash balance plan must provide “meaningful” benefits to at least 40% of the non-excludable employees of the plan sponsor. The IRS defines “meaningful” as a participant whose principal credit converts to at least a 0.5% benefit accrual for the year. To do this calculation, a participant’s principal credit is accumulated to the plan’s normal retirement testing age using the plan’s interest crediting rate and converted to a benefit accrual rate. If the plan’s interest crediting rate defined as the plan’s investment rate of return and this rate is too low, a participant’s accrual rate may be less than 0.5% and may not be counted as benefiting for purposes of this test. If enough of the plan participants do not make the 0.5% accrual threshold, the plan may not pass this test. In that case, plan eligibility would have to be expanded to other classes of participants or benefits would have to be increased to enough of the current plan participants to meet the 40% threshold under IRC 401(a)26. [Cash balance plans](https://watkinsross.com/articles/2019-06-20-cash-balance-plan-considerations/) continue to grow in popularity as a way to save additional monies for retirement and can create significant tax deductions. Many plans are moving towards utilizing an investment rate of return for their interest crediting rate. However, it is important for plan sponsors that are thinking of utilizing an investment rate of return to be aware of these issues before they implement this approach. If you have questions regarding this issue, please feel free to contact David Paauwe, MSPA, EA at [**dpaauwe@watkinsross.com**](mailto:dpaauwe@watkinsross.com). **Categories:** Cash Balance Plans **Tags:** Cash Balance Plans --- ### [Cash Balance Plan Considerations](https://watkinsross.com/articles/2019-06-20-cash-balance-plan-considerations/) **Published:** June 20, 2019 **Author:** Watkins Ross Team **Excerpt:** The number of new Cash Balance Plans continues to rise each year. Here are a few cash balance plan considerations as a popular retirement plan vehicle. **Content:** The number of new cash balance plans continues to rise each year. Cash balance plans are a popular retirement vehicle because they can provide a rapid accumulation of benefits and significant tax deductions. For example, by incorporating a cash balance plan, a 55-year-old business owner can contribute $108,000 to their retirement program on an income of only $75,000. ## CASH BALANCE PLAN CONSIDERATIONS ### IS $56,000 ENOUGH? Cash balance plans make sense when one or more employees or owners can benefit by contributing more than the $56,000 limit ($62,000 for catch-up eligible employees) to a retirement program. For example, the maximum allowable contributions can exceed $200,000 for employees who are over age 55 and have at least $150,000 in income. ### THE PLAN MIGHT PAY FOR ITSELF In more than half of all cash balance plans Watkins Ross administers, the estimated tax deferment on the cash balance plan contribution more than covers the added costs associated with offering a cash balance program. ### MORE BANG FOR YOUR BUCK Cash balance plans can be used to provide larger contributions to targeted employees. In fact, for every dollar a targeted employee might receive in a standard cross tested profit sharing allocation, he can generally receive at least 40-60 cents more in a cash balance plan, without increasing the total allocations to other employees. ### TYPES OF BUSINESSES Cash balance plans are especially popular for professional service groups (particularly medical practice groups), multi-generational family-owned businesses, and Single member S-Corporations taking Large S-Corporation distributions. Wondering if a cash balance plan is right for your firm? A good first step is to download our **[Cash Balance Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_Cash-Balance-Brochure.pdf)** and complete the checklist,[ **Is Your Business A Good Candidate For A Cash Balance Plan.**](https://watkinsross.com/wp-content/uploads/Cash-Balance-Plan-Checklist.pdf) If you have questions or would like help determining if you should implement a cash balance plan, please contact David Paauwe, MSPA, EA at ****. **Categories:** Cash Balance Plans **Tags:** Business Management, Cash Balance Plans, Plan Selection --- ### [Review Your Retirement Plan](https://watkinsross.com/articles/2019-05-20-review-your-retirement-plan/) **Published:** May 20, 2019 **Author:** Watkins Ross Team **Excerpt:** Retirement Plan errors can be costly & time-consuming. Periodically review your retirement plan to avoid issues and ensure it's operating in compliance. **Content:** How often do you review your retirement plan? Plan errors can be costly and time-consuming, so the best way to avoid long-running errors is to periodically review the plan to ensure it’s operating in compliance. As the plan administrator/sponsor, a good practice is to review your retirement plan at least twice a year; in the summer and winter. The IRS has a retirement plan check-up brochure on their website that details when, what and how the check-up should be performed. Read the IRS brochure [“Have You Had Your Check-up This Year?”](https://benefitslink.com/src/irs/p3066-122017.pdf) for an overview of the process. The brochure also includes useful links to other resources, like their [401(k) Plan Checklist](https://www.irs.gov/pub/irs-pdf/p4531.pdf) and their [Fix-it Guide](https://www.irs.gov/retirement-plans/plan-sponsor/fix-it-guides-common-problems-real-solutions) on how to find, fix and avoid plan mistakes. Taking time to review your plan now may save you time and money in the future! You may also be interested to read our blog about the [Operational Compliance List for 2019](https://watkinsross.com/articles/2019-03-28-2019-irs-operational-compliance-list/) to stay up to date on the changes. If you have questions or concerns about your plan’s compliance, please contact your Watkins Ross representative to discuss the specifics of your situation. **Categories:** Retirement Plans **Tags:** Business Management, Plan Administration, Retirement Plans --- ### [Defined Benefit Plans’ Actuarial Equivalence Under Attack: Reasonable Becomes Unreasonable (Opinion)](https://watkinsross.com/articles/2019-03-04-defined-benefit-plans-actuarial-equivalence-under-attack-reasonable-becomes-unreasonable-opinion/) **Published:** March 4, 2019 **Author:** Watkins Ross Team **Excerpt:** Recent class action lawsuits are targeting the reasonability of actuarial equivalence factors used in defined benefit plans. **Content:** Recent class action lawsuits targeting the reasonability of actuarial equivalence factors used in defined benefit plans have been making news and causing the retirement community to wonder if defined benefit plans, once again, will be exposed to scrutiny and possibly forced to make changes that will be burdensome to plan sponsors and result in increased liabilities. Defined benefit pension plans are required to define “actuarial equivalence” factors that are used to convert the plan’s normal form of benefit to other forms of benefit payment. The law indicates that these factors in the plan must be “reasonable”, but it does not define what constitutes “reasonable”. In my opinion, lawmakers put the “reasonable” requirement in place to avoid a plan having factors that are defined arbitrarily (not based on actuarially sound principals), or having factors that are specifically advantageous to a key owner, or other such abusive methodology. These lawsuits are claiming the plan’s actuarial equivalence factors are not reasonable because the factors haven’t been adjusted to keep pace with the life expectancy or interest rate trends, or a combination thereof. By law, accrued benefits under a defined benefit pension plan cannot decrease. Also in compliance with the law, benefits are permitted to be frozen, never to increase. The law does not require plans to grant cost of living increases on benefits, although some plans provide cost of living increases specifically written into the provisions of the plan. I don’t agree that increased life expectancy should be treated any differently than an increase in the cost of living, and plans should not be required to adjust benefits accordingly. Also, in a plan where benefits have been frozen, they should not be forced to increase benefits due to a change in actuarial equivalence definition. Furthermore, by the rationale of these lawsuits, if the trend of life expectancy were to turn the other direction and start declining, the adjustment to “reasonable” mortality rates could result in lower benefits. I’m guessing this is not the desired intent, and if that happened, there would likely be a new set of class action lawsuits. Finally, if plans were required to change their actuarial equivalence, there could be unintended consequences on the plan’s nondiscrimination compliance. These lawsuits are questioning actuarial equivalence assumptions with regard to retirees who have already begun receiving benefit payments; thus they are questioning the rates applicable to benefits earned in the past. To go back historically and determine what actuarial equivalence mortality and interest rates should have been used (i.e. considered reasonable) over the history of the plan would be both administratively costly and nearly impossible. And how would we approach the timing of “reasonable” – annually reasonable, monthly reasonable, daily reasonable? Because there is not and never has been language in the law to require periodic adjustment to these factors, to bring that burden on now to pension plans that have been around for many years is unreasonable. Let me define unreasonable: Employers have provided pension benefits to their employees, not because they were required by law, but because they were being generous or they negotiated it with employees. The plans they set up were done so in compliance with the law. To argue that the law should change now (or be defined more narrowly) to increase benefits that were provided by the generosity of an employer and earned in the past, is unreasonable. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Cash Balance Plans, Defined Benefit Plans, Multiemployer Plans **Tags:** Actuarial Services, Government Regulation, Opinion --- ### [2019 Government Shut Down Affects Lump Sum Payments from Defined Benefit Plans](https://watkinsross.com/articles/2019-01-22-2019-government-shut-down-affects-lump-sum-payments-from-defined-benefit-plans/) **Published:** January 22, 2019 **Author:** Watkins Ross Team **Excerpt:** How the 2019 government shut down affected lump sump payments from defined benefit pension plans due to the timing of the interest rates. **Content:** Did you know the government shut down affects the lump sum payments from your defined benefit pension plan? If your defined benefit plan has a lump sum payment option, the plan document must define the timing for determining the interest rate used in calculating the lump sum. The interest rate may be fixed for a year, or it may float monthly, or anything in between, depending on how the plan defines it. The interest rates for determining lump sum payments are published monthly by the IRS. Typically the month’s rates are posted around the 7th to 10th day of the following month. The rates are posted a little later when a holiday falls at the beginning of a month. It appears that the rates aren’t posted at all when **the government shuts down.** Eventually, these rates will be posted, but in the meantime, it could affect your plan’s payment of lump sums. If your plan’s definition of the interest rate floats monthly or is otherwise based on rates posted in December, participants may have to wait for a later payout date. There are some creative options you could employ to get benefits paid now and square up with posted rates at a later date. If you have questions on if and how this timing affects your plan and the options available, contact Watkins Ross or your actuarial service provider. **Categories:** Defined Benefit Plans, Retirement Plans **Tags:** Defined Benefit Plans, Government Regulation, Lump Sum Payments --- ### [1099-R](https://watkinsross.com/articles/2018-12-18-1099-r/) **Published:** December 18, 2018 **Author:** Watkins Ross Team **Excerpt:** If your plan retirement plan had distributions from it this year, you must report these to the participants on a Form 1099-R. **Content:** If your retirement plan had distributions from it this year, you must report these to the participants on a Form 1099-R. A distribution will have occurred from your plan for a number of reasons including a cash or rollover distribution due to terminations, retirement, RMD’s, hardships, outstanding loan balances, death benefit or a plan correction. Form 1099-R is used for reporting purposes when participants file their personal tax return and will show the gross distribution amount, how much is taxable, any amounts withheld for taxes and a code. Any distributions from the plan for a participant over $10 must be reported; however, whether or not a distribution is **taxable** is determined by the type of distribution received. A Form 1099-R must be mailed to individuals no later than January 31, 2019. The IRS must receive a copy of the 1099-R by February 28, 2019; however, if you file electronically the deadline is April 1, 2019. If your plan asset custodian does not issue the 1099-R forms, Watkins Ross can prepare these for you. Failure to file a 1099-R or filing a 1099-R with incorrect information could result in penalties. Additional information is provided in the [IRS Instructions for Forms 1099-R and 5498.](https://www.irs.gov/pub/irs-pdf/i1099r.pdf) **Categories:** Retirement Plans **Tags:** 1099-R --- ### [Is Your Business a Good Candidate for a Cash Balance Plan?](https://watkinsross.com/articles/2018-11-12-is-your-business-a-good-candidate-for-a-cash-balance-plan/) **Published:** November 12, 2018 **Author:** Watkins Ross Team **Content:** Cash balance plans allow high-income earners to save more towards retirement than a defined contribution plan. For example, in a defined contribution plan, the maximum annual additions are limited to $56,000 per year (as indexed). However, since the annual allocation limit in a cash balance plan depends on age, the maximum annual allocation for someone age 50 is more than $150,000. So, who should consider implementing a cash balance plan? High-income earners that have been maxing out their profit sharing/401(k) contributions but would like to save more for retirement. Download the [Cash Balance Plan Checklist](https://watkinsross.com/wp-content/uploads/Cash-Balance-Plan-Checklist.pdf) to help you determine if a cash balance plan may be right for your business. Contact [David Paauwe, MSPA, EA](mailto:dpaauwe@watkinsross.com) to discuss your completed checklist or answer any questions. **Categories:** Cash Balance Plans, Defined Benefit Plans **Tags:** Business Management, Cash Balance Plans, Plan Selection --- ### [Sufficient Tax Withholding from Pension Payments](https://watkinsross.com/articles/2018-09-17-sufficient-tax-withholding-from-pension-payments/) **Published:** September 17, 2018 **Author:** Watkins Ross Team **Excerpt:** The IRS urges everyone (including retirees) to use their Withholding Calculator to determine if they have sufficient tax withholding from pension payments. **Content:** Enactment of The Tax Cuts and Jobs Act changed the way taxes are calculated for many taxpayers in 2018, including retirees receiving monthly benefits from a pension plan. With the end of 2018 approaching, the IRS encourages everyone to review their withholding as soon as possible to ensure retirees have sufficient tax withholding from pension payments and avoid a surprise tax bill at filing time (or possibly penalties). The IRS urges everyone (employees and retirees) to use their [Withholding Calculator](https://www.irs.gov/individuals/irs-withholding-calculator) to determine if they need to update their federal withholding. Per the IRS article, [Retirees: Avoid a Surprise Tax Bill; Get Enough Tax Taken Out of Pension Payments; IRS Withholding Calculator Can Help](https://www.irs.gov/newsroom/retirees-avoid-a-surprise-tax-bill-get-enough-tax-taken-out-of-pension-payments-irs-withholding-calculator-can-help), “As noted in the Withholding Calculator’s step-by-step instructions, retirees should treat their pension like income from a job by entering the gross amount of each payment, how often they receive a payment (monthly, quarterly, etc.) and the amount of tax withheld so far this year.” Pension plan sponsors and the payer of the pension benefits should be prepared to see changes in withholding elections. Retirees can update the amount withheld from their pension payments by submitting a new [Form W-4P](https://www.irs.gov/pub/irs-pdf/fw4p.pdf) to the payer of the benefits. A tax professional should be consulted if you or your retirees have questions regarding their specific tax withholding on pension payments from your company sponsored plan. Reminder, if you are new to sponsoring a retirement plan and are unsure how to submit the federal tax withholding, check out our blog, [How to Submit a Federal Tax Withholding Tax Deposit.](https://watkinsross.com/articles/2018-06-11-how-to-submit-a-federal-withholding-tax-deposit/) Please contact Watkins Ross if you have questions about the process. **Categories:** Cash Balance Plans, Defined Benefit Plans **Tags:** Federal Withholding, Pension --- ### [Is This a Sham Termination?](https://watkinsross.com/articles/2018-09-10-is-this-a-sham-termination/) **Published:** September 10, 2018 **Author:** Watkins Ross Team **Excerpt:** Is a distribution from a retirement plan valid if the participant is rehired after the distribution occurs or is this a sham termination? **Content:** Termination of employment is a valid reason for a participant to receive a distribution from their retirement plan. However, what if that employee is terminated, receives a distribution and is then hired back? Is this a sham termination or is it still a valid distribution? According to the NAPA [Case of the Week: Sham Termination of Employment**,**](https://www.napa-net.org/news/technical-competence/case-of-the-week/case-of-the-week-sham-termination-of-employment/) “The IRS could view the firing and rehiring of an employee who has taken a distribution of plan assets due to a separation of service or severance of employment as either a “sham” or a “bona fide” termination depending on the facts and circumstances.” The following facts and circumstances could be considered by the IRS: - Was the participant a highly compensated employee? - Did the termination of employment and distribution follow the established administrative procedures? - Is there documentation to support the termination and distribution? - How much time passed from the date of termination to the date of rehire? - Were the terms of the plan document followed? If the IRS deems there was a conspiracy between the plan sponsor and the participant to stage a fake termination of employment to allow the participant access to their retirement funds, the plan status would be in jeopardy and, under investigation, the IRS could impose tax consequences on the employer and the participant. If you have questions regarding a termination of employment, [please contact us](https://watkinsross.com/contact/). **Categories:** Retirement Plans **Tags:** Distributions, IRS, Plan Termination --- ### [Safe Harbor Hardship Withdrawal Guidelines](https://watkinsross.com/articles/2018-09-04-safe-harbor-hardship-withdrawal-guidelines/) **Published:** September 4, 2018 **Author:** Watkins Ross Team **Excerpt:** The IRS requires Plan Sponsors to adhere to specific safe harbor hardship withdrawal guidelines for the distribution to take place. **Content:** According to the IRS, a hardship distribution from a 401(k) plan must be made on account of an [immediate and heavy financial need](https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-hardship-distributions#1) of the employee and the amount withdrawn must be necessary to satisfy the financial need. The IRS requires Plan Sponsors to adhere to specific hardship withdrawal guidelines for the distribution to take place. In the event of an IRS audit, failure to provide these items is a qualification failure which must be corrected through the Employee Plans Compliance Resolution System (EPCRS). The Safe Harbor Hardship Withdrawal Guidelines provides a general overview of the hardship withdrawal requirements and supporting documentation required. Please contact your Watkins Ross associate with any questions you have regarding a specific hardship distribution withdrawal request. **Categories:** 401(k) Plans, Profit Sharing Plans **Tags:** Compliance, Hardship, Safe Harbor --- ### [Attention all PBGC Premium Filers](https://watkinsross.com/articles/2018-08-06-attention-all-pbgc-premium-filers/) **Published:** August 6, 2018 **Author:** Watkins Ross Team **Excerpt:** The PBGC has a new mailing address! Make sure to update your files so that your filing and payment are sent to the correct address. **Content:** The PBGC (Pension Benefit Guarantee Corporation) has a new address effective immediately for mailing in your premium payment checks and any correspondence. If you typically pay your premium via paper check, please [click here](https://www.pbgc.gov/prac/prem/premium-filing-payment-and-instructions) to check out the new address. Not sure what the PBGC is and what they do for your pension plan? Check them out [here](https://www.pbgc.gov/about/who-we-are)! **Categories:** Defined Benefit Plans **Tags:** PBGC Premiums --- ### [401(k) Plan Eligibility Requirements for Summer Help](https://watkinsross.com/articles/2018-07-30-401k-plan-eligibility-requirements-for-summer-help/) **Published:** July 30, 2018 **Author:** Watkins Ross Team **Categories:** 401(k) Plans **Tags:** 401k Plans, Eligibility, Temporary Employees --- ### [How to Submit a Federal Withholding Tax Deposit](https://watkinsross.com/articles/2018-06-11-how-to-submit-a-federal-withholding-tax-deposit/) **Published:** June 11, 2018 **Author:** Watkins Ross Team **Excerpt:** Although you cannot mail a check for a federal withholding tax deposit, there are a few options to submit these payments to the IRS electronically. **Content:** Are you brand new to sponsoring a retirement plan and have no idea how to submit a federal withholding tax deposit? You can scour the web for hours hoping to find a form you can just print, sign and mail with your check. However, you will soon find all business-related tax deposits are made *electronically*. And while it may seem scary and daunting, the IRS has made it easy for plan sponsors to submit these payments. There are a few options available for you to do this: - Submit payments using the [Electronic Federal Tax Payment System® (EFTPS)](https://www.eftps.gov/eftps/). This is the same site you will go to for enrolling and for making payments. You will need to establish a four-digit PIN to use the site. The number to call to obtain this is 1-800-555-4477. For your security, the IRS will only send the PIN by U.S. Mail to the company address listed on file. Please keep in mind new enrollments for EFTPS can take up to five business days to process. - You can make the withholding payment by calling their voice response system at 1-800-555-3453. Follow the automated prompts, starting with your tax identification number and PIN. Form 945 Federal Tax withholding is the form needed to submit the taxes. You can use the [EFTPS-Direct Payment Worksheet](https://www.hws.edu/offices/pdf/electronic_tax_payment_worksheet.pdf) to practice making a payment beforehand. The same form can also be used to fill out all of your information to have on hand for future years. - If you are still unsure about using EFTPS® yourself, you can appoint your tax professional or payroll provider to submit payments for you. Keep in mind these providers may charge additional fees for these services. So, although you cannot mail a check, there are other options available to submit your tax deposits. If you still have questions regarding the options detailed above, please [contact Watkins Ross](https://watkinsross.com/contact/). **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Cash Balance Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans, Retirement Plans **Tags:** Environment, Federal Withholding, IRS, Tax Deposit --- ### [Unbundled Services in a Defined Benefit Plan](https://watkinsross.com/articles/2018-06-04-unbundled-services-in-a-defined-benefit-plan/) **Published:** June 4, 2018 **Author:** Watkins Ross Team **Excerpt:** Unbundled services in a defined benefit plan mean the various functions are performed by separate entities, which presents advantages for employers. **Content:** An employer with a defined benefit plan needs to access many professional services related to the plan: investment management services, custodial services, benefit payment services, plan document services, administrative services, plan design consulting services, and actuarial services. If the plan sponsor chooses to have these services provided under the “bundled” approach, all or most functions are performed under the umbrella of one service provider. Unbundled services in a defined benefit plan means the various functions are performed by separate entities, which presents advantages for employers as outlined below. 1. Accountability – Having multiple providers performing various functions creates a system of checks and balances. As a simple example, the actuary performing the valuation each year will be checking that benefit payments were made as expected and will make note of any unusual funds going in or out of the assets and will communicate any unusual activity to the plan sponsor. 2. Expertise – One provider of all services may not have expertise in each of the various areas. For example, investment service providers focus on the assets, fees, and benefit payments; whereas the benefit administrator and/or actuary has a focus on plan design, funding and function of the plan. Of most concern is that services being provided are assisting the plan sponsor in maintaining the qualified status of the plan – making sure the benefit structure is legally appropriate, that nondiscrimination testing is done correctly, that participants receive the correct benefit, and that all forms and notices are provided and filed as required. 3. Consulting Toward the Plan Sponsor’s Business Objectives – Similar to the expertise advantage, having separate providers allows the experts to hone in on and make the plan sponsor aware of opportunities for meeting their business objectives with minimal bias. For example, a sponsor of a frozen plan would benefit from their actuary being tuned into their needs with regard to time horizon of the plan and liability risk-reducing opportunities. At the same time, the sponsor will need the investment service providers to be aware of liquidity needs and higher level consulting opportunities such as liability driven investing (LDI). Less focused consulting or a biased approach could result from one entity providing both services. Instead, with multiple providers, the plan sponsor is presented with all possible opportunities and can make informed decisions that best meet the sponsor’s objectives. 4. Multiple Professionals Sharing Varying Experiences – Having multiple service providers allows a client to benefit from past experience, varying philosophies, differing levels of education, and creative personalities. A good unbundled service provider will share ideas and solutions with other providers to capitalize on this value. 5. Transparency of Cost – Bundled service providers typically charge asset-related fees, which makes it difficult to discern the cost of each function. Each unbundled service provider will quote and charge the plan sponsor individually, so there is no question of the cost of each service. 6. Finally, having unbundled services promotes a working environment where the plan sponsor stays familiar with the plan. Often bundled services don’t require the plan sponsor to be directly involved in the administration and thus there’s a tendency to become disengaged from the plan. Staying involved with service providers and administration of the plan puts the plan sponsor in a position to protect the plan from errors. Choosing service providers is part of the fiduciary duty of the plan administrator/plan sponsor of a qualified plan. When the plan is a defined benefit plan, there are complicated characteristics that require specific expertise by service providers. As you consider all the factors, it is likely you’ll find that going with unbundled services provides the greatest overall value. Watkins Ross is an unbundled service provider, offering actuarial and administrative support services for defined benefit plans, as well as administrative services for defined contribution, 401(k), ESOP and post-retirement medical plans. If you need additional information, [please contact us](https://watkinsross.com/contact/). **Categories:** Defined Benefit Plans **Tags:** Defined Benefit Plans, Unbundled Services --- ### [Defined Benefit Plan Termination Procedure](https://watkinsross.com/articles/2018-05-21-defined-benefit-plan-termination-procedure/) **Published:** May 21, 2018 **Author:** Watkins Ross Team **Excerpt:** There are many reasons a company may terminate the plan, but specific steps must be followed for the defined benefit plan termination procedure. **Content:** There are various reasons a company decides to terminate their defined benefit retirement plan, but specific steps must be followed to properly terminate the plan. Our [Defined Benefit Plan Termination Procedure](https://watkinsross.com/wp-content/uploads/DB-PlanTermination-Procedures-2020.pdf) provides a detailed overview of the termination procedures. [Please contact Watkins Ross](https://watkinsross.com/contact/) if you are considering a plan termination to ensure all requirements and deadlines are met. **Categories:** Defined Benefit Plans **Tags:** Defined Benefit Plans, Plan Administration, Plan Termination --- ### [Reducing Risk in Your Pension Plan: Lump Sum Payments to Former Employees](https://watkinsross.com/articles/2018-05-14-reducing-risk-in-your-pension-plan-lump-sum-payments-to-former-employees/) **Published:** May 14, 2018 **Author:** Watkins Ross Team **Excerpt:** Have you considered offering lump sums to former employee participants as a step toward reducing pension risk and expense? **Content:** Have you considered offering lump sums to former employee participants as a step toward reducing pension risk and expense? Below are some things to consider: - The first priority of the plan fiduciaries is to act solely in the interest of plan participants (which includes former employee participants), providing them with the full benefit they’ve earned and communicating their options with regard to the distribution of their benefit. - Is the plan’s funded percentage (AFTAP) over 80%, or has the plan been completely frozen since before September 1, 2005? If the answer to either of these is “yes”, you have jumped a hurdle that would limit your ability to pay the lump sums. Still, because this percentage changes annually, you should discuss this possible limitation with an actuary. - In general (but depending on your plan’s provisions), lump sums under $1,000 may be paid without participant consent; lump sums over $1,000 require the participant’s affirmative election to take a lump sum, and lump sums over $5,000 require that you also offer a monthly benefit as an alternative to the lump sum in order for the participant to make a valid election. These factors affect the administrative work involved with the lump sum process. - Highly Compensated former employees may possibly not be permitted to receive a lump sum distribution. There are many parameters on this “restriction” so it should be discussed with an actuary. - Get an estimate of the value of these lump sums. Lump sums are typically higher than the liabilities calculated for minimum funding purposes that you see in your annual actuarial valuation report. Paying lump sums could result in higher minimum contributions, decreased funded status, and/or other effects that may be of significance. An actuary can assist in the analysis of this when providing an estimate of the lump sum values. - Lump sum distributions from the plan could trigger a “settlement” recognition on your company’s financial statement pursuant to pension accounting rules. You may want to get an estimate of the impact so that this isn’t a big surprise after the lump sums have been paid. These are some of the main considerations in determining whether paying lump sums to former employees makes sense for your plan. To learn more about all options available to reduce the risk in your pension plan, read [Reducing Pension Plan Risk](https://watkinsross.com/articles/2019-03-10-reducing-pension-plan-risk-updated-to-reflect-irs-notice-2019-18/). If you would like assistance in determining whether paying lump sums is an effective and viable option for your plan, [contact our actuarial team.](https://watkinsross.com/contact/) **Categories:** Defined Benefit Plans, Pension Risk **Tags:** Lump Sum Payments, Pension, Risk Assessment --- ### [Reducing Pension Plan Risk – Updated to Reflect IRS Notice 2019-18](https://watkinsross.com/articles/2019-03-10-reducing-pension-plan-risk-updated-to-reflect-irs-notice-2019-18/) **Published:** March 10, 2019 **Author:** Watkins Ross Team **Excerpt:** Reducing pension plan risk has become a prudent consideration, especially for those plans that have frozen benefits. De-risk your pension plan today! **Content:** ## RISK IN PENSION PLANS Risk is often associated with the opportunity for great gain at the cost of opportunity for great loss. Risk exists in a pension plan because the annual and ultimate cost of the plan is sensitive to factors such as market swings, life expectancy improvements, PBGC premiums, pension legislative changes, changes in tax code, and other uncontrollables. Some of these factors affect legally required minimum funding, some affect the real cost of the plan (the real cost of paying all benefits due and administrative expenses over the life of the plan), and most affect both. Most of the risk in a pension plan offers little opportunity for gain, so a plan sponsor should annually consider whether there are risk elements in the plan that can be eliminated. ## APPROACHES TO REDUCING PENSION PLAN RISK In very general terms, there are four approaches to de-risking: - **Allow lump sum payments from the pension plan to individuals who have terminated employment** This strategy removes risk of future mortality improvements and interest rate fluctuation with regard to the future benefit streams that are instead paid as a lump sum. There are varying degrees of offering lump sums: to all terminated employees, at retirement age only, up to a stated threshold, or as a “window” opportunity for terminated employees. In early 2019 the IRS and Treasury issued Notice 2019-18, opening up an opportunity that may allow plans to offer lump sums to retirees in pay status in lieu of the continuation of the monthly benefit (they had removed this option in 2015 via Notice 2015-49). When individuals are paid their benefit as a lump sum, they are removed from the plan, thus reducing per-participant PBGC premiums and alleviating the administrative cost of tracking these former employees. - **Use a Liability Driven Investment (LDI) asset management approach** This strategy involves investing pension assets in vehicles that match the future pension plan cash flow needs. As a plan matures and has greater cash outflows and a shorter time horizon, a larger portion of investments under this approach will be directed to fixed income vehicles to preserve capital and reduce the impact of market swings. - **Transfer longevity risk via use of insurance company products** Purchasing annuities for retirees in pay status provides a secure vehicle outside the pension plan to continue the retirees’ lifelong benefit payments. Although this approach may be expensive to complete, there are creative options that can be employed when teaming up with experienced pension risk transfer professionals to hedge costs, such as buying into a group annuity contract rather than purchasing individual annuities. This approach will reduce per-participant PBGC premiums and alleviate administrative cost of tracking retirees. Your retirees will experience easy transition with no disruption to their monthly benefit payments. - **Plan termination** The ultimate de-risking action is to terminate the pension plan and pay out all benefits to participants via annuity purchases and/or lump sum payments. If your plan is frozen, plan termination is probably your goal as soon as feasible. Sponsors may want to consider financing the cost of plan termination if the interest cost would be less than the expected future administrative costs. Plan termination is a lengthy and costly process, but if it will be done eventually, the decision is mostly about timing. - **Combination of Actions** Finally, there may be a combination of the actions mentioned above that would meet the objectives of the plan sponsor. As one example, spinning off a portion of the pension plan into a new continuing plan and terminating the remaining plan may present de-risking opportunities that are not available with the whole plan intact. That’s just one example of a creative combination of actions. ## THE NEXT STEP Each approach to decreasing risk requires careful consideration of the benefits and trade-offs such as cost, tax advantages, philosophical positions, administration, time horizon, etc. with regard to the particular pension plan and its company sponsor. Watkins Ross has the expertise and resources to assist you and your advisors in exploring how these opportunities would best suit your specific circumstances. Please [contact us](https://watkinsross.com/contact/) to begin a discussion! **Categories:** Defined Benefit Plans, Pension Risk **Tags:** IRS, Plan Administration, Risk Assessment --- ### [Changes To The 402(f) Special Tax Notice](https://watkinsross.com/articles/2018-04-23-changes-to-the-402f-special-tax-notice/) **Published:** April 23, 2018 **Author:** Watkins Ross Team **Excerpt:** The 402(f) Special Tax Notice was revised as a result of the tax reform legislation known as the “Tax Cuts and Jobs Act." **Content:** On December 22, 2017, President Trump signed into law tax reform legislation known as the “Tax Cuts and Jobs Act” (the “Act”). The 402(f) Special Tax Notice was revised as a result of this Act. The Act reduces the potential tax burden on some participants who default on plan loans as a result of termination of employment or plan termination. Participants who terminate employment with an outstanding loan from their 401(k) plan or other qualified plans often are immediately deemed to be in default of their loans. Therefore, the participant’s account balance is permanently reduced by the amount of the outstanding loan. This is commonly referred to as a plan loan offset. The intent of the Act is to give participants more time to [roll over the loan offset.](https://watkinsross.com/articles/2018-01-09-new-loan-offset-rules/) A participant who incurs a “qualified” loan offset (meaning such offset was caused by termination of employment or termination of the plan) after December 31, 2017, will have until the participant’s tax return due date (for the year in which the loan offset occurred) to roll over up to 100% of the plan loan offset amount into an IRA or another employer plan, and avoid paying federal income tax (and the early withdrawal penalty, if applicable) on the amount rolled over. The Act basically provides more time for participants to come up with money to repay the outstanding loan that would otherwise be treated as a taxable distribution due to the termination of employment. As a Plan Sponsor, you should review your loan policies or loan program and your 402(f) Special Tax Notice to make sure that those documents accurately describe the tax consequences of terminating employment with an outstanding loan, and, the new (longer) time frame for avoiding the unpaid loan being treated as a taxable distribution. A [sample Special Tax Notice for plans that contain Roth monies](https://watkinsross.com/wp-content/uploads/Sample-402f-Roth-Notice.pdf) and a [sample Special Tax Notice for non-Roth monies](https://watkinsross.com/wp-content/uploads/Sample-402f-Non-Roth-Notice.pdf) are available on our website. Both reflect the new required language. If you currently utilize your fund company’s Notice, no further action will be required. The fund companies will be updating their Notices accordingly. If you utilize our volume submitter adoption agreement, we will be providing you with updated Special Tax Notices. Please [contact Watkins Ross](https://watkinsross.com/contact/) if you have any questions regarding your loan policies/loan program or Special Tax Notices (402(f) Notices). **Categories:** 401(k) Plans, Retirement Plans **Tags:** 402(f) Notice, Government Regulation --- ### [Is Your Business a Good Candidate for an ESOP?](https://watkinsross.com/articles/2018-04-09-is-your-business-a-good-candidate-for-an-esop/) **Published:** April 9, 2018 **Author:** Watkins Ross Team **Excerpt:** Are you wondering if your business is a good candidate for an ESOP? The rules are complex, so let's break it down for you. **Content:** An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan that invests primarily in the company stock of the employer. Providing direct ownership opportunities to your employees through an ESOP encourages motivation and retention, and provides several major tax incentives to the selling stockholders and the corporation. Owners consider selling to an ESOP as a way to increase employee retention, preserve the company’s legacy or incorporate into their succession plan. Establishing an ESOP is adaptable to almost any business strategy since there are many ways to structure it. However, your company must meet certain guidelines to be a good candidate. Our [ESOP Checklist](https://watkinsross.com/wp-content/uploads/ESOP-Checklist.pdf) can serve as a starting point to determine if you should consider an ESOP for your business. If you have additional questions or would like to discuss the results of your completed checklist, please contact David Bosch, ESOP Consultant, at . **Categories:** Employee Stock Ownership Plans **Tags:** Business Management, ESOP, Plan Selection, Retirement Plans --- ### [Reporting And Disclosures Checklist](https://watkinsross.com/articles/2018-04-03-reporting-and-disclosures-checklist/) **Published:** April 3, 2018 **Author:** Watkins Ross Team **Excerpt:** Qualified retirement plans are subject to many reporting and disclosure requirements. Download the reporting and disclosures checklist. **Content:** Qualified retirement plans are subject to many reporting and disclosure requirements under ERISA and related regulations. Although there may be additional requirements that apply to special circumstances, the [reporting and disclosures checklist ](https://watkinsross.com/wp-content/uploads/reporting-disclosure-requirements-watkins-ross.pdf)provides an overview of the requirements that typically apply. Information pertaining to both defined benefit and defined contribution plans are in this one checklist. For additional information, can also be found on the [IRS website.](https://www.irs.gov/pub/irs-tege/irs_reporting_disclosure_guide.pdf) Please [contact Watkins Ross](https://watkinsross.com/contact/) for specific questions pertaining to your plan’s reporting and disclosure requirements. **Categories:** Retirement Plans **Tags:** Plan Disclosures --- ### [Requirements For A Qualified Domestic Relations Order (QDRO)](https://watkinsross.com/articles/2018-03-12-requirements-for-a-qualified-domestic-relations-order-qdro/) **Published:** March 12, 2018 **Author:** Watkins Ross Team **Excerpt:** It is imperative for a Qualified Domestic Relations Order (QDRO) to meet the various requirements before a benefit is paid out of the plan. **Content:** A Qualified Domestic Relations Order (QDRO) is a judgment, decree or order for a retirement plan to pay child support, alimony or marital property rights to a spouse, former spouse, child or other dependent of a participant (i.e. alternate payee). A QDRO can be part of a Judgment of Divorce if it contains the required language; however, typically such order is separately drafted and entered into the Court. In order to be **qualified**, the order must meet several requirements. For example, it must specifically state the retirement plan name, list the affected parties and their addresses along with the amount or percentage of the participant’s benefits to be paid to each alternate payee. The QDRO may not award an amount or form of benefit that is not available under the plan. Many other factors must be considered when reviewing a QDRO. The [Defined Contribution Plan QDRO Requirements Checklist](https://watkinsross.com/wp-content/uploads/DC-QDRO-Checklist-2020.pdf) can help you determine if the QDRO you received is acceptable and additional information can also be found on the [IRS website](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-qdro-qualified-domestic-relations-order). Since it’s critical for a QDRO to meet all requirements before a benefit is paid out, Watkins Ross provides a QDRO review service for our clients. Please [contact Watkins Ross](https://watkinsross.com/contact/) associate if you have questions or would like us to review a QDRO you received. **Categories:** Retirement Plans **Tags:** Compliance, QDRO --- ### [Celebrating Your Employees](https://watkinsross.com/articles/2018-02-26-celebrating-your-employees/) **Published:** February 26, 2018 **Author:** Watkins Ross Team **Content:** Did you know that Friday (March 2) is National Employee Appreciation Day? Whether you believe engaged employees are more productive or that a work/life integration is more important than a balance, I think we can all agree that employee happiness has a positive impact on a firm. And let’s be honest….everyone likes to feel appreciated. This holds true whether you’re talking about your kids, your colleagues or your clients. As Noted in the Human Factor article, [Why Happy Employees are Winning Employees](http://thehumanfactor.biz/happy-employees-winning-employees/), “People want to make a difference in the workplace, and they want to win. Help them do both and they will buy into and feel good about what they do on the job. When people feel good about coming to work, they bring more of themselves to the job every day.” Considering how much time we spend with our colleagues, it’s important to show each other appreciation. At Watkins Ross, we do this through our Employee Excellence Award. Our award structure is simple – at the end of each quarter, employees vote for the colleague they think is most deserving (the person that goes above and beyond). The winner is announced at a company luncheon and presented with a certificate and a cash prize. It’s a fun way to bring everyone together and celebrate our team. Plus, everyone loves a good lunch! How do you celebrate each other at your company? **Categories:** Latest News **Tags:** Business Management, Watkins Ross Updates --- ### [Starting a 401(k) Plan](https://watkinsross.com/articles/2018-02-19-starting-a-401k-plan/) **Published:** February 19, 2018 **Author:** Watkins Ross Team **Excerpt:** Starting a 401(k) plan is a popular choice to help employees prepare for retirement, but can also help attract the talent needed to grow your business. **Content:** A 401(k) plan is a type of defined contribution retirement plan that allows workers to contribute a portion of their income to save for retirement. 401(k) plans are a popular choice to help employees prepare for retirement, but a well-structured plan can also help attract and retain the talent needed to grow a business and offer tax advantages to employers. Starting a 401(k) plan can feel daunting to business owners, but it doesn’t have to feel that way. ## STARTING A 401(K) PLAN As outlined in the IRS guide, [401(k) Plans for Small Businesses](https://www.irs.gov/pub/irs-pdf/p4222.pdf), four basic actions are necessary to establish a tax-advantaged 401(k) plan: - Adopt a written plan, - Arrange a trust fund for the plan’s assets, - Develop a recordkeeping system, and - Provide plan information to participants. Enlisting the right professionals can help you through the process to be certain all legal requirements are met. The experienced team at Watkins Ross can help you establish your 401(k) plan and ensure the plan continues to meet the annual compliance requirements. The Watkins Ross team specializes in customized retirement plan designs, administration and consulting for 401(k) plans. We are happy to talk with you about the various plan choices and what may best suit your situation. Please contact David Bosch () or Sheila Freund () to begin the conversation. **Categories:** 401(k) Plans **Tags:** 401k Plans, Business Management, Plan Administration --- ### [Retirement Plan Check-up](https://watkinsross.com/articles/2018-01-29-retirement-plan-check-up/) **Published:** January 29, 2018 **Author:** Watkins Ross Team **Excerpt:** The best way to avoid long-running errors on your retirement plan is to complete a Retirement Plan Check-up twice a year; in the summer and winter. **Content:** The best way to avoid long-running errors on your retirement plan is to periodically review the plan to ensure it’s operating in compliance. **You should complete a Retrirement Plan Check-up twice a year; in the summer and winter.** The IRS has a retirement plan check-up brochure on their website that details what, how and when the check-up should be performed. Read the IRS brochure [“Have You Had Your Check-up This Year?”](https://benefitslink.com/src/irs/p3066-122017.pdf) for an overview of the process. The brochure includes helpful links to other resources, like their [401(k) Plan Checklist](https://www.irs.gov/pub/irs-pdf/p4531.pdf) and their [Fix-it Guide](https://www.irs.gov/retirement-plans/plan-sponsor/fix-it-guides-common-problems-real-solutions) on how to find, fix and avoid plan mistakes. Besides, the IRS says reading the brochure may be the best 2 minutes you’ve ever spent on your business’ retirement plan! Reviewing your plan now may save time and money later. If you have questions or concerns about your plan’s compliance, please [contact Watkins Ross](https://watkinsross.com/contact/) to discuss the specifics and any appropriate corrections. **Categories:** Retirement Plans **Tags:** Compliance, Plan Administration, Retirement Plans --- ### [New Loan Offset Rules](https://watkinsross.com/articles/2018-01-09-new-loan-offset-rules/) **Published:** January 9, 2018 **Author:** Watkins Ross Team **Excerpt:** Beginning in 2018, the new law extends the 60-day rollover deadline to the participant’s tax return due date for the year the loan offset occurred. **Content:** Beginning in 2018, the new loan offset rules extended the 60-day rollover deadline to the participant’s tax return due date (including extensions) for the year the loan offset occurred. This rule gives participants more time to deposit the funds and avoid unexpected taxation. To learn more, read ERISA attorney Ilene Ferenczy’s article [The New Tax Bill Is Enacted – What Does This Mean For Retirement Plans?](http://ferenczylaw.com/ferenczy-flashpoint-the-new-tax-bill-is-enacted-what-does-this-mean-for-retirement-plans/) If you are unsure if/how the changes affect your plan participants, please [contact Watkins Ross](https://watkinsross.com/contact/). **Categories:** Retirement Plans **Tags:** Loan Offsets, Rollover --- ### [Defined Benefit Plan Compliance Calendar](https://watkinsross.com/articles/2018-01-08-defined-benefit-plan-compliance-calendar/) **Published:** January 8, 2018 **Author:** Watkins Ross Team **Content:** A qualified retirement plan must meet various requirements throughout the year in order to retain the qualified status. If you are responsible for administering your company’s defined benefit plan, it’s critical to meet these deadlines. From making quarterly contributions to issuing the annual funding notice to participants, it can feel overwhelming. Let us help you stay on track by downloading our 2018 [defined benefit plan compliance calendar.](https://watkinsross.com/defined-benefit-compliance-calendar-watkins-ross/) The dates on this calendar pertain to a plan with a calendar plan year (with off-calendar due dates in parentheses). If you have questions regarding your specific plan provisions or due dates, please contact your Watkins Ross analyst. You can also [let us know here](http://app.referralsafe.com/view/_ASiMl8CwJHJ3LePgdf0vW_P-Q5TJd4K) if you have someone in your personal network that would like to discuss their plan provisions and applicable deadlines. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Latest News **Tags:** Compliance, Defined Benefit Plans, Resources --- ### [Defined Contribution Plan Compliance Calendar](https://watkinsross.com/articles/2018-01-02-defined-contribution-plan-compliance-calendar/) **Published:** January 2, 2018 **Author:** Watkins Ross Team **Excerpt:** Download the 2018 defined contribution plan compliance calendar to help you stay on top of your 401(k) plan deadlines this year. **Content:** A qualified retirement plan must meet various requirements throughout the year in order to retain the qualified status. If you are responsible for administering your company’s defined contribution plan, it’s critical to meet these deadlines. From processing failed ADP/ACP test refunds to delivering the participant fee disclosures, it can feel overwhelming. Let us help you stay on track by downloading our 2018 [defined contribution plan compliance calendar.](https://watkinsross.com/wp-content/uploads/defined-contribution-compliance-calendar-watkins-ross.pdf) The dates on this calendar pertain to a plan with a calendar plan year. However, if your plan utilizes an off-calendar plan year or you have questions regarding your specific plan provisions, please contact your Watkins Ross Retirement Plan Administrator. You can also [let us know here](http://app.referralsafe.com/view/v6da4GMhrRezvl7zqZ-fMaZz5ml0Idyg) if you have someone in your personal network that would like to discuss their plan provisions and applicable deadlines. **Categories:** Latest News **Tags:** Compliance, Defined Contribution Plans, Resources --- ### [2017 Census Request: What Do I Report To My TPA?](https://watkinsross.com/articles/2017-10-30-2017-census-request-what-do-i-report-to-my-tpa/) **Published:** October 30, 2017 **Author:** Watkins Ross Team **Excerpt:** The 2017 Census Request provides critical information your TPA needs to calculate contributions and complete the valuation report for the retirement plan. **Content:** It’s hard to believe we are already in the 4th quarter of 2017. This means it’s time to start thinking about completing the 2017 census request. Whether you’re a longtime vet or new to this process, it’s important to remember why we ask for this data. The census request is a tool for plan administrators to report business changes that have occurred in the previous year and the employee census data required for annual testing. It’s critical to report accurate information since missing/incorrect ownership and employee data (including compensation, hours, termination dates, etc.) may affect test results. And, an inaccurate test could lead to complicated corrections and possible penalties. ## What do I report? The [Census Request Overview](https://watkinsross.com/articles/2015-12-03-census-request-overview/) provides detailed explanations regarding compensation (one of the most important pieces of information reported!). It also covers contributions reported, your employees’ data, highly compensated & key employees, and mergers/acquisitions. If you have questions regarding the information you should report on the census, contact your TPA. Asking the question now may avoid fixing an inaccurate test later. **Categories:** Retirement Plans **Tags:** Business Management, Census Request, TPA --- ### [Long Awaited but Never Forgotten… New Mortality Rates Apply in 2018](https://watkinsross.com/articles/2017-10-04-long-awaited-but-never-forgotten-new-mortality-rates-apply-in-2018/) **Published:** October 4, 2017 **Author:** Watkins Ross Team **Excerpt:** The IRS has posted final regulations requiring new mortality rates for single-employer defined benefit plans to apply in 2018. **Content:** The IRS has posted final regulations requiring new mortality rates to be used in various calculations under single-employer defined benefit plans beginning with 2018 plan years. The initial impact of the new rates will be most visible as: - an increase in minimum funding requirements, - an increase in PBGC premiums, - an increase in lump sum values, and - a decrease in plan funded percentages. Although there was some dissent among the masses regarding the finalization of these rates, the majority of the pension and actuarial community recognized that increased longevity needed to be incorporated in the calculation of liabilities; and ultimately the IRS determined that these rates published by the Society of Actuaries were the best available for this purpose. The published rates include base mortality rates and a mortality improvement scale. The improvement scale will be updated routinely in future years. It is estimated that these mortality rates will increase liabilities on average 5% in 2018, depending on individual plan demographics, plan design, and specific variances of the mortality tables being used. Please [contact us](https://watkinsross.com/contact/) if you have questions or would like to discuss the mortality rates that apply in 2018. **Categories:** Defined Benefit Plans **Tags:** Mortality, Retirement Trends --- ### [IRS Electronic Media Guidance](https://watkinsross.com/articles/2017-07-05-irs-electronic-media-guidance/) **Published:** July 5, 2017 **Author:** Watkins Ross Team **Excerpt:** The IRS Electronic media guidance methods may be used to deliver most plan information required under the Internal Revenue Code. **Content:** **Electronic media guidance** is the IRS’s equivalent to the DOL’s Electronic Disclosure Safe Harbor. You may use these methods to deliver most plan information required under the Internal Revenue Code, such as the 401(k) Safe Harbor and Auto Enrollment Notices. The DOL approved the use of the IRS Electronic Media Guidance for delivering quarterly benefit statement information and notices of investment of the participant account balances in a qualified default investment option (QDIA). IRS Electronic Media Guidance provides two methods of electronic delivery. The **General Method** has system, consent and notice requirements substantially similar to those under the DOL’s Electronic Disclosure Safe Harbor. The **Alternative Method** allows plan administrators to use any medium as long as the recipient has the “effective ability to access.” This method includes e-mail and websites. Under this method, the plan administrator must notify participants that they may request a free paper copy of the information. The plan administrator must also determine that a proposed electronic delivery method meets the “effective ability to access” test. The IRS has released limited guidance for making this determination. ## Here are some considerations: - In general, a plan administrator must have evidence that the delivery medium will permit the participant to access the information. For example, it is not sufficient to send an e-mail to the participant’s last known e-mail address. It is also unclear whether a recipient can effectively access an electronic medium if s/he does not own a computer. However, the spread of smartphones and tablets may be greatly reducing this population. - Employees may have the effective ability to access information through a worksite computer kiosk, even if not at their desk. - Neither the IRS or DOL has commented on a scenario where the employer establishes an e-mail account for every employee solely for the purpose of providing ERISA information electronically. The IRS Electronic Media Guidance is, generally, considered less restrictive that the [DOL’s Electronic Disclosure Safe Harbor](https://watkinsross.com/articles/2017-07-05-dol-electronic-disclosure-guidance/). Therefore, if the electronic delivery meets the conditions of the DOL’s Safe Harbor (the Wired at Work or Affirmative Consent methods) it will generally satisfy the IRS Electronic Media Guidance. **Categories:** Retirement Plans **Tags:** Compliance, Environment, IRS --- ### [DOL Electronic Disclosure Guidance](https://watkinsross.com/articles/2017-07-05-dol-electronic-disclosure-guidance/) **Published:** July 5, 2017 **Author:** Watkins Ross Team **Excerpt:** The DOL Electronic Disclosure guidelines recognize two Safe Harbor methods in addition to two supplemental methods **Content:** The DOL Electronic Disclosure guidelines recognize two Safe Harbor methods and two supplemental methods. For an overview of electronic delivery allowed by both the DOL and the IRS, please refer to the [Electronic Delivery of Participant Disclosure Materials](https://watkinsross.com/articles/2017-07-05-electronic-delivery-of-participant-disclosure-materials/) post. ## **S**AFE HARBOR METHODS OF ELECTRONIC DELIVERY A Safe Harbor provides guidelines for complying with a legal requirement, such as the requirement to deliver information by a method “reasonably calculated to ensure receipt.” The DOL Electronic Disclosure guidelines recognize two Safe Harbor categories: participants who **“Affirmatively Consent”** and employees who are **“Wired at Work.”** Providing computer kiosks does not make employees Wired at Work; rather access must be an integral part of the employee’s duty. Click here for details on Affirmative Consent versus Wired at Work. If the plan administrator takes the steps required in the Safe Harbor, a notice or other electronic means will be considered to be delivered as if the information was sent by first class mail. Plan administrators may rely on the Electronic Disclosure Safe Harbor for delivering plan information if **all** of the following general requirements will be met: 1. The electronic system used must be designed to reasonably assure actual receipt of the information. This may require periodic reviews or surveys to confirm receipt of the electronically delivered information. Also, the plan administrator should be aware of, and follow-up on, undelivered and, to the extent known, unopened e-mail. 2. The system must be designed to protect the confidentiality of the personal information of the participant who receives the information. 3. A participant receiving an electronically delivered document must, at the time the document is delivered, be provided with a notice explaining the importance of the document and the right to receive a paper copy of the disclosure. 4. Electronically delivered documents must be prepared in the style and format applicable to the particular disclosure. 5. Electronically delivered documents must contain all of the information required to be included in the particular disclosure. 6. Upon request, the participant must be provided a paper version of the document. Plan administrators have flexibility when providing information by electronic delivery if the above requirements are met. For example, a document may be included in the text of an e-mail or as an attachment. A plan administrator may also send, via electronic or paper mail, a link to the required information on a website. ## DOL SUPPLEMENTARY METHODS OF ELECTRONIC DELIVERY In addition to the above Safe Harbors, the DOL has issued supplementary methods that allow additional electronic delivery methods in certain situations: Assumed Consent and Continuous Access Website. The Electronic Disclosure Safe Harbor methods are applicable for all types of required plan information, but the supplementary methods may only be used for certain types of the plan information. **Categories:** Retirement Plans **Tags:** Compliance, Department of Labor, Plan Administration --- ### [Census Request & The Data Requested](https://watkinsross.com/articles/2016-12-07-census-request-the-data-requested/) **Published:** December 7, 2016 **Author:** Watkins Ross Team **Excerpt:** It's important to understand the census request and the data requested from your TPA to avoid inaccurate tests and potential penalties. **Content:** 2016 is coming to a close which means you will receive the annual census request from your TPA soon. The census request is used to report any business changes that have occurred in the previous year and provide employee census data for annual testing. It’s crucial to report accurate information because missing/incorrect ownership and employee data may affect test results, and inaccurate tests could lead to complicated corrections and possible penalties. The [Census Request Overview](https://watkinsross.com/articles/2015-12-03-census-request-overview/) provides detailed explanations regarding compensation (one of the most important pieces of information reported!), contributions reported, your employees’ personal/employment data, highly compensated & key employees, and mergers/acquisitions. If you have questions regarding your plan’s definition of compensation or other items asked for on the census, contact your TPA. Asking the question now may avoid fixing an inaccurate test later. **Categories:** Health Plans, Retirement Plans **Tags:** Census Request, Compliance, TPA --- ### [Updated IRS Procedures for Correcting Retirement Plan Errors](https://watkinsross.com/articles/2016-11-29-updated-irs-procedures-for-correcting-retirement-plan-errors/) **Published:** November 29, 2016 **Author:** Watkins Ross Team **Excerpt:** IRS Revenue Procedure 2016-51 modifies the procedures for correcting retirement plan errors under the Employee Plans Compliance Resolution System (EPCRS). **Content:** The IRS Revenue Procedure 2016-51 modifies the procedures for **correcting retirement plan errors** under the Employee Plans Compliance Resolution System (EPCRS). This revenue procedure is effective January 1, 2017, and supersedes the prior revenue procedures applicable to EPCRS. ## Some Key Changes Include - The requirement for a plan sponsor to submit a determination letter application to the IRS when correcting qualification failures that include a plan amendment no longer applies. - Fees associated with the Voluntary Correction Program (VCP) are now user fees and no longer set forth in the EPCRS revenue procedure. - Availability of Self-Correction Program (SCP) for significant failures has been modified to provide that, for qualified individually designed plans, a determination letter need not be current to satisfy the Favorable Letter requirement. A full listing of the changes applicable in Revenue Procedure 2016-51 is included in the IRS’ article [Updated Retirement Plan Correction Procedures](https://www.irs.gov/retirement-plans/updated-retirement-plan-correction-procedures). **Categories:** Retirement Plans **Tags:** EPCRS, IRS, VCP --- ### [Eligibility – Know Your Retirement Plan’s Provisions and Apply Correctly](https://watkinsross.com/articles/2016-10-18-eligibility-know-your-retirement-plans-provisions-and-apply-correctly/) **Published:** October 18, 2016 **Author:** Watkins Ross Team **Content:** It is important you understand the provisions of your retirement plan eligibility to make sure all eligible employees, and only those eligible, are included as participants. Mistakes can easily occur if eligibility is not tracked accurately. During the Plan Year, you should continually update your list of employees to determine if anyone has met the requirements to become a Participant. You must know the provisions of your plan since not all plans have the same rules. Some provisions may be allowed, but they may not be in your plan. Also, don’t assume you know what the current plan provisions are; if your plan document was recently restated or amended, changes may have been made. Your primary reference source must be the plan document (or adoption agreement plus the basic plan document), not the Summary Plan Description (SPD) which may not have sufficient detail. During an audit, the IRS will look for errors in eligibility calculations. Examples include: (1) improperly excluding eligible employees, (2) failure to re-enroll rehired employees, (3) failure to automatically enroll employees (for an automatic enrollment plan) and (4) failure to provide complete enrollment materials. Other common errors are misclassifying an independent contractor or improperly excluding part-time or temporary employees, controlled group employees and merged employees. By applying plan rules correctly and maintaining good records, your plan will run smoothly and you can avoid costly corrections for operational failures. Please contact Watkins Ross if you have questions pertaining to your Plan’s eligibility provisions or how to apply them. **Categories:** Retirement Plans **Tags:** Eligibility, Plan Administration, Plan Provisions --- ### [Have You Reviewed Your Fidelity Bond Coverage? Should You?](https://watkinsross.com/articles/2016-10-05-have-you-reviewed-your-fidelity-bond-coverage-should-you/) **Published:** October 5, 2016 **Author:** Watkins Ross Team **Content:** A Third Party Administrator (TPA) must collect plan information from Plan Sponsors each year in order to complete the valuation and required filings. Providing accurate information to your TPA is critical, but one area often overlooked is reporting accurate fidelity bond information. The fidelity bond is required to protect the plan and participants from fraud. Check out the [Fidelity Bond Coverage Requirements](https://watkinsross.com/articles/2014-09-29-fidelity-bond-coverage-requirements/) blog post to learn more about the fidelity bond requirements. I’d like to highlight that if a company offers more than one employee benefit plan, all plans must be accounted for on the fidelity bond. This means the fidelity bond must list each plan (defined benefit and defined contribution plans) and assets in all the plans must be considered to determine the amount of the bond required. Please contact Watkins Ross if you have questions regarding the fidelity bond coverage. **Categories:** Retirement Plans **Tags:** Compliance, Fidelity Bond, TPA --- ### [Have Your Clients Missed The PPA Restatement Deadline?](https://watkinsross.com/articles/2016-07-19-have-your-clients-missed-the-ppa-restatement-deadline/) **Published:** July 19, 2016 **Author:** Watkins Ross Team **Content:** ### **IF YES: WR CAN ASSIST YOUR CLIENTS IN CORRECTING THIS FAILURE!** The deadline for your clients to restate their 401(k), profit sharing and money purchase plans onto a pre-approved PPA document was April 30, 2016. To ensure these plans stay qualified, WR can assist your clients in updating their plans for PPA by using the Internal Revenue Service’s Voluntary Compliance Program (VCP). WR would work with you and your clients to update their plans as well as prepare the necessary IRS submission forms – all at a reduced rate. DON’T WAIT! Now is the time to ask your clients if their plans are in compliance. Download the Missed PPA brochure here and contact us for additional details on the VCP procedures. **Categories:** Retirement Plans **Tags:** Compliance, IRS, PPA Document, VCP --- ### [2016 Michigan Employee Owner of the Year](https://watkinsross.com/articles/2016-07-14-2016-michigan-employee-owner-of-the-year/) **Published:** July 14, 2016 **Author:** Watkins Ross Team **Content:** Watkins Ross is pleased to announce that Sharon Miller-Walcott, QKA, Certified ESOP Specialist, was elected as the 2016 Employee Owner of the Year by the Michigan Chapter of The ESOP Association. The ESOP Association, a non-profit trade association founded in 1978, is the largest employer sponsored advocacy and education association focused on retirement savings in America. Each year, The ESOP Association and its 18 State Chapters work to promote and recognize the best and brightest employee owner throughout the ESOP community. To be named the Employee Owner of the Year, an employee must be actively involved in the employee ownership activities of the company and/or The ESOP Association. Sharon has been with Watkins Ross since 1999 and serves as a Certified ESOP Specialist and Retirement Plan Administrator. Given that Sharon’s occupation includes providing administrative services to ESOPs, she has a deep knowledge and understanding of how an ESOP works, what it means to be employee-owned, and the value employee ownership brings to the company and the community. In addition to her regular job responsibilities, Sharon has written the ESOP-related blogs for the [Watkins Ross website.](https://watkinsross.com/articles/ "Watkins Ross website.") Sharon is also an active member of the Michigan Chapter of The ESOP Association and currently serves as an Executive Committee member. As the 2016 Employee Owner of the Year, Sharon was honored at the Michigan Chapter’s Spring ESOP Conference held in Lansing, MI, and was highlighted at the 25th Annual Awards Ceremony held during the 39th Annual National ESOP Conference in Washington, D.C. **Categories:** Employee Stock Ownership Plans, Retirement Plans **Tags:** Awards & Accreditations, ESOP, ESOP Association, Watkins Ross Updates --- ### [OPEB: Fast Facts & Planning Tips](https://watkinsross.com/articles/2016-04-15-opeb-fast-facts-planning-tips/) **Published:** April 15, 2016 **Author:** Watkins Ross Team **Content:** The National Retirement Planning Coalition has designated April 11-15 as the 2016 National Retirement Planning week. In celebration, each day this week Watkins Ross will share some fast facts and planning tips on the various types of retirement plans we service. Friday’s focus: **Other Post-Employment Benefits (OPEB).** ## WHAT IS AN OPEB? ### FAST FACTS - Large firms offering retiree health coverage dropped from 66% in 1988 to 28% in 2013.\* - Forty-five percent of all retirees age 55-64 had retiree health coverage in 2012.\* - Nearly one in three Medicare Beneficiaries have a retiree health plan that supplements Medicare.\* - Of employers providing retiree health coverage support, 40% require retirees age 65 and older to pay a full premium, 14% do not require retirees to pay a portion of the premium.\* \* *Information from The Henry J. Kaiser Family Foundation* ## PLANNING TIPS ### RETIREE MEDICAL COST CONTAINMENT STRATEGIES - Increase retiree contribution to employer - Limit or restrict participation - Increase deductibles and co-pays - Utilize HRA’s and health exchanges brought about by the Affordable Care Act ### OPEB ACCOUNTING - Recognize the cost and liability of future benefits when earned (not when paid) on the employer’s balance sheet. - Net periodic expense (P&L) and accumulated other comprehensive income. - Accounting changes required by Governmental Accounting Standards Board (GASB) statements 74 and 75 (for public employers) effective for years beginning after June 15, 2016 and June 15, 2017 (respectively). ### RETIREE HEALTH CARE DEVELOPMENTS - Cost sharing changes under Medicare Parts A and B - Reduced payments to Medicare Advantage plans - Development of Health Annuities - Increasing Medicare eligibility age is being considered ## REPORTING REQUIREMENTS Private employers subject to GAAP accounting and public sector employers are required to expense these benefits on an accrual basis during the period of an employee’s active service, and to report a liability for the “accrued” portion of these benefits on their balance sheets. Because these are actuarial calculations, companies providing these benefits need to retain an actuary qualified in these specialized calculations. #### To learn more about OPEB plans or reporting requirements, contact the specialized team at Watkins Ross. **Categories:** Health Plans, Other Post-Employment Benefits **Tags:** Business Tips, OPEB, Plan Selection --- ### [Cash Balance Plans: Fast Facts & Planning Tips](https://watkinsross.com/articles/2016-04-13-cash-balance-plans-fast-facts-planning-tips/) **Published:** April 13, 2016 **Author:** Watkins Ross Team **Content:** The National Retirement Planning Coalition has designated April 11-15 as the 2016 National Retirement Planning week. In celebration, each day this week Watkins Ross will share some fast facts and planning tips on the various types of retirement plans we service. Wednesday’s focus: **Cash Balance Plans.** ## DID YOU KNOW? - The number of cash balance plans in the US is growing at over a 20% rate, compared to a 1% growth rate for 401(k) plans.\* - More than 25% of all defined benefit plans are cash balance plans, compared to less than 3% in 2001.\* - Cash balance plans aren’t just for large employers. 87% of all cash balance plans are sponsored by employers with fewer than 100 employees, and the highest growth rate is among employers with fewer than 25 employees.\* - Cash balance plans help ALL employees reach their retirement goals. The average total employer contribution to rank and file staff is over 6% of compensation in companies that sponsor both a cash balance plan and a 401(k) plan, compared to approximately 2.5% of compensation in companies sponsoring only a 401(k) plan.\* - By incorporating a cash balance plan, a 55 year old business owner can contribute $97,000 to his retirement program on income of only $50,000. *\* Cash Balance Plan statistics based on a Kravitz, Inc. review of publicly available IRS form 5500 data.* ## PLANNING TIPS ### IS $53,000 ENOUGH? Cash balance plans make sense when one or more employees or owners can benefit by contributing more than the $53,000 ($59,000 for catch-up eligible employees) to a retirement program. For example, the maximum allowable contributions can exceed $200,000 for employees who are over age 55 and have have at least $150,000 in income. ### THE PLAN MIGHT PAY FOR ITSELF In more than half of all cash balance plans Watkins Ross administers, the estimated tax deferment on the cash balance plan contribution more than covers the added costs associated with offering a cash balance program. ### MORE BANG FOR YOUR BUCK Cash balance plans can be used to provide larger contributions to targeted employees. In fact, for every dollar a targeted employee might receive in a standard cross tested profit sharing allocation, he can generally receive at least 40-60 cents more in a cash balance plan, without increasing the total allocations to other employees. ## Cash Balance Plan Sponsors Might Look Like You Cash balance plans are especially popular for the following types of employers: professional service groups (particularly medical practice groups), multi-generational family owned businesses, and Single member S-Corporations taking Large S-Corporation distributions. #### To learn if a cash balance plan might be right for your company or client, contact the team at Watkins Ross. **Categories:** Cash Balance Plans **Tags:** Business Tips, Cash Balance Plans, Plan Selection --- ### [ESOP: Fast Facts & Planning Tips](https://watkinsross.com/articles/2016-04-12-esop-fast-facts-planning-tips/) **Published:** April 12, 2016 **Author:** Watkins Ross Team **Content:** The National Retirement Planning Coalition has designated April 11-15 as the 2016 National Retirement Planning week. In celebration, each day this week Watkins Ross will share some fast facts and planning tips on the various types of retirement plans we service. Tuesday’s focus: **Employee Stock Ownership Plans (ESOPs).** ## FAST FACTS **Additionally** - ESOPs make significant contributions to employee retirement savings with nearly 60% of ESOP companies contributing at least 6% or more of compensation to the ESOP. - A Washington State study found that ESOP participants made 5%-12% more in wages and had 3 times the retirement assets than workers at comparable non-ESOP companies. - The ESOP Association, one of the largest ESOP advocacy groups in the US, reports that 68% of its members have fewer than 250 employees. - ESOP companies experience 2.3%-2.4% more growth in sales and employment in the post-ESOP period than would have been expected based on the pre-ESOP period analysis. ## PLANNING TIPS ### 1. CUT THE TAX Tax incentives to encourage the sale of stock to ESOPs may allow shareholders who sell to an ESOP to defer or eliminate capital gains tax on the sale of their stock. ### 2. STAY IN CONTROL By selling to an ESOP, selling shareholders can stay involved in the management and control of their company while also monetizing what may be their most valuable asset. ### 3. CUT THE TAX II S-Corporation ESOPs pay no federal income tax on the portion of the company owned by an ESOP. A 100% ESOP owned S-corporation pays no federal income tax. This tax treatment allows ESOP companies to free up cash otherwise used to pay taxes to gain competitive business advantages and reward employees. ### 4. ESOPs PROVIDE LIQUIDITY ESOPs can provide a valuable liquidity tool to exiting shareholders and also allow the company to obtain capital to effect the buyout on a tax advantaged basis. As a result, they can be instrumental in the succession planning of companies with multiple shareholders. ## WHAT DOES THIS MEAN? ### THE TIME IS RIGHT Current market conditions are creating a surge in ESOP transactions. Business valuations of closely held companies have recovered from the economic downturn of the mid-2000s to near record highs and business owners are locking in gains. This fact, combined with the increased availability of relatively inexpensive capital looking to get in the market, make now the time to consider implementing an ESOP. #### To learn if an ESOP might be right for your company or client, contact the team at Watkins Ross. **Categories:** Employee Stock Ownership Plans **Tags:** Business Tips, ESOP, Plan Selection --- ### [401(k) Plans: Fast Facts & Planning Tips](https://watkinsross.com/articles/2016-04-11-401k-plans-fast-facts-planning-tips/) **Published:** April 11, 2016 **Author:** Watkins Ross Team **Content:** The National Retirement Planning Coalition has designated April 11-15 as the 2016 National Retirement Planning week. In celebration, each day this week Watkins Ross will share some fast facts and planning tips on the various types of retirement plans we service. Monday’s focus: **401(k)/Profit Sharing Plans.** ## FAST FACTS **Additionally** - Experts estimate that it costs a company between $10,000-$50,000 dollars per year per employee for every year an employee delays retirement beyond normal retirement age. (Prudential Retirement) - The average 401(k) account balance in the US has increased by over 100% in the last ten years to approximately $100,000. However the median 401(k) balance is approximately only $35,000. (Vanguard Retirement Plans) - Using the 4% withdrawal rule, a $200,000 401(k) account balance will only provide an annual income of $8,000. ## PLANNING TIPS ### 1. How Can Employers Help Employees Save More Towards Retirement? #### MAKE SAVING EASY Sometimes employees just need a hand to overcome status quo bias, the inertia of delaying decisions that change their current state. By implementing an Automatic Enrollment feature, an employer can eliminate the need for an employee to make a decision to save. #### INCENTIVIZE EMPLOYEES Plan sponsors should encourage the type of behavior they want their employees to engage in. For example, employers can “stretch” their match. Rather than contribute a dollar for dollar matching contribution on the first 3% of employee deferral contributions, employers may want to consider doing a match of fifty cents on the dollar for the first 6% deferred. ### 2. How Can Plan Design Impact Employees’ Retirement Savings? #### CONSIDER TARGETED CONTRIBUTIONS A common misconception among plan sponsors is that all employees in a plan must be treated the same. On the contrary, employees must be treated fairly but they need not be treated the same. Employers can make different levels of employer contributions to different groups of employees or specific individuals provided it can be demonstrated (using complex testing rules) that such contributions are fair. This may allow a plan to reward certain employees or provide additional benefits to business owners. #### OPTIMIZE YOUR PLAN Too often, employers adopt a “vanilla” 401(k) plan without considering how that plan can best benefit them as a plan sponsor as well as their employees, as the participants. By engaging in a plan optimization analysis, a plan sponsor can ensure their 401(k) plan best meets their needs and objectives. #### To learn how to make your 401(k) plan the best that it can be, contact the team at Watkins Ross. **Categories:** 401(k) Plans **Tags:** 401k Plans, Plan Administration --- ### [Safe Harbor Plans: is it Safe to Amend?](https://watkinsross.com/articles/2016-03-03-safe-harbor-plans-is-it-safe-to-amend/) **Published:** March 3, 2016 **Author:** Watkins Ross Team **Content:** If you have a safe harbor plan and wanted to make a change during the year, the IRS restricted what you could and could not amend, even if the change didn’t affect the safe harbor provisions. Recently, the IRS issued additional guidance for both traditional and qualified automatic contribution arrangements (QACA) safe harbor plans, allowing for most type of mid-year changes, as long as certain requirements are met. If the change does not affect either the safe harbor provisions or the notice requirement, no other special procedures are required. Amendments which do not affect the content of the safe harbor notice do not require an updated safe harbor notice and does not cause the plan to lose its safe harbor status. Participants must receive an updated safe harbor notice (30-90 days before the change) if it affects either a plan’s safe harbor provisions, or the information required to be included in the safe harbor notice. Participants must also be provided a reasonable opportunity (30 days) to change contribution elections. This new guidance is a welcome relief for safe harbor plan sponsors, allowing more flexibility in plan design if the need arises during the plan year. **Categories:** 401(k) Plans **Tags:** IRS, Plan Changes, Safe Harbor --- ### [Price Slashing at the IRS!](https://watkinsross.com/articles/2016-02-03-price-slashing-at-the-irs/) **Published:** February 3, 2016 **Author:** Watkins Ross Team **Content:** If you have identified an operational error with your qualified retirement plan (401(k) plan, profit sharing plan, defined benefit plan) and are considering correcting it through the IRS Voluntary Correction Program (VCP), you’ll be glad to know that the IRS has just reduced its fees for VCP submission for most employers. Here’s a chart that shows what the rates were before, compared to what they are under the new rules: There are other options for correcting failures in qualified plans besides VCP. To determine if VCP is the right program for correcting a failure, contact your administrator at Watkins Ross or your ERISA attorney. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Latest News, Retirement Plans **Tags:** IRS, VCP --- ### [Policies, Procedures & Internal Controls](https://watkinsross.com/articles/2016-01-13-policies-procedures-internal-controls/) **Published:** January 13, 2016 **Author:** Watkins Ross Team **Content:** With the New Year just beginning, now is a good time to review your policies, procedures and internal controls for your retirement plan. Having strong internal controls and documenting policies/procedures is important to ensure you are operating your plan properly; as well as detect and prevent errors. Below are some guidelines to assess your policies, procedures and internal controls: For a more comprehensive list of questions visit [www.irs.gov/Retirement-Plans/Policies-Procedures-and-Internal-Controls-Self-Audit](http://www.irs.gov/Retirement-Plans/Policies-Procedures-and-Internal-Controls-Self-Audit). As the old saying goes: “An ounce of prevention is worth a pound of cure.” **Categories:** Plan Documents, Retirement Plans **Tags:** Business Management, Compliance, Plan Administration --- ### [A Case for Defined Benefit Plans – PART 1](https://watkinsross.com/articles/2016-01-05-a-case-for-defined-benefit-plans-part-1/) **Published:** January 5, 2016 **Author:** Watkins Ross Team **Content:** Traditional pension plans, or defined benefit plans, are the original backbone of the corporate pension system. Retired employees who have worked for a company with one of these plans are enjoying benefits provided well into old age. Middle aged employees of today who were hired into a company with a pension plan most likely have seen the plan become frozen (meaning employees are no longer earning additional benefits), and possibly terminated altogether, leaving a relatively small benefit for retirement. Younger employees have very likely never heard of a traditional pension or, if they have, only recognize it as a nearly nonexistent benefit of the past. The diminished role of the pension plan is due to the labyrinth of laws and regulations that employers must navigate in order to sponsor one, not due to a faulty concept for providing retirement benefits. Regardless of their reputation today, defined benefit plans are still an important part of a sound financial strategy for retirement. These plans provide for a set monthly income to a company’s retirees. So, even though an employee is no longer working, a level of income can be relied upon each month. In addition, these pensions will not run out nor are they subject to market risk. No matter how long a retiree lives or how badly investments perform, the monthly income will continue for the retiree’s life. The employee and ultimately the retiree do not have to decide how to invest the money in order to draw the benefit for life. Also, if designated at retirement, a survivor benefit can be a part of the monthly income, leaving a portion of the benefit to the spouse or designated beneficiary for their continuing life. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Defined Benefit Plans **Tags:** Defined Benefit Plans, Plan Selection --- ### [OPEB Reporting – Summary of Changes to GASB Statements](https://watkinsross.com/articles/2015-12-14-opeb-reporting-summary-of-changes-to-gasb-statements/) **Published:** December 14, 2015 **Author:** Watkins Ross Team **Content:** The Governmental Accounting Standards Board (GASB) recently released Statements 74 and 75, which replace statements 43 and 45, respectively for reporting related to other postemployment benefits (OPEB) plans. The purpose of the update was to provide increased consistency and transparency about the information being reported for OPEB plans across entities. For public employers who also sponsor defined benefit pension plans, the changes may seem familiar, as many of the updates reflect changes similar to those that were brought about by GASB 67 and 68 for reporting related to pension plans. **Summary of Key Changes** **Additional Disclosure Requirements** - Funded plans must disclose: - The annual money-weighted rate of return on plan investments - The plan’s long-term investment policy, earnings assumptions and current asset allocations - All plans must disclose: - A 10 year schedule showing components of the net OPEB liability, identifying sources of change in the liability - A statement of the fiduciary net position, including: - Assets - Liabilities - Deferred inflows/outflows - Sensitivities in the net OPEB liability to 1 percentage point increase and decrease in the: - Discount rate - Healthcare trend rate - Employers are encouraged to restate prior period financial statements based on new regulations or disclose justification for not restating **Questions?** If you have questions regarding the impacts of GASB Statements 74 and 75, you may contact Christian Veenstra, MAAA, EA at or your plan’s auditor. **Blog authored by Kylie Young, ASA, Actuary.** **Categories:** Latest News, Other Post-Employment Benefits **Tags:** Compliance, GASB, OPEB --- ### [Census Request Overview](https://watkinsross.com/articles/2015-12-03-census-request-overview/) **Published:** December 3, 2015 **Author:** Watkins Ross Team **Excerpt:** The information reported on a census requests is crucial for your TPA to provide accurate annual testing. But, what do they need? **Content:** Each year, you receive the census request from Watkins Ross. The census request provides a way for you to notify your actuary or TPA of any business changes that may have occurred in the previous year and provide employee census data for annual testing. Although the information requests may seem a bit repetitive and intrusive, there is a good reason to answer all questions in detail and fill out employee census requests completely. Missing or incorrect ownership and employee data may affect test results, and inaccurate tests could lead to complicated corrections and possible penalties. Start the year knowing that your retirement plan is not at risk in the event of an audit by providing the following items: **Compensation** – One of the most important pieces of information requested is plan year wages (refer to the current plan document or latest amendment for the correct definition of compensation for your plan). The definition of compensation for testing purposes may differ from the definition of compensation for plan contribution purposes. For example, in a defined contribution plan, many plans use gross W-2 wages for testing purposes but exclude annual bonus wages from employee deferrals and employer matching contributions. A plan may also exclude compensation prior to plan participation from testing and/or contributions. Any form of post-severance pay that the employee would not have received if employment had continued must be excluded for all plan purposes. As your TPA, we can confirm that the annual census contains the proper definition of compensation, but the plan sponsor is ultimately responsible for providing accurate wage information. **Contributions** – Providing correct contribution totals is also essential for accurate test results. As with compensation, there are multiple compliance tests that rely on the employee/employer contribution information to produce accurate test results. In a defined contribution plan, the employee deferral contributions and employer contributions (match, profit sharing, etc.) on the annual testing should match annual payroll totals. The contribution figures you provide on the census should match the actual contributions deposited to the participant accounts. **Personal/Employment Data** – Personal and employment data such as date of birth and date of hire are necessary for determining eligibility and plan participation dates. Termination dates help determine who is eligible for employer contributions, who needs to receive a distribution, and how many eligible participants a plan has at year end. Social Security numbers are used for employee identification purposes and are also necessary for reporting taxable distributions on Form 1099-R and other tax-related reporting to the IRS or DOL. In addition, reporting any special types of employees (leased employees, union, non-resident aliens, etc.) assist with determining who is or is not an eligible plan participant. **Highly Compensated & Key Employees** – Accurate classification of highly compensated and key employees is critical to provide accurate testing for qualified retirement plans. In a defined contribution plan, the ADP (Average Deferral Percentage) test compares the contribution percentages of the highly compensated employees to the non-highly compensated employees to determine if any contribution refunds are required for the highly compensated employees. Identifying who the highly compensated employees are for each plan year is essential for accurate ADP test results, as well as other compliance tests. For the 2017 plan year, any participant who owned more than 5% of the employer business *or* earned at least $120,000 in 2016 is considered a highly compensated employee for 2017 testing purposes. Employers may also elect the Top-Paid Group condition, which defines highly compensated employees as the top 20% of employees based on pay. In comparison, a key employee is any employee who, at any time during the 2017 plan year met at least one of the following criteria: 1) was an officer of the employer with compensation greater than $175,000; 2) an owner of 5% or more; *or* 3) owned 1% or more with compensation greater than $150,000. The 2017 key employees are used to determine your top-heavy status for the 2018 plan year. **Mergers/Acquisitions** – Any changes in ownership and any mergers or acquisitions during the plan year should be reported at least annually, but ideally these types of changes should be reported before they occur. Acquiring new businesses could force an employer to become a controlled group which could require the plan to cover additional employees for plan eligibility, testing, and contributions. So, when your actuary or TPA presses you for information, keep in mind that this process is not intended to feel like an interrogation. These requests not only help us to complete the basic annual testing and tax reporting requirements, but they also help us determine if your plan would be at risk during an IRS or DOL audit. **Blog authored by Sara Lewis, Retirement Plan Administrator.** **Categories:** Latest News **Tags:** Census Request, Compliance --- ### [An ESOP Safari Adventure](https://watkinsross.com/articles/2015-11-19-an-esop-safari-adventure/) **Published:** November 19, 2015 **Author:** Watkins Ross Team **Content:** Having attended the Great Lakes Regional ESOP Conference in October, I arrived back to work the following Monday a bit smarter. It was either because most of the break-out sessions had the word ‘fiduciary’ in the program title or because I discovered that putting your raffle ticket in the bucket that has the least amount of tickets could make you a winner! Fiduciary responsibility, plan design, corporate governance, committee roles, accounting and tax issues, ownership behavior, litigation and DOL audits – ugh – what does this all have to do with administering a retirement plan? It can be so overwhelming. Fortunately, the presenters at this conference have an incredible way of delivering their knowledge. So even if you felt like a small meerkat listening from the back of the jungle, the extensive expertise and uniqueness of all of the speakers, takeaway materials and new connections, *combined with the great company of employee-owners,* confirms your belief in employee ownership and leaves you feeling like you can conquer any task; even tackling that “fiduciary elephant” in the room. For more information on fiduciary responsibility in an ESOP visit: [www.esopassociation.org](https://www.esopassociation.org) or [www.nceo.org](https://www.nceo.org) **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Conferences, ESOP, ESOP Association, Watkins Ross Updates --- ### [PBGC Premiums Will Increase Again in 2016, and Then…](https://watkinsross.com/articles/2015-11-04-pbgc-premiums-will-increase-again-in-2016-and-then/) **Published:** November 4, 2015 **Author:** Watkins Ross Team **Content:** The PBGC has announced the 2016 premium rates for defined benefit pension plans. The flat rate premium is $64 per participant for single employer defined benefit pension plans and $27 for multi-employer plans. We knew that the variable rate premium (per $1,000 of unfunded benefit liability) would be at least $29 with a possible increase for indexing. Now we know that the rate will actually be $30. For plans with unfunded benefit liabilities, all contributions to the plan will generally offset the premium, in effect giving an automatic 3.0% return on the contribution (with the limited exception of plans that hit the premium cap of $500 per participant). Plan sponsors should consider the impact on PBGC premiums when deciding what level of contributions to deposit to the plan. Here’s a snapshot of the premium schedule in recent years: **Year****Single Employer Flat Rate****Single Employer **Variable Rate******Per Participant **Variable Rate Cap******Multi-Employer **Flat Rate****2012$35$9N/A$92013$42$9$400$122014$49$14$412$122015$57$24$418$262016$64$30$500$27After 2016 all rates are subject to indexed increases, following an inflation factor. **and Then…** Stay tuned to our blog to find out if the recent budget proposal in Congress will go all the way to law with even further increases in PBGC premiums! **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Defined Benefit Plans, Latest News **Tags:** Defined Benefit Plans, PBGC Premiums --- ### [Do You Have the ESOP Factor?](https://watkinsross.com/articles/2015-10-22-do-you-have-the-esop-factor/) **Published:** October 22, 2015 **Author:** Watkins Ross Team **Content:** Succession planning, exit strategy, sustainable business, retain passion, create liquidity, leave a legacy … if these words caught your attention, you may have the ***‘ESOP Factor.’*** What is an ESOP? An Employee Stock Ownership Plan (ESOP) is a qualified defined contribution retirement plan that invests primarily in the common stock of the sponsoring company. Employee ownership – as little as 20% or 100% – can transform a company. When employees become owners, productivity rises and errors decline. Many studies by The ESOP Association and National Center for Employee Ownership (NCEO) have found that ESOP-owned companies have outperformed their peers and the general stock market. Establishing an ESOP can be a successful tool for many company owner(s) in their succession planning. The owner’s shares are sold to the ESOP at a fair market value whereby creating liquidity for the owner(s) and a structure to reward employees by giving them an equity ownership interest. There are also significant tax advantages for the sponsoring company and the selling shareholder. ESOPs require planning. Owners and their advisors should review the advantages and disadvantages to determine whether an ESOP is right for them. For owners looking to achieve the maximum cash price for their business, an ESOP is probably not the best fit. There can be significant professional expenses incurred to establish an ESOP as well. Because of the costs and complexities involved, an ESOP may not be the right fit for a small company with less than a few million in sales, carry a lot of debt, or have a high employee turnover rate – or for an owner that does not care what happens to the company after they leave. On the other hand, if the selling owner has developed a great management team, is financially strong and wants to make sure that what they have created in their business continues after they move on, if the owner and employees believe that the business really matters and they do not lack passion in the workplace, if the desire is to leave a legacy … then they just may have the ***‘ESOP Factor.’*** If you would like to learn more about why ESOPs are so popular please visit: [www.esopassocitioantorg](https://www.esopassociation.org) or [www.nceo.org](https://www.nceo.org). **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Business Management, ESOP, Plan Selection --- ### [Get Your KSOP on by October 1, 2015](https://watkinsross.com/articles/2015-09-24-get-your-ksop-on-by-october-1-2015/) **Published:** September 24, 2015 **Author:** Watkins Ross Team **Content:** The typical Employee Stock Ownership Plan (ESOP) is designed to reward those who stay with the company, providing an annual allocation of contributions. The typical 401(k) plan is designed to encourage employees to make salary deferral contributions. When a single plan combines the two – that is a KSOP – and when the KSOP adds a formula permitting the employer to match employee elective deferrals, or better yet, a Safe Harbor contribution – that is called *Sweettt!* ***Items to remember:*** **Safe Harbor (SH) 401(k) Implementation Deadline: October 1, 2015** **When implementing a new plan**: 401(k) plans providing for a safe harbor component must be implemented no later than October 1st, 2015 to be effective for the 2015 plan year. This deadline would apply to any current profit sharing (only) plan that adds a 401(k) and safe harbor feature, as well as to any newly implemented 401(k) plan that will provide for a 2015 safe harbor provision. **Existing 401(k) plans**: Safe Harbor provisions can only be added to an existing plan before the beginning of the plan year, and they must be in effect for the entire year. In order to get a free pass on the ADP/ACP Test Safe Harbor provisions cannot be changed or eliminated during the year except if the plan is terminated completely. In the event of plan termination, the Safe Harbor contribution up through the date of termination would still apply. **Expect advance preparation and planning**: Planning is a necessity in order to establish a new tax-qualified plan or redesign an existing one. The same goes for a safe harbor plan design. Therefore, now is the time to consider whether a safe harbor feature is right for your company or your client’s plan in order to ensure that it can be fully operational by the deadline. **Technical Issues**: Failing ADP and ACP test? With the right SH design, this testing is no longer needed. **Tax advantages of ESOPs**: There are several major tax incentives to the selling stockholders and the corporation. **Totally check out Watkins Ross for your KSOP Third Party Administrator**: Watkins Ross designs and administers all types of retirement plans. The staff at Watkins Ross not only assists our clients in complying with the regulations in a cost and time efficient manner, we also work with them to ensure their retirement plan meets the needs of the employees, as well as the objectives of the employer. **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** KSOP, Plan Administration, Plan Selection, Safe Harbor --- ### [Must your plan cover leased employees?](https://watkinsross.com/articles/2015-09-17-must-your-plan-cover-leased-employees/) **Published:** September 17, 2015 **Author:** Watkins Ross Team **Content:** Does your Company utilize the services of Leased Employees? If so, it is important to be aware of the rules governing qualified retirement plans and leased employees. There are certain requirements that must be met in order for an individual to be considered a leased employee. They are: - The individual is not a common-law employee of the employer. - The individual provides services under an agreement between a leasing organization and the employer. - The services are provided on a substantially full-time basis for at least one year. - The services are of a type historically performed in the employer’s business by common-law employees. The IRS provides a limited safe harbor that permits a recipient employer to exclude leased employees from plan coverage if: - Leased employees do not constitute more than 20 percent of the recipient employer’s non-highly compensated employee workforce, and - The leasing organization maintains a non-integrated money purchase plan that makes a contribution of at least 10 percent of compensation for the leased employees. - Such a plan must provide the leased employees with immediate eligibility and full vesting upon plan entry. Employers can consider adding a plan provision that excludes leased employees from participating. This strategy is viable only if the plan can pass coverage testing that includes the leased employees as eligible employees who are excluded from benefiting under the plan. Whether your plan document excludes leased employees or not, it is important to alert your third party administrator if you are utilizing leased employees. They can help you work through the particulars of dealing with this issue. An ounce of prevention is worth more than a pound of cure! **Categories:** Retirement Plans **Tags:** Compliance, Leased Employees, Plan Administration --- ### [Old Mortality Rates Survive Another Year](https://watkinsross.com/articles/2015-08-26-old-mortality-rates-survive-another-year/) **Published:** August 26, 2015 **Author:** Watkins Ross Team **Content:** The IRS published the 2016 required mortality rates for purposes of minimum funding in defined benefit plans via Notice 2015-53. The 2016 rates will NOT be based on the newly published Society of Actuaries (SOA) RP2014 rates along with the improvement scale MP2014, but will be an extension of the “old” RP2000 rates required in previous years. This means that the pending impact of the new rates (i.e. increase in pension liabilities – see [December 2014 blog on Mortality Improvements](https://watkinsross.com/articles/2014-12-15-mortality-improvements/ "December 2014 blog on Mortality Improvements")) is put off another year, at least with regard to minimum funding calculations and lump sum payout values. Keep in mind, that even though new rates are not yet required for these specific purposes in 2016, auditors will likely require use of the newer rates for accounting (FASB) and disclosure on company financial statements in 2015, if they weren’t already reflected in 2014. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Latest News, Pension Risk **Tags:** Government Regulation, IRS, Mortality --- ### [Take Me Out to the Ball Game](https://watkinsross.com/articles/2015-08-19-take-me-out-to-the-ball-game/) **Published:** August 19, 2015 **Author:** Watkins Ross Team **Content:** This was my grandson’s first year of baseball. He was new to the game. I wanted him to succeed. I wanted him to love it. As an ESOP administrator, I love working with new ESOP clients. A new ESOP can be much like a child learning baseball; they must learn the basic fundamentals when they are small. Learn the proper techniques: #### **Basic Skills** - Engage experienced ESOP administration professionals, including an employee benefits attorney, a qualified business valuation appraiser and a certified ESOP TPA. - Define your vision of employee ownership. #### **Make it Fun and Challenging** - Incorporate an ESOP culture with employee involvement. - Learn new things: attend ESOP conferences, webcasts, etc. - Use your imagination – get in the game! #### **Improve and Strengthen** - Oversee the administration of the ESOP. - Communicate with your employees (your ESOP’s children) how they impact the stock value, implement educational meetings on enrollment, vesting, distribution and diversification rights, and provide annual statements supporting the long term awards – build a team! #### **Dedicated to Achievement** - Yes, the responsibilities are high but to become a successful ESOP company you must love the game and play to win! **Categories:** Employee Stock Ownership Plans **Tags:** Business Tips, ESOP, Plan Administration --- ### [Lump Sums to Retirees: A Controversial De-risking Tactic Removed From the Table](https://watkinsross.com/articles/2015-08-12-lump-sums-to-retirees-a-controversial-de-risking-tactic-removed-from-the-table/) **Published:** August 12, 2015 **Author:** Watkins Ross Team **Content:** On July 9, 2015 the IRS issued a Notice of its intent to disallow lump sum offerings to retirees who are already receiving monthly benefits from the plan. Current law prohibits payments to retirees that would increase later in the annuity payment period (with limited exceptions such as for cost of living adjustments and plan amendments that increase benefits) because it could be used as a tactic to defer and/or minimize taxation of benefits. Making a lump sum offer to retirees is an increase later in the annuity payment period not expressly allowed by law, but many have interpreted the law to permit this activity, and it has been used often in recent years to de-risk a pension plan. There has been much controversy surrounding this de-risking tactic, but not because of deferring taxation, even though that’s the area of the law that is now expressly prohibiting it. Pension rights advocates believe that retirees, by turning in their guaranteed monthly income for a lump sum payment, are taking on risk they are neither properly informed about nor prepared well to manage. The IRS Notice 2015-49 is effective immediately and language changing the law will follow. Pension plans that have already been amended or have taken intentional moves toward the process of offering lump sums to retirees by July 9 may follow through with the process. In addition, it appears at this time that the IRS will still allow lump sum offerings to retirees upon plan termination and in other limited circumstances that are permitted by the plan document. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Latest News, Pension Risk **Tags:** Pension, Risk Assessment --- ### [Push for Representatives and Senators to co-sponsor H.R.2096 and S.1212](https://watkinsross.com/articles/2015-08-05-push-for-representatives-and-senators-to-co-sponsor-h-r-2096-and-s-1212/) **Published:** August 5, 2015 **Author:** Watkins Ross Team **Content:** There is overwhelming evidence that ESOP Companies are more productive, more profitable and more sustainable by providing locally controlled Jobs. The Pro-Private ESOP Company Tax Bill introduced in House and Senate would expand the availability of ESOPs in S Corporations. Pro-ESOP Bill, S. 1212, Introduced in Senate; May 2015 and Pro-ESOP Bill, H.R. 2096, Introduced in House; April 2015 will: - Permit owners of S stock to sell the stock to an ESOP and defer the capital gains tax on his/her gain if the proceeds are reinvested in the equities of U.S. Operating corporations as owners of C corporations stock have done under IRS 1042 since 1984. - Establish an office in the Department of Treasury to provide technical assistance to S corporations with ESOPs. - Provide that a small business (S or C) eligible for one of the many programs provided by the Small Business Administration to remain eligible for SBA programs if the company becomes owned 50% or more by an ESOP, and the workforce remains the same or nearly the same as before the establishment of the 50% ownership by employees through the ESOP. Watkins Ross encourages ESOP advocates to promote private company ESOPs by providing their own company story to its member of Congress. **SPEAK UP** – Push for Representatives and Senators to co-sponsor H.R.2096 and S.1212, respectively. ESOPs are in the law and Congress can take them away. It is important to keep advocating laws that encourage the creation and operation of ESOPs so that ESOP Companies and their engaged and committed employee owners may continue to realize the benefits of employee ownership. The ESOP Association Spring 2015 Advocacy Kit is available at [www.esopassociation.org](https://www.esopassociation.org/ "www.esopassociation.org"). **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** ESOP, ESOP Association, Government Regulation --- ### [What is an Actuary?](https://watkinsross.com/articles/2015-07-29-what-is-an-actuary/) **Published:** July 29, 2015 **Author:** Watkins Ross Team **Content:** ## The Highly Ranked Profession that Almost No One Understands You know the scene. It happens at every party or barbecue you’ve ever attended. You meet someone new and chat for a while. Eventually the conversation runs dry so you turn to those tried and true small talk topics. Once you are finished talking about the weather they ask you what you do for a living. “I’m an actuary.” Next, one of two things happens: 1. “Cool! Really? My \[cousin, sister, roommate, best friend from elementary school\] is an actuary! I’ve heard you have to take A LOT of tests.” Or, more often, 2. \*Crickets\* So what is an actuary anyways? To generalize, they are credentialed professionals, who employ a mix of business, financial, IT and legal knowledge to solve complex business problems and help organizations optimize their financial risks. That didn’t help clarify? Let’s look at some of the jobs that actuaries do. You may be surprised how many of them impact your everyday life. ## Jobs Filled by Actuaries - At Watkins Ross, the actuarial staff is responsible for valuing and consulting on retirement plan issues. This involves helping employers determine the costs of their defined benefit pension plans, cash balance plans and retiree medical benefits as well as consulting on retirement plan trends, retirement benefit designs that help attract and retain high-level employees and strategies to help manage the cost of these benefits. - Actuaries are the people who determine what premium you should pay for life insurance, health insurance, car insurance, and really insurance of any kind. - Actuaries are also the people who make sure that insurance companies understand how much money to keep in the bank to pay for the benefits they promised. - Actuaries are often involved in the process to estimate the cost of proposed federal legislation before it goes to vote. - Actuaries sit on the executive team at many financial organizations, filling roles like Chief Financial Officer, Chief Risk Officer and sometimes even Chief Executive Officer. - Actuaries also fill a number of other roles, considered to be “non-traditional” where their analytical approach to solving business problems of all kinds is highly valued. Lastly, let’s talk about a few things that actuaries are NOT. ## Things Actuaries are NOT - They are *not* like Ben Stiller’s character in Along Came Polly. ([Along Came Polly Movie Clip](https://www.youtube.com/watch?v=uDffmOSVnBM)) - Actuaries are *not* magic genies who can tell you how long you will live. - Increasingly, actuaries are not just number-crunching nerds who are kept in the back office producing reports that only they can understand. As business problems become more complex, actuaries need to be good communicators with business acumen and management potential, regardless of their particular job function. ## Interested in Learning More? You can always reach out to a member of our [Client Management Team](https://watkinsross.com/about-our-firm/#our-team) for more information about the actuarial services we provide. For more information about the actuarial profession, [www.beanactuary.org](http://www.beanactuary.org) is a great resource. **Blog authored by Kylie Young, ASA, Actuary.** **Categories:** Latest News **Tags:** Actuarial Services, Industry Info --- ### [Watkins Ross Launches Green Initiative](https://watkinsross.com/articles/2015-07-21-watkins-ross-launches-green-initiative/) **Published:** July 21, 2015 **Author:** Watkins Ross Team **Content:** As many of you know, we moved to our new location (200 Ottawa NW Suite 600) in late October 2014. It was a very exciting challenge and certainly a learning experience, since you never know how much you have until you have to move it! Watkins Ross is doing our part as stewards of our environment and as good neighbors to our clients and our community. We believe it’s important to be environmentally conscious and reduce our carbon footprint; therefore, we initiated a new program, WR2 (Watkins Ross Waste Reduction). We, at Watkins Ross, are committed to reducing consumption and limiting our waste by not using, and ultimately disposing of, so much paper. We are in the process of setting up new internal guidelines for the use of paper and I will be periodically updating our progress on our website – we hope you will join us on our journey. Did you know: - 24 million tons of paper is still being discarded vs. recycled, even though paper being sent to landfills has dropped by ½ since 2000. - 1 ton of paper = 200,000 sheets of paper - 1 ton of paper = 24 trees - The average office worker prints 10,000 sheets per year We each have to be a player and do our part! ## CONTRIBUTING TO A GREEN FUTURE. **Categories:** Latest News **Tags:** Environment, Watkins Ross Updates --- ### [Watkins Ross Advocates Pro-ESOP Bills by Seeking a Congressional Visit](https://watkinsross.com/articles/2015-07-08-watkins-ross-advocates-pro-esop-bills-by-seeking-a-congressional-visit/) **Published:** July 8, 2015 **Author:** Watkins Ross Team **Content:** Watkins Ross is 100% employee owned – we believe in ESOPs – we believe that ESOP laws should be continued and expanded. ESOP’s are in the law and Congress can take them away. It is important to keep advocating laws that encourage the creation and operation of ESOPs so that ESOP companies and their engaged, committed employee owners may continue to realize the benefits of employee ownership. **Pro-ESOP Bill, S. 1212, Introduced in Senate; May 2015 and** **Pro-ESOP Bill, H.R. 2096, Introduced in House; April 2015 will:** - Permit owners of S stock to sell the stock to an ESOP and defer the capital gains tax on his/her gain if the proceeds are reinvested in the equities of U.S. Operating corporations as owners of C corporations stock have done under IRS 1042 since 1984. - Establish an office in the Department of Treasury to provide technical assistance to S corporations with ESOPs. - Provide that a small business, S or C, eligible for one of the many programs provided by the Small Business Administration to remain eligible for SBA programs if the company becomes owned 50% or more by an ESOP, and the workforce remains the same or nearly the same as before the establishment of the 50% ownership by employees through the ESOP. Additionally, the Pro-ESOP Bill, H.R. 2096 will: - Permit lenders to S corporations with 50% or more ownership through an ESOP to exclude 50% of the interest from the loan, if used to acquire stock for the ESOP. Some benefits to the Seller, the ESOP and its Employee Owners include: - The Seller defers tax liability for the company stock sold directly to the ESOP and receives income from the sale. - The company receives benefits from the 31-100% owned ESOP, S Corporations are not subject to “UBIT” ‘Unrelated Business Income Tax’, K-1 income is not subject to federal or state, corporate or personal income tax, and employees benefit from an employer contributed retirement plan that will grow in value based on their efforts. Single bills tend not to get considered by themselves, but if enough support is shown, they could be included in much larger tax bills, such as 2017 tax reform. What can ESOP companies do to advocate for these bills? Easiest done is to push for Representatives and Senators to co-sponsor H.R.2096 and S.1212, respectively. The most effective activity in obtaining congressional support for ESOPs is having your member of Congress visit **your** ESOP company and declare openly a pro-ESOP position. Since Watkins Ross believes in ESOPs and that the laws should be continued/expanded, we have taken steps in hopes of securing a congressional visit. The ESOP Association Spring 2015 Congressional Company Visit Kit provides instructions and sample letters to use when trying to secure a congressional visit. The kit is available at[ www.esopassociation.org](http://esopassociation.org). **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** ESOP, ESOP Association, Government Regulation, Watkins Ross Updates --- ### [BINGO to Avoid an Audit Trigger on Your ESOP Form 5500](https://watkinsross.com/articles/2015-06-11-bingo-to-avoid-an-audit-trigger-on-your-esop-form-5500/) **Published:** June 11, 2015 **Author:** Watkins Ross Team **Content:** **2I – 2O – 2P – 2Q – 3I, Bingo!** Entering incorrect information on the return or report, or leaving a field blank when there should be an entry increases the likelihood that you’ll be selected for an Employee Plans Compliance Unit compliance check. **Plan characteristic codes under item 8** are one of the four specific items on the annual Form 5500 that are unique to ESOP plans. 1. Codes are used to identify various characteristics of the plan or plan sponsor. Specific to an ESOP are: - 2I – stock bonus plan - 2O – ESOP other than a leveraged ESOP - 2P – leveraged ESOP - 2Q – plan sponsor is an S Corporation - 3I – plan requiring employer contributions be invested in employer securities 2. Financial Information on Schedule H for Large Plans: Specific items to report in Part I, Part II, and Part IV include employer stock at Fair Market Value, exempt loan liabilities, interest expense paid on exempt loans, dividends or S Corporation distribution income, unrealized gain/loss on employer stock and compliance questions related to the employer stock assets. 3. Financial Information on Schedule I for Small Plans: Specific items to report in Part I include current Fair Market Value as well as other assets, outstanding principal on exempt loans, dividends or C Corporation Distributions, interest paid on exempt loans and value of employer securities held by the plan. 4. Retirement Plan Information on Schedule R: - Part IV – ESOP Information - Line Item 10, 11a, 11b, and 12 must be completed Yes or No If you are preparing the Form 5500 yourself, look at each line item and instructions carefully. Do not copy line items from year to year as it easy to make an entry on the wrong line or use an incorrect code. If a Third Party Administrator prepares your return, take the time to examine it before it is submitted. The ultimate liability for its accuracy and completeness rests with the plan administrator. Consult your benefits administrator when concerns arise. **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Audits, Compliance, ESOP, Form 5500 --- ### [Escalating PBGC Premiums](https://watkinsross.com/articles/2014-09-18-escalating-pbgc-premiums/) **Published:** September 18, 2014 **Author:** Watkins Ross Team **Content:** Plan sponsors of defined benefit pension plans who are subject to PBGC coverage receive an email each year from the PBGC requiring input (and payment). What’s also required is a deep breath and a strong heart. Although the purpose of the PBGC is meaningful and well-intended, it doesn’t make the escalating premiums any easier to pay. Starting after the 2012 filing year, the flat rate (per participant) premium began an upward climb, and after the 2013 filing year, the variable rate portion (per $1,000 of unfunded vested benefits) joined the hike. Here’s a snapshot of the premium schedule: YearSingle Employer Flat RateSingle Employer Variable RateMulti-Employer Flat Rate2012$35$9$92013$42$9$122014$49$14$122015$57$24$122016$64$29$122015 and 2016 are also subject to indexing and could be higher than what’s shown above. After 2016, all rates are subject to indexed increases, following an inflation factor. The flat rate premium is based on the number of participants in your plan and there’s no flexibility, but it’s often the lesser portion of the premium. The only real opportunity to decrease the flat rate premium is by decreasing the number of participants in the plan (by paying lump sums to terminated employees if your plan allows for that, or purchasing annuities for retirees). There are some options available in calculating the variable rate premium, but very limited, and there are measures in place to prohibit plans from jumping methods each year in order to create the lowest premium. The one sure way to limit the increase in the variable portion of the PBGC premium is to strengthen the funded status by making additional contributions to the plan. In essence, by paying more contributions to the plan, you pay less premium to the PBGC. As an estimate of how much you could decrease the premium with an additional contribution, multiply the amount of additional contribution by the applicable variable rate in the table, and divide by 1000. It may be worth consideration. As your actuaries calculating the PBGC premium, Watkins Ross will assess and communicate with you each year if there are any viable opportunities to lessen the premium. Feel free to contact us if you have questions about how you can better protect yourself from these future premium increases. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Defined Benefit Plans, Latest News **Tags:** Defined Benefit Plans, PBGC Premiums --- ### [Escalating PBGC Premiums](https://watkinsross.com/articles/2015-03-30-escalating-pbgc-premiums-2/) **Published:** March 30, 2015 **Author:** Watkins Ross Team **Content:** Plan sponsors of defined benefit pension plans who are subject to PBGC coverage receive an email each year from the PBGC requiring input (and payment). What’s also required is a deep breath and a strong heart. Although the purpose of the PBGC is meaningful and well-intended, it doesn’t make the escalating premiums any easier to pay. Starting after the 2012 filing year, the flat rate (per participant) premium began an upward climb, and after the 2013 filing year, the variable rate portion (per $1,000 of unfunded vested benefits) joined the hike. Here’s a snapshot of the premium schedule: **Year****Single Employer** **Flat Rate****Single Employer** **Variable Rate****Multi-Employer** **Flat Rate**2012$35$9$92013$42$9$122014$49$14$122015$57$24$262016$64$29$262015 and 2016 are also subject to indexing and could be higher than what’s shown above. After 2016 all rates are subject to indexed increases, following an inflation factor. The flat rate premium is based on the number of participants in your plan and there’s no flexibility, but it’s often the lesser portion of the premium. The only real opportunity to decrease the flat rate premium is by decreasing the number of participants in the plan (by paying lump sums to terminated employees if your plan allows for that, or purchasing annuities for retirees). There are some options available in calculating the variable rate premium, but very limited, and there are measures in place to prohibit plans from jumping methods each year in order to create the lowest premium. The one sure way to limit the increase in the variable portion of the PBGC premium is to strengthen the funded status by making additional contributions to the plan. In essence, by paying more contributions to the plan, you pay less premium to the PBGC. As an estimate of how much you could decrease the premium with an additional contribution, multiply the amount of additional contribution by the applicable variable rate in the table, and divide by 1000. It may be worth consideration. As your actuaries calculating the PBGC premium, Watkins Ross will assess and communicate with you each year if there are any viable opportunities to lessen the premium. Feel free to contact us if you have questions about how you can better protect yourself from these future premium increases. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Defined Benefit Plans, Latest News **Tags:** Defined Benefit Plans, PBGC Premiums --- ### [Who Should Consider a Cash Balance Plan?](https://watkinsross.com/articles/2015-06-02-who-should-consider-a-cash-balance-plan-2/) **Published:** June 2, 2015 **Author:** Watkins Ross Team **Content:** ***The content below was originally posted 06/02/2015 and has since been updated. [Click here](https://watkinsross.com/articles/2018-08-13-who-should-consider-a-cash-balance-plan/) to read the updated information.*** Cash balance plans allow high-income earners to save more towards retirement than a defined contribution plan. Unlike a defined contribution plan where the maximum annual additions are limited to $53,000 per year (as indexed), the annual allocation limit in a cash balance plan depends on age. For example, the maximum annual allocation for someone age 50 is more than $140,000. So, who should consider implementing a cash balance plan? High-income earners that have been maxing out their profit sharing/401(k) contributions but would like to save more for retirement. Watkins Ross has been designing and administering cash balance plans to provide strategically targeted benefits and increased tax deferred savings since 1999. If you have additional questions or would like help determining if you should implement a cash balance plan, please call David Paauwe, MSPA, EA at 616.742.9211. **Categories:** Cash Balance Plans **Tags:** Business Tips, Cash Balance Plans, Plan Selection --- ### [Questions to Ask When Choosing an Actuary For Your Cash Balance Plan](https://watkinsross.com/articles/2018-03-05-questions-to-ask-when-choosing-an-actuary-for-your-cash-balance-plan/) **Published:** March 5, 2018 **Author:** Watkins Ross Team **Excerpt:** Accurate administration of a Cash Balance Plan is critical! The following questions can help you when choosing an actuary for your cash balance plan. **Content:** Cash Balance Plans can provide rapid accumulation of benefits and significant tax deductions. Accurate and timely administration of a Cash Balance Plan is critical to the success of the plan, so it’s imperative to enlist the right team of professionals. The following questions can help you through the process when choosing an actuary for your Cash Balance Plan: #### **1. How long has the firm administered Cash Balance Plans?** Watkins Ross has administered Cash Balance Plans for 19 years. #### **2. What size plan do you typically administer?** Watkins Ross specializes in small Cash Balance Plans with less than 100 participants. Our attention to detail and the specialized service we provide to high-income business owners is something we continue to strive to improve upon. #### **3. Who will complete the actuarial work for your Cash Balance Plan?** David Paauwe, MSPA, EA is Co-President of Watkins Ross and has been with the firm since 1999. David is credited with building our Cash Balance Plan line of business. When you choose Watkins Ross as your Cash Balance Plan actuary, you work directly with David and his colleagues on the cash balance team. #### **4. What are your fees?** Watkins Ross fees are not contingent on the size of the plan’s asset pool or the amount of the deduction generated from the annual contribution to the plan. Instead, our fees are based on the number of plan participants and are based on a fee for service model. #### **5. Does the actuarial firm also manage the plan’s assets?** At Watkins Ross, we believe it is in the client’s best interest to separate the functions of actuarial work and managing the plan’s assets. Because of this independence, Watkins Ross clients are not steered towards certain financial advisors or investment products. #### **6. Who will maintain and implement the plan’s document?** Due to the complexities of cash balance plans, we encourage our clients to seek outside legal counsel for legal compliance of the plan document. Similar to investment advice, we believe it’s in the best interest of the clients to have an ERISA attorney to work with for legal issues that may arise. Although it may seem more convenient, many firms try to utilize a “bundled” approach and provide actuarial, legal and investment expertise. Watkins Ross is focused on providing the best actuarial service to their clients and work with legal counsel and investment advisors. #### **7. What is the ownership structure of the actuarial firm?** Watkins Ross is 100% employee owned which means all of our employees have a financial stake in the future of Watkins Ross. We believe that ownership translates into increased engagement with our clients and low employee turnover. You can [download our Cash Balance Plan brochure](https://watkinsross.com/resources/) for additional information. Please contact David Paauwe, MSPA, EA at if you would like to discuss implementing a Cash Balance Plan. **Categories:** Cash Balance Plans **Tags:** Actuarial Services, Cash Balance Plans, Plan Selection --- ### [What is a Cash Balance Plan?](https://watkinsross.com/articles/2015-05-26-what-is-a-cash-balance-plan/) **Published:** May 26, 2015 **Author:** Watkins Ross Team **Content:** A cash balance plan is a defined benefit plan that specifies the benefit as a hypothetical account balance. Each year, the hypothetical account is credited with a principal credit and an interest credit, as defined in the plan document. These plans are required to permit an annuity form of payment, but the standard form is a lump sum equal to the amount of the hypothetical account balance. The employer contributions made to a cash balance plan are not discretionary, since they are subject to the minimum funding requirements applicable to defined benefit plans. Watkins Ross has been designing and administering cash balance plans to provide strategically targeted benefits and increased tax deferred savings since 1999. If you have additional questions or would like help determining if you should implement a cash balance plan, please call David Paauwe, MSPA, EA at 616.742.9211. **Categories:** Cash Balance Plans **Tags:** Cash Balance Plans, Defined Benefit Plans, Plan Services, Retirement Plans --- ### [Watkins Ross Named Silver ESOP Award Winner](https://watkinsross.com/articles/2015-05-20-watkins-ross-named-silver-esop-award-winner/) **Published:** May 20, 2015 **Author:** Watkins Ross Team **Content:** Watkins Ross has been named a Silver ESOP Award winner by The ESOP Association. The Silver ESOP Awards recognize companies for their work in sustaining their ESOP for 25 years or more. Watkins Ross is one of 48 corporate members of the Association to be honored in 2015 with a Silver ESOP Award. The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOP) and the leading voice in America for employee ownership. “We are proud to be a 2015 Silver ESOP Award recipient. We believe strongly in the power of employee ownership and are pleased to have not only our company but our employee owners recognized for their efforts,” commented David Bosch, who serves as the primary consultant in the ESOP and Defined Contribution divisions of Watkins Ross. “I consider it an honor to recognize Watkins Ross as a 2015 Silver ESOP Company,” said J. Michael Keeling, president of The ESOP Association. “Watkins Ross evidences that with proper management and planning, a company can remain employee-owned, benefiting all employee owners for years to come.” As a Silver ESOP Award recipient, Watkins Ross was honored at The ESOP Association’s Annual Conference held in Washington, D.C. in May and was highlighted at the 24th Annual Awards Ceremony to honor outstanding companies and individuals in the employee ownership community. To be named a Silver ESOP Award winner, a company must be a member of The ESOP Association and have an ESOP in place for 25 years or more. This is the eighth year the Silver ESOP Awards have been presented by the Association. **Categories:** Latest News **Tags:** Awards & Accreditations, Employee Owned, ESOP Association, Watkins Ross Updates --- ### [Hardship and Participant Loan Documentation](https://watkinsross.com/articles/2015-05-13-hardship-and-participant-loan-documentation/) **Published:** May 13, 2015 **Author:** Watkins Ross Team **Content:** The IRS recently published guidelines for Plan Sponsors to adhere to regarding the documentation of hardship distributions and participant loans. Generally speaking, plan participants sign a distribution form certifying that they qualify for a hardship distribution. However, this is not sufficient documentation. Along with the distribution form, the proper documentation proving the financial need for the hardship, documentation that the hardship was made in accordance with the terms of the plan and a copy of the actual distribution and Form 1099-R must be retained by the Plan Sponsor. In the event of an IRS audit, failure to provide these items is a qualification failure which must be corrected through EPCRS (Employee Plans Compliance Resolution System). Complete and accurate documentation of participant loans is also the responsibility of the Plan Sponsor. The loan application, including evidence of the review and approval process, the executed promissory note, proof that the loan was issued in accordance with the terms of the plan, proof of the loan repayments and proof of any collection attempts for defaulted loans, and related Form 1099-R must be kept on file. If a plan loan is issued for the purchase of a primary residence, the participant must provide proof that they used the money for that purpose. To read more about your documentation responsibilities as Plan Sponsor, please click here: **Categories:** Latest News, Plan Documents **Tags:** Compliance, Distributions, Hardship, Plan Documents --- ### [2015 401(a)(17) Compensation Limit](https://watkinsross.com/articles/2015-04-22-2015-401a17-compensation-limit/) **Published:** April 22, 2015 **Author:** Watkins Ross Team **Excerpt:** Section 401(a)(17) provides an annual compensation limit for each employee under a qualified plan. **Content:** In order to be considered a qualified plan, a plan must satisfy section 401(a)(17). Section 401(a)(17) provides an annual compensation limit for each employee under a qualified plan. The 2015 annual limit on compensation for qualified plans is $265,000. By placing a “ceiling” on compensation, the amount of tax deductions for Employers is restricted. In addition, qualified plans such as 401(k) plans are intended to be fair for all participants, regardless of income. As a result, the IRS limits the amount of compensation that may be taken into account for contribution purposes. Let’s suppose your employer matches 100% of deferrals up to 3% of compensation, your compensation is $400,000 and you are deferring 3%. This scenario would generate a matching contribution of $12,000. However, because the 2015 compensation limit is $265,000, your maximum matching contribution would be $7,950. If contributions are made in excess of the compensation limit, corrective action is required. As a result, it is imperative that your payroll provider limit employees’ compensation for contribution purposes to the IRS Annual Limit. **Categories:** 401(k) Plans, Latest News **Tags:** 401(a)(17), Plan Limitations --- ### [Do You Ooze ESOP?](https://watkinsross.com/articles/2015-04-15-do-you-ooze-esop/) **Published:** April 15, 2015 **Author:** Watkins Ross Team **Excerpt:** ESOP-Owned Companies are unique through their values, integrity, teamwork and passion. Do you ooze ESOP? **Content:** Ho-hum, it’s another day in the life of a Retirement Plan Administrator. March 15th came and went, so the first round of 401k plan testing is over. Is anything exciting happening in this field? Yes! I recently attended the Michigan Chapter of the ESOP Association Annual Spring ESOP Conference and came back reinvigorated! If you have attended a presentation with Employee Owners speaking about their ESOP, you know what I mean. They have a fantastic spirit when discussing their roles and how it applies to ownership. ESOP Owned Companies are unique through their values, integrity, teamwork and passion. How can you learn more about ESOP’s? Check out the ESOP Association website at [www.esopassociation.org](http://www.esopassociation.org). How can you get reinvigorated about your ESOP? Attend an ESOP Association Conference. Are you a CEO of an ESOP Company? Attend an ESOP Association CEO Roundtable. There are many ways to get involved and get reinvigorated! Do ***you*** ooze ESOP? **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Conferences, ESOP, ESOP Association --- ### [Can a Business Owner Receive a Safe Harbor Contribution?](https://watkinsross.com/articles/2015-01-28-can-a-business-owner-receive-a-safe-harbor-contribution/) **Published:** January 28, 2015 **Author:** Watkins Ross Team **Content:** Owners and highly compensated employees who are eligible participants in a safe harbor 401(k) plan are typically allowed to receive an employer contribution using the same safe harbor formula that is applied to the rank-and-file plan participants. However, some plans that use a cross-tested allocation method may exclude owners and/or highly compensated employees from receiving a safe harbor contribution. The adoption agreement will detail the safe harbor allocation provisions for each plan. Safe harbor plans may also provide additional benefits to business owners, including the following: - Safe harbor contributions may satisfy top heavy requirements. - 3% Safe harbor nonelective contributions may be included in cross-testing. - Safe harbor plans are deemed to satisfy nondiscrimination testing which allows all participants to maximize contributions, up to the annual IRS limits. - Offering a safe harbor contribution can help employers attract and retain qualified employees. - Contributions made to a safe harbor plan typically qualify as a tax deduction for the employer. **Blog authored by Sara Lewis, Retirement Plan Administrator.** **Categories:** Latest News **Tags:** Highly Compensated Employees, Safe Harbor --- ### [A Prying TPA Keeps the IRS Away](https://watkinsross.com/articles/2015-01-14-a-prying-tpa-keeps-the-irs-away/) **Published:** January 14, 2015 **Author:** Watkins Ross Team **Content:** January 1st brings anticipation for the future, a fresh start, and a chance to follow through on those New Year’s resolutions. But it also means that it’s retirement-plan reporting season as well. It’s time again to notify your TPA of any business changes that may have occurred in the previous year and provide employee census data for annual testing. Although the information requests from your TPA may seem a bit repetitive and intrusive, there is good reason to answer all questions in detail and fill out employee census requests completely. Missing or incorrect ownership and employee data may affect test results, and inaccurate tests could lead to complicated corrections and possible penalties. Start the New Year knowing that your retirement plan is not at risk in the event of an audit by providing your TPA with the following items: **Compensation** – One of the most important pieces of information that your TPA will request is plan year wages (refer to the current plan document or latest amendment for the correct definition of compensation for your plan). The definition of compensation for testing purposes may differ from the definition of compensation for plan contribution purposes. For example, many plans use gross W-2 wages for testing purposes but exclude annual bonus wages from employee deferrals and employer matching contributions. A plan may also exclude compensation prior to plan participation from testing and/or contributions. Any form of post-severance pay that would not have been received had employment continued must be excluded completely for all plan purposes. Your TPA should confirm that the annual census contains the proper definition of compensation, but the plan sponsor is ultimately responsible for providing accurate wage information. **Contributions** – Providing correct contribution totals is also essential for accurate test results. As with compensation, there are multiple compliance tests that rely on the employee/employer contribution information to produce accurate test results. The employee deferral contributions and employer contributions (match, profit sharing, etc.) on the annual testing should match annual payroll totals. Your TPA should also confirm that the contribution figures you provide on the census match the actual contributions deposited to the participant accounts. **Personal/Employment Data** – Personal and employment data such as date of birth and date of hire are necessary for determining eligibility and plan participation dates. Termination dates help your TPA determine who is eligible for employer contributions, who needs to receive a distribution, and how many eligible participants a plan has at year end. Social Security numbers are used for employee identification purposes and are also necessary for reporting taxable distributions on Form 1099-R as well as other tax-related reporting to the IRS or DOL. In addition, reporting any special types of employees (leased employees, union, non-resident aliens, etc.) assists a TPA with determining who is or is not an eligible plan participant. **Highly Compensated & Key Employees** – The ADP (Average Deferral Percentage) test compares the contribution percentages of the highly compensated employees to the non-highly compensated employees to determine if any contribution refunds are required for the highly compensated employees. Identifying who the highly compensated employees are for each plan year is essential for accurate ADP test results, as well as other compliance tests. For the 2014 plan year, any participant who owned more than 5% of the employer business *or* earned at least $115,000 in 2013 is considered a highly compensated employee for 2014 testing purposes. Employers may also elect the Top-Paid Group condition, which defines highly compensated employees as the top 20% of employees based on pay. In comparison, a key employee is any employee who, at any time during the 2014 plan year met at least one of the following criteria: 1) was an officer of the employer with compensation greater than $170,000; 2) an owner of 5% or more; *or* 3) owned 1% or more with compensation greater than $150,000. All key and former key employees must be reported on the annual top heavy test. **Mergers/Acquisitions** – Any changes in ownership and any mergers or acquisitions during the plan year should be reported to your TPA at least annually, but ideally these types of changes should be reported before they occur. Acquiring new businesses could force an employer to become a controlled group which could require the plan to cover additional employees for plan eligibility, testing, and contributions. So this year, when your TPA presses you for information, keep in mind that this process is not intended to feel like an interrogation. These requests not only help us to complete the basic annual testing and tax reporting requirements, but they also help us determine if your plan would be at risk during an IRS or DOL audit. **Blog authored by Sara Lewis, Retirement Plan Administrator.** **Categories:** Latest News **Tags:** IRS, TPA --- ### [Mortality Improvements](https://watkinsross.com/articles/2014-12-15-mortality-improvements/) **Published:** December 15, 2014 **Author:** Watkins Ross Team **Content:** Defined Benefit plan actuaries use various assumptions to calculate a plan’s benefit liabilities for various purposes. One of the main assumptions employed is the rate of mortality for the plan’s population. The IRS requires specific mortality tables for some purposes, such as calculating the minimum funding requirement and calculating lump sum benefit payments. For other purposes specified mortality tables are not required, but the actuary is bound by Actuarial Standards of Practice (ASOP) that require use of mortality rates (and other assumptions) that will result in the best possible estimate of liabilities. The RP-2000 mortality table that has been required for some purposes and often employed for other purposes is becoming outdated. In addition, experts believe that mortality improvements expected in the future should be better reflected in rates used to calculate current liabilities. Recently, the Society of Actuaries Retirement Plans Experience Committee (SOA RPEC) issued updated mortality tables referred to as RP-2014. A scale to reflect future improvements in mortality was also published, referred to as MP-2014. In general, RP-2014 is a set table of underlying mortality rates; and MP-2014 applies a scale to the underlying rates, projecting mortality improvements into the future. As an example of the impact of the new tables compared to the previously published tables, the life expectancy of a healthy 65 year old in 2014 increased 2.0 years for males and 2.4 years for females. For minimum funding requirements and for purposes of calculating lump sum payouts, the IRS will eventually require use of the new tables, but not until at least the 2016 plan year, and possibly as late as the 2018 plan year. This is an important consideration when exploring the possibilities of de-risking by paying lump sums (see earlier blog about de-risking) because the impact of the new required rates will be an increase in lump sum values. For pension accounting purposes actuaries should consider, in consultation with the plan sponsor and their unique circumstances, use of the new tables for 2014 and later disclosures. The updated mortality rates will create an increase in pension liabilities on the books, with the specific impact based on the demographics and other factors of the particular plan. The SOA has estimated an increase in liabilities of 4-8% if adopted in 2014. Because of the compounding effect of the mortality improvement scale, earlier adoption will serve to smooth the impact of the change. If Watkins Ross prepares your pension disclosure report for your financial statements, expect to receive communication from us in advance of preparing the report regarding adoption of the new mortality rates. In the meantime, if you would like an estimate of the specific impact of the new rates on your plan’s liabilities, please contact us. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Defined Benefit Plans, Latest News **Tags:** Actuarial Services, IRS, Mortality, Pension, Risk Assessment --- ### [Who is Considered a Leased Employee?](https://watkinsross.com/articles/2014-12-08-who-is-considered-a-leased-employee/) **Published:** December 8, 2014 **Author:** Watkins Ross Team **Content:** Does your Company employ leased employees? An employee is considered “leased” if all of the following criteria is met: - The services must be performed under an agreement between the recipient and a leasing organization. - The services must be performed for at least one year on a substantially full-time basis. Substantially full-time service means 1,500 hours in a 12-month period (or 75% of the customary hours in that job position, if less). - The recipient employer must have primary direction or control over the services rendered by the individual. All service is counted during the period the individual is a leased employee. If your plan document does not exclude leased employees, once an individual satisfies the leased employee definition he/she is treated as an employee as of the close of the 1-year qualifying period. In a 401(k) plan, eligible leased employees must be given the right to make deferrals and they also must be included in all non-discrimination testing. Please keep this in mind when submitting your census information to your Third Party Administrator. **Categories:** 401(k) Plans, Latest News **Tags:** 401k Plans, Compliance, Government Regulation, Leased Employees --- ### [Prospective 409(p) Testing](https://watkinsross.com/articles/2014-12-01-prospective-409p-testing/) **Published:** December 1, 2014 **Author:** Watkins Ross Team **Content:** The end of the year is a good time for S Corporations to conduct prospective anti-abuse testing under IRC 409(p) for their ESOP Plan. The anti-abuse test under IRC 409(p) is a complex ownership concentration test that must pass on every day of the plan year. The Anti-Abuse Rule provides that Disqualified Persons cannot have ownership interests in 50% or more of S Corporation shares and/or synthetic equity. Most calendar year plans should have participant distributions completed by this time which may affect stock ownership percentages. The test should use current year data and project the next year’s activity. It is critical that the administrator be provided with all the necessary data to perform this test, including any changes in family relationship and synthetic equity. The consequences of violating the test are extreme. If the testing has been close, discussing the calculations with your TPA and/or ESOP counsel prior to any change in ownership percentages, family relationship changes or synthetic equity is a necessity. **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** 409(p), Anti-Abuse, ESOP --- ### [Safe Harbor Contributions](https://watkinsross.com/articles/2014-11-17-safe-harbor-contributions/) **Published:** November 17, 2014 **Author:** Watkins Ross Team **Content:** Employers with qualified 401(k) plans that fail nondiscrimination testing each year may find that a plan amendment to add a safe harbor contribution is an effective solution. A safe harbor provision requires a mandatory employer contribution, 100% immediate vesting of safe harbor funds, and an annual notice for all plan participants. But, it may also allow a plan to automatically satisfy ADP/ACP tests, Top Heavy requirements, and 401(a)(4) for cross-tested plans. Choosing the type of safe harbor contribution that fits your plan can be overwhelming. A review of participant demographics, employee deferral rates, and current plan provisions can help determine which option is best for an employer. Following is a list of the four different types of safe harbor contributions and the specific requirements for each. ## Safe Harbor Nonelective Contribution A safe harbor nonelective requires at least a 3% safe harbor contribution to all eligible plan participants. A nonelective contribution is often the most cost effective option for plans that are top heavy and make additional annual employer contributions. ## Safe Harbor Matching Contribution A basic safe harbor matching formula requires a match rate of 100% of employee deferrals up to 3% of compensation plus 50% of employee deferrals between 3% – 5% of compensation, for a maximum match of 4% of eligible compensation. Safe harbor matching plans offer a simple transition for many employers who are currently making a discretionary matching contribution, but consistently fail ADP and/or ACP testing. A safe harbor matching option may also be beneficial for plans with low employee deferral participation. ## Enhanced Safe Harbor Matching Contribution A plan may allow for an alternative matching contribution that differs from the safe harbor basic match as long as the formula is a fixed rate and the contribution amount does not increase as employee deferral contributions increase. An enhanced matching formula must also provide a benefit equal to or greater than the maximum allowable basic safe harbor matching contribution (i.e., 4%). For instance, a fixed 4% annual safe harbor matching contribution would meet the enhanced safe harbor matching requirements. ## Automatic Enrollment Contribution The safe harbor exemption for automatic enrollment requires both employers and employees to make contributions to the plan. Upon becoming an eligible participant, employees must defer at least 3% in the first year of participation, 4% in the second year, 5% in the third year, and 6% in the fourth and all future years. An employer may require participants to defer at least 6% immediately to avoid the hassle of tracking the automatic increase for each active participant. Under an automatic enrollment safe harbor plan, employers must make either a matching or a nonelective contribution. Employers who chose the matching option must make a contribution of 100% on the first 1% deferred, and 50% of the next 5% deferred for a maximum match of 3.5%. The nonelective contribution must provide all eligible participants with a 3% safe harbor contribution, whether or not they defer into the plan. Unlike standard safe harbor plans, the automatic enrollment feature does not require immediate vesting until a participant earns 2 years of vested service. Under a safe harbor plan, highly compensated employees may make deferral contributions, up to the IRS limits, and avoid a contribution refund after the end of the plan year due to test failure. A safe harbor provision also allows for an exemption from top heavy requirements as long as no other employer contributions (e.g., profit sharing, forfeiture allocation) are made to the plan in addition to the safe harbor contribution. Despite the mandatory contribution rules and immediate vesting requirements, safe harbor contributions can provide a simple solution for employers who would like to avoid test failures. **Blog authored by Sara Lewis, Retirement Plan Administrator.** **Categories:** Latest News **Tags:** ADP/ACP, Defined Contribution Plans, Safe Harbor, Top Heavy Plans --- ### [The Current Trend of Pension De-Risking](https://watkinsross.com/articles/2014-10-21-the-current-trend-of-pension-de-risking/) **Published:** October 21, 2014 **Author:** Watkins Ross Team **Content:** Pension plan “de-risking” has recently become a hot discussion topic for pension plan sponsors. De-risking involves employing strategies to make the plan less sensitive to factors that affect required pension funding levels, such as market swings and life expectancy improvements, and therefore lessening the risk of future volatility in required contributions. In very general terms, there are three different approaches to de-risking: 1. **Allow lump sum payments from the pension plan when individuals terminate employment** This strategy removes risk of future mortality improvements and interest rate fluctuation with regard to the benefits that are paid as a lump sum. There are varying degrees of offering lump sums: to all terminated employees, at retirement age only, or as a “window” opportunity for terminated employees. This approach has the additional benefit of reducing per participant PBGC premiums. 2. **Use a Liability Driven Investment (LDI) asset management approach** This strategy involves investing pension assets in vehicles that match the future pension plan cash flow needs. As a plan matures and has greater cash outflows, a larger portion of investments under this approach will be directed to fixed income options which preserve asset returns and reduce the impact of market swings. 3. **Transfer longevity risk via use of insurance company products** Purchasing annuities for retirees in pay status is the obvious strategy here, but there are other creative options as well. Each approach requires careful consideration of the benefits and trade-offs such as cost, philosophical positions, administration, time horizon, etc. with regard to the particular pension plan and its company sponsor. These options should be discussed with your actuarial consultants, investment advisors, and/or insurance providers to determine if any of these de-risking options are desirable for your company and the pension plan(s) you sponsor. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Pension Risk **Tags:** Pension, Retirement Trends, Risk Assessment --- ### [Michigan Chapter of the ESOP Association Annual Fall Conference](https://watkinsross.com/articles/2014-09-10-michigan-chapter-of-the-esop-association-annual-fall-conference/) **Published:** September 10, 2014 **Author:** Watkins Ross Team **Content:** Watkins Ross, a Conference Sponsor, will be attending the Michigan Chapter of The ESOP Association Annual Fall ESOP Conference in Lansing, Michigan on Thursday, September 25, 2014. ## This Fall’s Theme is ‘On The Go For ESOPs.’ Morning speakers J. Michael Keeling, President and Chief Government Relations Officer of the ESOP Association, will warn all that the ESOP community should not be complacent about positive results for ESOP law during recent tax reform debates and Jordan Bush, district Director for U.S. Representative Justin Amash will share strategies for arranging a successful meeting with your legislator, including how to efficiently and effectively communicate with them. There are several Concurrent Breakout Sessions for every technical and employee ownership level. David Bosch from Watkins Ross will be co-presenting the session ‘A Look Into a DOL Audit.’ The registration deadline to qualify for discounted pricing is September 19, 2014. Walk-ins are always welcome. You may contact your Watkins Ross Retirement Plan Administrator for more information. Your participation in this cost-effective conference provides local networking opportunities and will benefit you and your organization. Stop by our sponsor table to see what is new and exciting at Watkins Ross! **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Conferences, ESOP, ESOP Association, Michigan --- ### [Employee Ownership Month](https://watkinsross.com/articles/2014-09-15-employee-ownership-month/) **Published:** September 15, 2014 **Author:** Watkins Ross Team **Content:** For over 20 years, The ESOP Association and its member companies have been celebrating Employee Ownership Month every October. It is a celebration of the incredible spirit of employee ownership and an opportunity to educate employee owners about the tremendous benefits of employee stock ownership plans (ESOPs). It’s not too early to start planning! Chili Cook-off? Ice Cream Social? Scarecrow Building Contest? Theme Day? Scavenger Hunt? Photo Contest? We believe that Employee Ownership Month offers your company a unique opportunity to share your ESOP story with your local community, elected officials and the media. **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** Employee Owned, ESOP, ESOP Association --- ### [All the Boring Actuaries](https://watkinsross.com/articles/2014-09-09-all-the-boring-actuaries/) **Published:** September 9, 2014 **Author:** Watkins Ross Team **Content:** According to Wikipedia, an Actuary is a business professional who deals with the financial impact of risk and uncertainty. Basically, actuaries are super smart individuals, with an unfair reputation for being super boring. But not all actuaries are boring. Did you know that an actuary even appeared in 4 issues of the Batman comic? *“Actuary was a mathematical genius who allied himself with the Penguin. He was able to apply formulas to the Penguin’s criminal schemes.”* The profession also consistently ranks among the best jobs and ranked No. 1 for 2013 (). So the next time I’m asked what Watkins Ross does, maybe I’ll avoid the glazed over eyes and just tell them that WR employs one of the most sought after professions; that these super genius, intellectual masterminds (working closely with the other highly credentialed staff) help savvy business owners maximize their retirement plans to get the best tax deferred savings. I challenge you to show me a business owner with glazed over eyes when you mention tax deferred savings! **Categories:** Latest News **Tags:** Actuarial Services, Watkins Ross Updates --- ### [Proud of Our Past, Committed to the Future](https://watkinsross.com/articles/2014-09-02-proud-of-our-past-committed-to-the-future/) **Published:** September 2, 2014 **Author:** Watkins Ross Team **Content:** ## WR Mission Statement > “Proud of our Past, Committed to the Future in providing specialized employee benefit services” This statement was commissioned by Dick Ross several years ago and has significant meaning, still today. Watkins Ross has been in business for over 65 years and has had an ESOP in place for over 25 years. The company has persisted despite changes in ownership. The employees representing Watkins Ross have honorable and creditable character. We are PROUD of our company. Watkins Ross has a total of over 637 years of service and experience. Watkins Ross is a 100% ESOP owned company with continued increase in Value (appreciation) of its’ Stock. Watkins Ross has an awesome PAST. Watkins Ross employees are Dedicated, Loyal, Focused, and Entrusted. Watkins Ross employees are COMMITTED. Watkins Ross continues to grow and evolve. The Baby Boomers retire and the Gen X and Gen Y are educated. New ‘retirement ready’ visions are being established. Watkins Ross continues to ‘provide solutions’ for the FUTURE. **Categories:** Latest News **Tags:** Watkins Ross Updates --- ### [Highway and Transportation Funding Act (HATFA)](https://watkinsross.com/articles/2014-08-25-highway-and-transportation-funding-act-hatfa/) **Published:** August 25, 2014 **Author:** Watkins Ross Team **Content:** On August 8, the president signed the Highway and Transportation Funding Act (HATFA). Part of the revenue-raising in the Act provides for “pension smoothing” which is accomplished by resetting required interest rates used in minimum funding calculations back to the original corridor set in 2012 by MAP-21. The initial effect of this will increase the required interest rates and thus decrease minimum funding requirements to pension plans. The rates are effective for plan years beginning in 2013; however, plans may opt out for 2013. In many cases the 2013 actuarial valuation is already complete, so adopting the rates for 2013 would require revision of the valuation. In addition, some 2014 valuations are already complete, in which case a revision of the numbers will be required. It is important to note that this smoothing does not remove any obligation from the plan sponsor to fund the plan to eventually pay all benefits. Also, PBGC premiums are unaffected by this act and since premiums are heavily determined by a plan’s under-funded status, smaller required contributions will result in larger PBGC premiums, especially given that the PBGC premium rate per $1000 of unfunded benefit value is increasing over the next several years. Details from the Treasury are still forthcoming, but enough information is available for plan sponsors to start the decision-making process with guidance from their actuaries. **Blog authored by Cheryl Gabriel, CPC.** **Categories:** Latest News **Tags:** Government Regulation, HATFA --- ### [Expanded Leadership](https://watkinsross.com/articles/2014-08-08-expanded-leadership/) **Published:** August 8, 2014 **Author:** Watkins Ross Team **Content:** Rick Zweering will retire this October, after 38 years of service with the company. Rick successfully managed Watkins Ross, as President, since 1993 and was instrumental in strengthening the long standing reputation Watkins Ross has within the retirement plan industry. In conjunction with Rick’s retirement, Watkins Ross is pleased to announce that, effective July 1, 2014; Chris Veenstra and Dave Paauwe assumed the roles of Co-President. Chris Veenstra, Enrolled Actuary, has been with Watkins Ross since 1991 and has built the retiree medical plan division of the company. Dave Paauwe, Enrolled Actuary, has been with Watkins Ross since 1999 and has been responsible for developing the company’s Cash Balance plan business. Chris and Dave were promoted to Vice President in October 2013. Dave Bosch, Marianne Evans and Sheila Freund will continue to lead and develop the defined contribution divisions of the company. **Categories:** Latest News **Tags:** Watkins Ross Updates --- ### [New ESOP Legislation](https://watkinsross.com/articles/2014-06-16-new-esop-legislation/) **Published:** June 16, 2014 **Author:** Watkins Ross Team **Content:** According to the National Center for Employee Ownership, about 12,000 companies in the United States, employing 11-million Americans, have embraced Employee Stock Ownership Plans, commonly known as ESOPs, or other similar trust-based plans. The concept can motivate and reward employees, the NCEO noted on its website, and are used to take advantage of borrowing incentives in pretax dollars. In almost every case, ESOPs are a contribution to the employee, the NCEO said. On June 2, 2014, Sen. Bernie Sanders, I-Vt., announced new legislation to encourage employee ownership. Through one bill, the U.S. Labor Dept. would provide funds to states to set up training and technical support centers to promote employee ownership and educate companies about the model, the office of Sen. Sanders said. Another bill would create a bank to provide loans to workers who want to purchase businesses through an ESOP or a worker-owned cooperative. A news release from the office of Sen. Sanders noted that Sen. Patrick Leahy, D-Vt. is a cosponsor of Sander’s legislative package. The option of leaving the futures of companies in the hands of their staffs is commonly taken by business owners approaching retirement who want to see their firms continue under knowledgeable, existing teams. Exploring options, learning more about the idea of employee ownership and understanding how it works, may be the right model for your company. **Categories:** Employee Stock Ownership Plans, Latest News **Tags:** ESOP, Government Regulation --- ### [Watkins Ross Adds New Service](https://watkinsross.com/articles/2014-03-05-watkins-ross-adds-new-service/) **Published:** March 5, 2014 **Author:** Watkins Ross Team **Content:** Watkins Ross is pleased to announce a new service to our clients. We are now able to offer the ERISA Wrap Summary Plan Description (SPD) for a fee of $300.00. ERISA requires group health plans to have a written SPD document in place and to provide this SPD to plan participants upon enrollment in the plan. The Wrap SPD is a relatively simple document that “wraps” around your insurance policy, coverage certificate or plan booklet (i.e. group health plans, dental and vision plans, group term life, etc.). The benefits under the plan continue to be governed by your insurance policy, coverage certificate or plan booklet, while the wrap document supplements with the information necessary to comply with ERISA. Basically, the wrap document fills the gaps left by insurance carriers and third-party administrators. The Department of Labor describes the wrap SPD as the “primary vehicle for informing participants and beneficiaries about their rights and benefits” and you, as the employer, are legally obligated to provide each participant with a copy of the SPD. If you have any questions, or would like our assistance in preparing your ERISA Wrap SPD, please contact Jill Northup, Document Coordinator, at . **Categories:** Latest News **Tags:** ERISA, Wrap SPD --- ### [How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) **Published:** August 24, 2026 **Author:** Watkins Ross Team **Content:** *By Chris Veenstra, FCA, ASA, MAAA, EA, President* If you participate in a defined benefit pension plan, you likely receive a pension statement once a year, either by mail or through an online portal. Although you know that this statement contains important information about your retirement benefits, the terminology and calculations can feel overwhelming. Learning how to read a pension statement is one of the most valuable steps you can take toward [retirement readiness](https://watkinsross.com/articles/2026-05-19-saving-for-retirement-why-so-many-americans-are-falling-behind/). Whether you’re early in your career or approaching retirement, understanding what the numbers mean can help you make informed decisions and avoid surprises later. This guide walks through the key sections of a typical defined benefit pension plan financial statement and explains what each component means and why it matters. ## **What Is a Defined Benefit Pension Plan?** A [defined benefit pension plan](https://watkinsross.com/services/defined-benefit-plans/) provides a guaranteed lifetime retirement benefit based on a formula rather than an account balance. While formulas vary by retirement system, they generally include: - Years of service - Final average salary - A benefit multiplier ### **Which Type of Plan Do You Have?** If you’re not sure whether your plan is a defined benefit pension plan or a defined contribution plan, here’s a quick way to tell. #### **You likely have a defined benefit pension plan if:** - Your statement shows a guaranteed monthly or annual benefit amount. - Your employer bears the investment risk and is responsible for ensuring the plan is funded to meet your promised benefit, even if you also contribute. - Your benefit is based on a formula (years of service, salary, and a multiplier), not an account balance. - You’re expecting a monthly check for life at retirement. #### **You likely have a defined contribution plan if:** - Your statement shows an account balance, not a promised monthly amount. - Contributions, from you, your employer, or both, go into an individual account, and you bear the investment risk. - You have some say in how the money is invested. - Your eventual benefit depends on contributions and investment performance, not a formula. ## **How Is a Defined Benefit Pension Calculated?** Most defined benefit formulas follow a version of this equation: **Annual Pension Benefit = Service Credit × Final Average Salary × Multiplier** For example, an employee with 25 years of service, a final average salary of $80,000, and a 2.0% multiplier would calculate their benefit as follows: 25 × $80,000 × 2.0% = $40,000 annually Although understanding this formula makes it easier to interpret the figures on your statement, the calculation is only part of the picture. Your actual pension statement breaks this information into several sections, each reflecting a piece of that formula. Here’s what to look for on your statement and why each piece matters. ## **How to Read a Pension Statement: Key Sections to Review** ### **Personal Information** Start by confirming your name, date of birth, hire date, retirement system membership date, and beneficiary information. Even small errors can affect future benefit calculations, eligibility dates, or survivor benefits. Contact your retirement system promptly if something seems incorrect. ### **Service Credit** Service credit represents the amount of time you’ve earned toward your pension benefit. It may include regular employment service, purchased service credit, military service credit, or transferred service from another participating employer. Your statement may show: - Service earned during the current year - Total accumulated service credit - Service projected to retirement In most pension formulas, more service credit directly increases your retirement benefit, making this an important figure to review. ### **Accrued Benefit** Your accrued benefit is the pension you’ve earned as of the statement date. This is often shown as a monthly or annual amount payable at your plan’s normal retirement age. For example, your statement might show a monthly accrued benefit of $1,850, or $22,200 annually. This figure gives you a snapshot of your retirement progress, not necessarily an amount that you could collect immediately. ### **Projected Retirement Benefits** Many statements include projected benefits at future retirement ages, such as 55, 60, or 65. These projections typically assume continued employment, additional service credit, and certain salary growth percentages. A projected retirement benefit chart might look like this: **Retirement Age****Estimated Monthly Benefit**55$2,40060$3,20065$4,100These estimates show how additional years of service can increase retirement income. However, they are estimates, not guarantees. Actual benefits may differ due to future salary changes, employment interruptions, plan amendments, or when you choose to retire. ### **Vesting Status** [Vesting](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting) refers to your legal right to receive a pension benefit from the plan. Most systems require a minimum number of years of service, often 5, 8, or 10, before benefits become vested. Your statement may indicate whether you’re vested, not yet vested, or how many years remain until you become fully vested in the plan. Once vested, you generally retain rights to your earned benefit even if you leave employment before retirement. If you’re not yet vested and you leave your job, your future pension benefits may be limited or unavailable, depending on your retirement plan’s terms. ### **Employee Contributions** Some defined benefit plans require employee contributions. Your statement may show total contributions, contributions made during the year, and interest credited to those contributions. This information matters if you terminate employment or if your plan offers contribution-based benefits. If your plan offers refunds of employee contributions and you’re considering requesting one, keep in mind that doing so can reduce or eliminate your future pension eligibility. ### **Survivor and Beneficiary Information** You’ll also want to review your current beneficiary designations, survivor benefit options, and eligibility requirements. If you’ve experienced any recent life events such as marriage, divorce, or the birth of a child, you may need to contact your plan administrator or employer to update your beneficiary information. ### **Retirement Eligibility Dates** Often, statements for defined benefit plans include projected dates for early retirement eligibility, normal retirement eligibility, and unreduced retirement benefits. These dates are valuable planning tools that help you understand how retirement timing may impact your retirement income. ## **Questions to Ask About Your Retirement Plan** If you notice a discrepancy on your defined benefit pension plan financial statement, contact your plan administrator. Addressing errors early is often much easier than correcting records years later when you are close to retirement. You can use these questions to help guide your conversation: - Is all of my service credit included? - Have all eligible compensation amounts been reported? - Am I vested? - How are my projected benefits calculated? - Have my purchased service credits been applied correctly? - Is my beneficiary information current? ## **Better Understand Your Pension Plan** Your pension statement is more than a summary of numbers. It’s a roadmap to your future retirement income. Whether you’re reviewing your own pension statement or you’re the plan sponsor responsible for producing one, understanding these numbers matters. Watkins Ross has spent over 75 years helping employers administer defined benefit pension plans with accuracy and clarity, so both plan sponsors and participants can trust what’s on the page. To learn more about how we can help you craft an optimal retirement plan for your employees, [contact Watkins Ross today](https://watkinsross.com/contact/). You may also be interested in our [Defined Benefits Compliance Calendar](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross-2.pdf) to help ensure your defined benefit plans stay in compliance throughout the year. **Categories:** pensions, Plan Documents, Retirement Plans **Tags:** Pension, Plan Documents, Retirement Plans --- ### [What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) **Published:** July 27, 2026 **Author:** Watkins Ross Team **Content:** Sponsoring a defined contribution plan like a 401(k) is an excellent way to attract and retain employees, but it also comes with significant administrative and compliance responsibilities. Between IRS regulations, Department of Labor (DOL) requirements, annual compliance testing, and government reporting, keeping a retirement plan compliant requires ongoing attention. This is where a Third-Party Administrator (TPA) becomes a valuable partner. For many small and mid-sized employers, partnering with an experienced Third-Party Administrator provides more than administrative support. A TPA provides ongoing guidance through changing regulations and compliance requirements while reducing the administrative burden on your HR and payroll teams. ## **What Is a Third-Party Administrator (TPA) for a 401(k)?** A Third-Party Administrator (TPA) is an independent organization that specializes in retirement plan administration. For defined contribution plans like 401(k)s and 403(b)s, a TPA works alongside the plan sponsor (your company or organization), recordkeeper, payroll provider, and financial advisor to help ensure the plan operates according to IRS and Department of Labor (DOL) requirements. Rather than managing participant investments or processing daily transactions, a TPA focuses on the technical administration and compliance of the retirement plan. They help plan sponsors navigate complex regulations, maintain required plan documents, and provide guidance to keep the plan operating as intended. ## **5 Benefits of Hiring a Third-Party Administrator** Compliance doesn’t end after your retirement plan is established. Many employers choose to outsource retirement plan administration to a Third-Party Administrator because of the specialized expertise required to keep plans compliant with federal regulations. Most TPAs provide: ### **1. Continual Compliance Guidance** Plan compliance and administration aren’t “set-it-and-forget-it” tasks. TPAs handle the complex “behind-the-scenes” legalities, like performing mandatory [yearly compliance testing](https://watkinsross.com/articles/2026-02-12-understanding-annual-401k-compliance-testing/) to keep your employee benefits plans running smoothly. As your workforce grows and changes, so do your retirement plan’s compliance obligations. This ongoing oversight helps identify compliance issues early, reducing the risk of IRS penalties or plan disqualification. ### **2. Custom Plan Design** An independent TPA works with you to design a plan tailored to your specific business goals. They can help you develop a strategy to maximize tax deductions or boost participation among your staff. A TPA can also help implement advanced strategies, like [Safe Harbor provisions](https://watkinsross.com/articles/2018-10-29-safe-harbor-plan-amendments/) or profit-sharing formulas, that standard payroll providers often lack the expertise to manage. ### **3. Independent Administrative Oversight** While a recordkeeper tracks the daily balances, a TPA serves as an independent compliance partner by reviewing eligibility, contributions, vesting, and plan operations. This level of reconciliation is rarely performed by investment companies or payroll providers, providing a critical safety net against administrative errors. ### **4. Reduce The Internal Administrative Burden** TPAs provide administrative services that take technical tasks off your team’s plate. They can support your company by calculating employer contributions, tracking vesting schedules, and processing participant loans and distributions. By outsourcing these administrative tasks, HR and payroll teams can significantly reduce the amount of time they dedicate to retirement plan administration. ### **5. Advanced Fiduciary Support** Filing Form 5500 is a non-negotiable annual requirement for most plans. A TPA prepares these government filings, helping ensure they meet [ERISA requirements](https://www.dol.gov/general/topic/retirement/erisa). An experienced TPA also stays current on evolving regulations, including legislative changes such as the [SECURE 2.0 Act](https://www.irs.gov/newsroom/secure-2-point-0-act-changes-affect-how-businesses-complete-forms-w-2), to help plan sponsors stay informed and in compliance. ### **Can plan sponsors outsource their fiduciary responsibility?** While a Third-Party Administrator provides valuable compliance expertise, hiring a TPA does not transfer a plan sponsor’s fiduciary responsibilities. Plan sponsors remain ultimately responsible for overseeing the retirement plan. That is why it is important to work with a knowledgeable partner who can provide ongoing plan guidance and support. ## **Third Party Administrator vs. Recordkeeper** Often, TPA firms are confused with recordkeepers. Understanding which provider is responsible for each aspect of your retirement plan can help avoid confusion and ensure important administrative responsibilities don’t fall through the cracks. Essentially, a recordkeeper handles the day-to-day transactions and participant account access. The TPA, on the other hand, acts as the “rule-book referee,” keeping your plan compliant with IRS and Department of Labor (DOL) regulations. This chart outlines the key differences between third party administration and recordkeeping: **Feature****Third-Party Administrator (TPA)****Recordkeeper****Primary Focus****Compliance & Rules** (the “Back End”)**Transactions & Data** (the “Front End”)**Key Output**[Form 5500](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/), Testing Reports, [Plan Documents](https://watkinsross.com/services/plan-documents/)Participant Statements, Web Portals, Trade Execution**Participant Interaction**Minimal; usually works with the employerHigh; manages the website and call centers for employees## **How to Choose the Right Third-Party Administrator** Not every Third-Party Administrator offers the same level of service or expertise. The right partner depends on your organization’s size, retirement plan goals, and the level of support you need. As you evaluate your options, ask: - Does the TPA have experience administering plans like yours? - Can they customize your plan design as your business grows? - Will you have a dedicated consultant who understands your company and your plan? - Do they provide proactive guidance on changing IRS and Department of Labor regulations? - Will they help identify and resolve compliance issues before they become costly problems? Ultimately, the best Third-Party Administrator is one that serves as more than a compliance provider. Look for a partner who takes the time to understand your organization, communicates proactively, and provides the expertise and support you need to confidently manage your retirement plan. ### **Optimize Your 401(k) Plan With Watkins Ross** For more than 75 years, Watkins Ross has partnered with employers to design, administer, and maintain retirement plans tailored to their unique goals. Unlike one-size-fits-all providers, we take a consultative approach, assigning experienced professionals who get to know your organization, provide proactive guidance, and help you navigate changing regulations. Whether you’re selecting a Third-Party Administrator for the first time or evaluating your current provider, the right partner can make retirement plan administration simpler, more strategic, and more compliant. [**Contact Watkins Ross**](https://watkinsross.com/contact/) **to learn how our experienced team can provide the personalized administration, compliance expertise, and responsive support your organization deserves.** ## **Retirement Plan Guidance You Can Use Year-Round** At Watkins Ross, we believe informed plan sponsors make better decisions. That’s why we provide practical resources to help employers and plan sponsors stay organized, understand their responsibilities, and prepare for important compliance deadlines. [A Simple Way to Get Your Plan Organized ](https://watkinsross.com/articles/2026-01-22-how-to-get-your-plan-organized-in-the-new-year/) [A Compliance Calendar for Pensions](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross-2.pdf) **Categories:** 401(k) Plans, 401K Plan Compliance, Retirement Plans **Tags:** 401k Plans, Plan Administration, Plan Sponsor --- ### [Understanding the Key Roles in Qualified Retirement Plan Administration](https://watkinsross.com/articles/2026-06-12-understanding-the-key-players-in-qualified-retirement-plan-administration/) **Published:** June 12, 2026 **Author:** Watkins Ross Team **Content:** By: **Mishelle Becker, QKA** *Compliance and Training Coordinator* ## What Is a Qualified Retirement Plan? A qualified retirement plan is an employer-sponsored retirement plan that meets the requirements of the Internal Revenue Code and ERISA, allowing both employers and employees to receive certain tax advantages. Common examples include [401(k) plans](https://watkinsross.com/services/401k-plans/), profit-sharing plans, and defined benefit pension plans. Administering a qualified retirement plan well requires a structured network of professionals working together to keep the plan compliant, running smoothly, and focused on participants’ retirement goals. Each party plays a specific role, from the plan sponsor who establishes the plan to the recordkeeper who tracks participant account activity. While each retirement plan service provider’s responsibilities differ, their roles often overlap. Misunderstanding about these divisions of labor can lead to missed compliance deadlines, inaccurate data reporting, and unmonitored investment options. If you’re a retirement plan sponsor, understanding the different roles and responsibilities can help you ask the right questions, evaluate providers more effectively, control costs, and avoid compliance issues. ## **Who is Involved in a Qualified Retirement Plan?** This overview of the key individuals and organizations commonly involved in qualified retirement plan administration will help you maintain a compliant retirement plan that runs smoothly and serves your employees well. ### **Plan Participant** Although this role isn’t necessarily a part of the plan administration, it is an important role to understand nonetheless. A plan participant is an eligible employee covered by a retirement plan. Active employees, including those eligible participate in the plan but do not have an account balance, retired or terminated employees that still have an account balance in the plan, or a beneficiary or alternate payee (designated individuals who hold a legal right to a deceased or divorced participant’s account) are all considered participants. It’s important to understand who is a plan participant, as these individuals have a legal right to receive plan information including benefit statements, fee disclosures and annual summaries. The total number of participants also dictates how a plan files its annual tax return. ### **Retirement Plan Sponsor** The plan sponsor is the employer or organization that establishes and maintains the retirement plan for its employees. The plan sponsor is responsible for making high-level “settlor” decisions, such as designing plan features, adopting plan amendments, or deciding whether to terminate the plan. While many responsibilities can be delegated to retirement plan service providers, the plan sponsor is ultimately responsible for selecting and monitoring those providers, making sure the plan operates according to its terms, and complies with federal laws, like [ERISA](https://www.dol.gov/general/topic/retirement/erisa). [Additional information about the responsibilities of a plan sponsor can be found here.](https://www.irs.gov/retirement-plans/plan-sponsor/a-plan-sponsors-responsibilities) ### **Retirement Plan Administrator** The plan administrator is the person or organization responsible for the day-to-day administration of the plan. Those responsibilities include providing required disclosures and notices to participants, maintaining plan records, coordinating required filings, and selecting the plan’s service providers. In many cases, the plan sponsor also serves as the plan administrator unless another party is designated in the plan document. [Additional information about plan administration and maintenance can be found here](https://www.irs.gov/retirement-plans/retirement-plan-operation-and-maintenance). ### **Custodian** A custodian is a financial institution, such as a bank or brokerage firm, that holds and safeguards the plan’s assets. The custodian executes transactions as directed by the trustee but generally does not have discretionary authority over the assets. Its primary responsibility is to hold securities and other assets for safekeeping, helping minimize the risk of theft or loss. ### **Plan Trustee** The plan trustee is the individual or institution with legal authority and discretion over the management of plan assets. Under ERISA, trustees have a [fiduciary duty](https://www.dol.gov/general/topic/retirement/fiduciaryresp) to safeguard plan assets and manage them solely for the benefit of participants and beneficiaries. Think of it this way: the custodian holds the assets, while the trustee directs what happens with them. Trustees are always considered fiduciaries. The trustee’s exact responsibilities depend on the type of trustee arrangement in place. **A discretionary trustee** makes investment decisions on behalf of the plan while a **directed trustee** follows the instructions of another named fiduciary regarding investment decisions. ### **Plan Fiduciary** A fiduciary is anyone who: - Exercises discretionary authority or control over the management or administration of the plan - Has authority or control over the management or disposition of plan assets - Provides investment advice for a fee or other compensation related to plan assets. Fiduciaries are legally required to act solely in the interests of participants and beneficiaries, follow the terms of the plan document, act prudently, and avoid conflicts of interest. ### **Financial Advisor** In a defined contribution plan, the financial advisor helps bridge the gap between the plan’s technical requirements and participants’ retirement goals. Their role may include both investment oversight and participant support. A financial advisor may serve as a fiduciary under either ERISA Section 3(21) or 3(38) to help select and monitor the plan’s investment lineup. #### **3(21) Investment Advisor** A 3(21) investment advisor acts as a co-fiduciary. They provide investment advice and recommendations, but the plan sponsor makes the final decision about whether to add, remove, or replace investment options. #### **3(38) Investment Manager** A 3(38) investment manager acts as a discretionary fiduciary. They have the authority to select, monitor, and replace investments on behalf of the plan. This transfers more responsibility for investment decisions away from the plan sponsor. Financial advisors often support retirement plans through investment menu design, performance reporting, fee benchmarking, participant education, and enrollment assistance. ### **Recordkeeper** A recordkeeper is a third-party service provider responsible for maintaining financial and retirement plan records at both the plan and participant level. Accurate recordkeeping helps support participant benefit calculations, compliance testing, government reporting, and plan audits. Often referred to as the plan’s “bookkeeper,” the recordkeeper tracks participant account balances, processes contributions and investment transactions, and provides account statements. The recordkeeper typically also provides the online platform where participants can access and manage their accounts. ### **Payroll Provider** A payroll provider is not typically considered a retirement plan fiduciary, but it often plays an important role in plan administration. Payroll providers help process employee deferrals, track compensation, and provide data used for eligibility determinations, contribution calculations, and compliance testing. Because retirement plan administration relies heavily on accurate payroll information, timely communication between the plan sponsor, payroll provider, and other service providers is essential. ### **Retirement Plan Committee (Optional)** Some larger organizations establish a retirement plan or investment committee to help oversee fiduciary responsibilities. Committee members may assist with reviewing investments, monitoring service providers, documenting decisions, and helping the plan sponsor fulfill its oversight responsibilities. ### **Third-Party Administrator (TPA) – Watkins Ross** Managing a retirement plan comes with a wide range of administrative and compliance responsibilities. Having a Third-Party Administrator (TPA) can help plan sponsors manage many of the administrative and compliance responsibilities associated with maintaining a retirement plan. Watkins Ross provides a range of services to support plan sponsors, including consulting on plan design and compliance strategies, assisting with plan documents, and providing ongoing qualified retirement plan administration. We can help you: - Calculate vesting schedules - Process benefit payments - Perform [annual compliance testing](https://watkinsross.com/articles/2026-02-12-understanding-annual-401k-compliance-testing/) - Calculate employer contributions - Prepare Form [5500 filings](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/) Our goal is to plan sponsors navigate complex regulations and administrative requirements to keep their retirement plans compliant and operating efficiently. ## **Maximize Retirement Savings With Optimal Retirement Plan Administration** Understanding who does what within a qualified retirement plan can help plan sponsors make informed decisions, maintain compliance, and ensure their plan operates effectively for participants. However, hiring experienced providers is only part of that responsibility. Plan sponsors should regularly review provider reports, monitor the performance of each retirement plan service provider, and confirm the plan is operating according to its written terms. At Watkins Ross, we help plan sponsors navigate all the complexities of retirement plan administration with confidence. From plan design and compliance testing to ongoing administration and regulatory guidance, our team works alongside you to help keep your plan compliant, efficient, and focused on serving participants. Do you have questions about your retirement plan or the responsibilities of your service providers? [Contact Watkins Ross](https://watkinsross.com/contact/) to speak with a member of our experienced team and gain the clarity you’ve been looking for. **Categories:** Retirement Plans **Tags:** Qualified Plans, Retirement Plans --- ### [Saving for Retirement: Why So Many Americans Are Falling Behind](https://watkinsross.com/articles/2026-05-19-saving-for-retirement-why-so-many-americans-are-falling-behind/) **Published:** May 19, 2026 **Author:** Watkins Ross Team **Content:** By: **Esther Peterson ASA, EA, MAAA** The dream of a gold watch and a big retirement party is fading fast for many Americans. Our current methods of saving for retirement may no longer be enough. ## **The Retirement Savings Disparity** In early 2026, the National Institute on Retirement Security published [*Retirement in America: An Analysis of Retirement Preparedness Among Working-Age Americans*](https://www.nirsonline.org/research/retirementinamerica2026/), painting a sobering picture of how Americans are (or aren’t) preparing for retirement. While total retirement assets hit a record $48.1 trillion in late 2025, that wealth is far from evenly distributed. At first glance, the numbers might seem encouraging. [The average 401(k) balance reached $146,400 by the end of 2025.](https://about.fidelity.com/data-and-insights/q4-2025-retirement-analysis) Unfortunately, averages can be misleading. A few high earners significantly skew that number upward. The [median figures](https://www.nerdwallet.com/retirement/learn/the-average-retirement-savings-by-age-and-why-you-need-more) tell a more accurate story about saving for retirement in the U.S.: - **Across all workers** the median retirement savings is less than $1,000. - **For workers between ages 55–64** the median savings is only $185,000. This is far below the $1.26 million target experts now suggest for a comfortable retirement in 2026. It’s no surprise, then, that only [58% of pre-retirees feel confident that their savings will last](https://www.ebri.org/docs/default-source/rcs/2026-rcs/2026-rcs-release-report.pdf?sfvrsn=1229022f_1). Interestingly, Gen Z is currently the most prepared generation, with 47% on a positive trajectory. Much of this success is tied to newer plan features like automatic contributions and “set-it-and-forget-it” target-date funds that make saving for retirement more consistent and accessible. ## **Why Saving for Retirement Feels So Difficult** Low retirement savings account balances are not just due to lack of discipline. For many Americans, preparing for their financial futures has become a secondary priority due to increased financial pressures. **Rising Costs** As the cost of living increases, [81% of workers](https://www.ebri.org/docs/default-source/rcs/2025-rcs/2025-rcs-release-report.pdf?sfvrsn=f5e3042f_5) say they are worried that inflation will keep them from saving as much as they’d like in their retirement accounts. When everyday expenses climb, saving for retirement often takes a back seat. **Debt Burdens In addition, 65% of workers cite debt as a barrier to retirement savings. Although workers with student loan debt are more likely to have access to a workplace retirement plan, they are also more likely to have lower account balances than those without student loan debt. These debts combined with mortgage payments make it difficult for employees to save. **Medicare and Social Security Policy Uncertainty Concerns about potential changes to Social Security retirement benefits and Medicare have left 60% of American workers and 80% of retirees feeling concerned. A reduction in social security benefits could mean retirement savings need to stretch further than they’d originally planned for. ## **How the Earnings Gap Impacts Retirement Accounts** At the same time, not everyone has the same opportunity to build retirement savings. Higher earners are more likely to have surplus income after covering essential expenses. A higher monthly income allows them to consistently focus on saving for retirement and benefit from compound interest growth. Meanwhile, lower- and middle-income workers face vastly different financial circumstances. Stagnant wages, rising housing and healthcare costs, and greater job instability often make their investment objectives feel out of reach. When day-to-day survival becomes the priority, a retirement savings plan can start to feel like something to worry about “later.” Retirement contributions become inconsistent, or stop altogether. Even those who understand the importance of retirement saving feel forced to choose between right-now necessities and their retirement goals. ## **The Importance of Access to Retirement Benefits** Where you work often matters just as much as how much you earn when it comes to saving for retirement. Workers in professional, unionized, large-company, or public-sector roles are far more likely to have access to [employer-sponsored retirement plans](https://watkinsross.com/services/) like 401(k)s, pensions, and employer matching contributions. On the other hand, many service-sector, part-time, gig, and small-business workers lack access to any workplace retirement plan at all. This can create another retirement savings gap: workers with employer-sponsored plans are twice as likely to be on track with saving for retirement compared to those without access. ## **How to Close the Gap and Increase Retirement Income** If you feel behind on retirement savings, you’re not alone. No matter what stage of life you are in, there are still ways to strengthen your retirement savings strategy. #### Work 2 Years Longer Delaying retirement by even just 24 months can significantly improve your financial outlook and reduce pressure on your savings. #### Take Advantage of Catch-Up Contributions If you’re over 50, [catch-up contributions](https://watkinsross.com/articles/2026-03-03-your-guide-to-2026-elective-deferral-limits/) allow you to accelerate saving for retirement with additional tax-advantaged contributions. #### Use Employer-Sponsored Retirement Plans If available, take full advantage of your employer’s plan and any employer match options. Both can meaningfully boost your retirement savings account. #### Set a Realistic Budget Determine your desired retirement lifestyle and calculate how much annual income you’ll need in your nest egg. Be sure to account for living expenses, emergencies, and health care costs. #### Meet with a Financial Adviser to Optimize Your Investment Portfolio An adviser can help you determine the best asset allocation to meet your financial goals by full retirement age. ## **Key Takeaway: Retirement Saving Isn’t an Individual Effort** Saving for retirement is no longer just about individual effort. It’s shaped by income, access, and opportunity. Employer-sponsored retirement plans remain one of the most effective tools for improving financial security later in life. **For employees:** Take full advantage of any available workplace savings opportunities. Prioritize consistency, even if your contributions start small. Know the signs you are ready to retire so you can secure your financial future.. **For employers:** Your role as a financial wellness provider matters more than ever. Offering accessible, well-designed retirement plans have a direct impact on your employees’ ability to save. Know how to educate your employees on retirement readiness.If you’d like to help your employees make real progress toward saving for retirement, contact Watkins Ross to design a retirement plan that drives both participation and long-term success. Call [(616) 456-9696](tel:6164569696) or [email us](https://watkinsross.com/contact/) to get started. **Categories:** 401(k) Plans, Retirement Plans **Tags:** Retirement Plans, Retirement Trends --- ### [What is Retirement Plan Compliance Coverage Testing? A Simple Guide for Employers](https://watkinsross.com/articles/2026-04-20-what-is-coverage-testing-a-simple-guide-for-employers/) **Published:** April 20, 2026 **Author:** Watkins Ross Team **Content:** If your company offers a retirement plan, you know the IRS offers tax breaks in return. However, those tax breaks come with a caveat: your plan can’t be solely for owners and top executives. It needs to include a “fair share” of your regular employees too. That’s where Coverage Testing, from [IRS Code Section 410(b)](https://www.irs.gov/pub/irs-drop/rr-04-11.pdf), comes into play. ## **What is Coverage Testing?** Each year, the IRS requires companies offering retirement plans to pass a [series of compliance tests](https://watkinsross.com/articles/2026-02-12-understanding-annual-401k-compliance-testing/). Think of it as a yearly checkup for your plan. The coverage test is one of the [tests you’ll need to prepare for](https://watkinsross.com/articles/2025-12-22-how-to-prepare-for-401k-compliance-testing-5-key-areas/) in order to pass the annual compliance testing. This test ensures your plan is fair and accessible to a majority of employees, not just the higher-ups. ### **The Magic Number: 70%** In general, a plan passes coverage testing if at least 70% of eligible employees are covered or eligible to benefit, or if a specific percentage of non-highly compensated employees (NHCEs) are covered. At its core, the coverage test compares two employee groups: - [**Highly Compensated Employees**](https://watkinsross.com/wp-content/uploads/HCE-2026.pdf) **(HCEs):** The owners and employees with the highest salaries. - **Non-Highly Compensated Employees (NHCEs):** Everyone else. In simple terms, if 100% of your HCEs are benefiting from the plan, at least 70% of your NHCEs must also benefit. If the percentage of covered NHCEs is at least 70% of the percentage of covered HCEs, you’re good to go! ### **What Does “Benefiting” Mean?** In a defined contribution plan, an employee is “benefiting” from the plan if they’re allowed to make contributions (even if they choose not to) or if they are eligible for employer contributions. In a defined benefit plan, an employee is benefiting if they accrue a meaningful benefit during the plan year. ## **Two Ways to Test Coverage Compliance** There are two main ways to confirm your plan meets the required ratio percentage for coverage: - **The Ratio Percentage Test:** This compares the percentage of non-HCEs who can participate in the plan to the percent of HCEs who can participate. - **Average Benefits Test:** This test looks at the average benefit HCEs receive compared to NHCEs. **The Ratio Percentage Test** The Ratio Percentage Test is the most common way to prove coverage compliance. To confirm your plan’s compliance, your Third-Party Administrator (TPA) will: - Figure out what percent of your non-HCEs are eligible. - Determine what percent of your HCEs are eligible. - Divide the non-HCE percentage by the HCE percentage. If that ratio is 70% or higher, your plan passes. For example, if 100% of HCEs and 70% of NHCEs are eligible, you meet the coverage testing requirements. ### **The Average Benefits Percentage Test** If your plan doesn’t pass the Ratio Percentage Test, the Average Benefits Test (ABT) offers another way to demonstrate compliance. It is often considered a “last chance” to show that the plan does not favor highly compensated employees (HCEs). Unlike coverage testing, where “benefiting” simply means being eligible to participate, the Average Benefits Test looks at the actual value of benefits employees receive from all retirement plans offered by the employer. This typically includes employer contributions, such as matching or profit-sharing contributions, expressed as a percentage of each employee’s compensation. The test checks whether the average benefit received by non-highly compensated employees (NHCEs), relative to their pay, is reasonably close to what highly paid employees receive. For example, the table below shows employer contributions as a percentage of pay: **Employee Group****Salary****Retirement Benefit****Benefit %**Highly Compensated$200,000$10,000**5%**Non-Highly Compensated$60,000$2,700**4.5%**Even though the dollar amount for the executive is much higher, the percentages are close. As long as the average benefit for NHCEs is at least 70% of the HCE average benefit percentage, you pass the test. ## **Who Automatically Passes Coverage Testing?** A plan will automatically pass coverage testing if: - There aren’t any NHCEs to include - No HCEs benefited from the plan during the year - The plan is just for union employees - Your business went through a merger or acquisition and qualifies for the IRS transition relief rule (also outlined in [IRS Code Section 410(b)](https://www.irs.gov/pub/irs-drop/rr-04-11.pdf)) ## **When Does Coverage Testing Get Complicated?** While the 70% rule may sound straightforward, certain business situations can make coverage testing a little tricky. ### **Related Employers** If your company is part of a larger group of businesses, for example, a parent-subsidiary company or companies with common ownership, you can’t just look at one company in isolation. Coverage testing looks at all employees from every business in the group, not just the employees of the company that sponsors the plan. ### **Mergers and Acquisitions** If your company goes through a merger, acquisition, or any major change in structure, the mix of employees can shift quickly. This means your plan may suddenly develop gaps in coverage. After these types of changes, employers will need to review and possibly redo their coverage testing to make sure the plan still meets the 70% coverage ratio. ### **Different Contribution Types** Many plans offer multiple types of contributions, like salary deferrals, employer matching contributions, and profit-sharing. Because each contribution type may have different eligibility requirements, the IRS might require separate coverage tests for each one. This means a plan could pass coverage testing for employee deferrals but still need additional testing for employer match or profit-sharing contributions. ## **What If Your Retirement Plan Fails Coverage Testing?** If your plan fails coverage testing, there is no need to panic. However, it’s important to act quickly to bring the plan back into compliance. Your Third-Party Administrator can help identify the cause of the failure and recommend the best correction. Common remedies include: - **Expanding eligibility:** Allow more NHCEs to participate in the plan by adjusting waiting periods or service requirements. - **Increasing employer contributions for NHCEs:** Make additional employer contributions through profit-sharing or corrective contributions. - **Adjusting plan design:** Revise eligibility rules or contribution formulas. - **Using the Average Benefits Test:** If the plan fails the Ratio Percentage Test, it may still satisfy the Average Benefits Percentage Test requirements. Remember, although your TPA usually runs the calculations, you are responsible for [providing accurate data](https://watkinsross.com/articles/2024-11-27-why-clean-data-matters-for-your-401k-plan/). Regular, annual reviews of your workforce and plan design before year-end are the best way to avoid surprises and reduce the chance of future testing problems. **The Key to Keeping Your Plan Fair and Compliant** Keeping your plan compliant does more than just satisfy IRS rules. It ensures you provide a fair and valuable benefit to your entire team. By reviewing your workforce changes and plan design throughout the year, you can spot potential gaps long before testing deadlines approach. At Watkins Ross, we work with employers to help them better understand the requirements that affect their retirement plans. Our team can help you identify potential coverage issues early and then guide you through the steps needed to keep your plan running smoothly.If you have questions about 401(k) coverage testing or other retirement plan compliance requirements, [contact Watkins Ross today](https://watkinsross.com/contact/). **Categories:** 401K Plan Compliance, Retirement Plans **Tags:** 401k Plans, Compliance, Retirement Plans --- ### [Your Guide to 2026 Elective Deferral Limits](https://watkinsross.com/articles/2026-03-03-your-guide-to-2026-elective-deferral-limits/) **Published:** March 3, 2026 **Author:** Watkins Ross Team **Content:** Each year the IRS sets limits on the amount an individual can contribute (known as income they defer) through elective contributions to their retirement accounts. The limit applies to any [401(k)](https://watkinsross.com/services/401k-plans/), [403(b)](https://watkinsross.com/services/403b-plans/), SAR-SEPs, and SIMPLE-IRA plans, with the total contributions counted during a calendar year. As a plan sponsor, these annual updates to IRS Code Section 402(g) are important. You’ll need them to ensure compliance with 415(c) and ADP tests as well as your participants’ withdrawals for excess contributions. Read on for everything you need to know. ## Key Facts About the 402(g) Elective Deferral Limit - **It’s an individual limit:** The cap applies to you as a person, not to each individual plan. If you have 2 jobs or switch jobs mid-year and have different 401(k) plans, your total contributions across both cannot exceed the annual limit. - **Includes Pre-tax and Roth:** Both traditional, pre-tax contributions and designated Roth contributions count toward this single combined limit. - **Excluded contributions:** Employer contributions, such as a match or profit sharing, do not count toward the 402(g) limit. - **Applicable plans:** It covers 401(k), 403(b), SAR-SEPs, and SIMPLE-IRA plans. ## 2026 Annual Contribution Limits The IRS reviews the 402(g) elective deferral limits each year for cost-of-living adjustments. In 2026, they adjusted the limit to $24,500 (under age 50) and $32,500 for workers over age 50. **To Do:** Make sure to capture these new limits in your payroll software. **Year** **Standard Limit (Under Age 50)****Catch-Up Limit (Age 50+)****Total for Age 50+****2026****$24,500****$8,000****$32,500****2025**$23,500$7,500$31,000## “Excess Deferrals” If a participant contributes more to their retirement plan(s) than the Code section 402(g) limit for the calendar year, the extra amount is called an “excess deferral.” It *must* be distributed and *must* be included in the individual’s gross income. ### Exclude “Catch-Up” Contributions If you are at least age 50 at any time during the calendar year, you are eligible to make “catch-up” contributions (up to $8,000 in 2026). You can exclude these “catch-up” contributions when determining whether or not you exceeded your elective deferral limit. More on “Catch-Up” contributions and “Super Catch-Ups” below. ### Correct Excess Deferrals by April 15 Correct excess deferrals by April 15 of the following calendar year. *Note*: The plan’s year-end is irrelevant for purposes of the April 15 deadline. For individuals with excess deferrals and multiple plans, the simplest solution is to choose one plan to withdraw from. If the excess deferral is distributed by April 15, the following tax rules apply: - Tax year: - Pre-tax deferrals are taxable income in the year of deferral - Roth deferrals and earnings are taxable income in the year of distribution - The 10% early distribution tax does not apply - The 20% withholding is not required, and spousal consent is not required #### Excess Deferrals Corrected After April 15 ##### Individual Consequences If a participant doesn’t withdraw the excess deferral by April 15: 1. The excess amount will be included in their taxable income for the year it was contributed, and 2. It will be taxed again when the excess deferral is eventually distributed from the plan. ##### Plan Considerations for Administrators Excess deferrals can create a 402(g) issue, but they also have unique considerations plan administrators should know about. 1. Excess deferrals also count toward the plan’s overall annual contribution limit under Section 415(c) for the year in which the deferral was made. If the participant is already close to the 415(c) limit, the excess deferral could cause them to exceed that limit as well. 2. For [Highly Compensated Employees (HCEs)](https://watkinsross.com/wp-content/uploads/HCE-2026.pdf), excess deferrals are included in [Average Deferral Percentage (ADP) testing](https://watkinsross.com/wp-content/uploads/ADP-ACP-Testing-2.pdf), while excess deferrals of NHCEs are not. Unresolved excess deferrals may make the ADP test, if required, more difficult to pass. ## The “Catch-Up” Exception If you are age 50 or older, you are eligible for catch-up contributions, allowing you to save even more. These do not count toward the base 402(g) elective deferral limit: - 2025 & 2026 Catch-Up Limit: $7,500 (2025) and $8,000 (2026). - Super Catch-Up: Starting in 2025, participants aged 60–63 may be eligible for an even higher “super catch-up” limit—$11,250 for 2025 and 2026. ### Standard Catch-Up (Age 50+) Once you reach age 50, you are eligible to contribute more than the standard employee limit. In 2026 you can add an extra $8,000 to your 401(k), up from $7,500 in 2025. This brings your total possible employee contribution to $32,500 for the year. ### The “Super Catch-Up” (Ages 60-63) Thanks to the [SECURE 2.0 Act](https://www.fidelity.com/learning-center/personal-finance/secure-act-2), workers in their early 60s now have an even higher ceiling. If you turn 60, 61, 62, or 63 during the calendar year, your catch-up limit increases to $11,250. Eligible individuals can contribute $35,750 in total for 2026. ### New Roth Requirement for High Earners Starting in 2026, [a new rule](https://watkinsross.com/articles/2025-11-26-understanding-the-new-roth-catch-up-contribution-rules/) affects how you must contribute these catch-up funds based on your income. - **The Threshold:** If your prior-year (2025) FICA wages exceeded $150,000, all of your catch-up contributions must be made to a Roth (after-tax) account. - **Standard Earners:** If you earned $150,000 or less, you can still choose between pre-tax contributions or Roth contributions for your catch-up amounts. Plan sponsors must limit participant deferrals to the 402(g) limit every year as violations may lead to penalties for both the plan sponsor and the participant. ## Need Help Navigating Elective Deferral Limits? At Watkins Ross, we’re here to support you. If you have any questions or need help managing these responsibilities, we would love to chat. Please do not hesitate to call (616-456-9696) or [email us](https://watkinsross.com/contact/) with any questions you may have! **Categories:** 401(k) Plans, 401K Plan Compliance, 403(b) Plans, Retirement Plans **Tags:** 401k Plans, Business Management, Plan Administration, Retirement Plans --- ### [Understanding Annual 401(k) Compliance Testing](https://watkinsross.com/articles/2026-02-12-understanding-annual-401k-compliance-testing/) **Published:** February 12, 2026 **Author:** Watkins Ross Team **Content:** [![How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](https://watkinsross.com/wp-content/uploads/anastassia-anufrieva-ecHGTPfjNfA-unsplash-400x250.jpg)](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) ##### [How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) Aug 24, 2026 | [pensions](https://watkinsross.com/articles/categories/pensions/), [Plan Documents](https://watkinsross.com/articles/categories/plan-documents/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) By Chris Veenstra, FCA, ASA, MAAA, EA, President If you participate in a defined benefit pension plan, you likely receive a pension statement once a year, either by mail or through an online portal. Although you know that this statement contains... [read more](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) **Categories:** 401(k) Plans, 401K Plan Compliance, Retirement Plans **Tags:** 401(k) plans, 401k plan Compliance, Compliance --- ### [How to Prepare for 401k Compliance Testing: 5 Key Areas](https://watkinsross.com/articles/2025-12-22-how-to-prepare-for-401k-compliance-testing-5-key-areas/) **Published:** December 22, 2025 **Author:** Watkins Ross Team **Content:** [![What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/wp-content/uploads/kelly-sikkema-8XrYtOYQDRU-unsplash-400x250.jpg)](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) ##### [What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) Jul 27, 2026 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Sponsoring a defined contribution plan like a 401(k) is an excellent way to attract and retain employees, but it also comes with significant administrative and compliance responsibilities. Between IRS regulations, Department of Labor (DOL)... [read more](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) **Categories:** 401K Plan Compliance **Tags:** 401k Plans, Compliance --- ### [Understanding the New Roth Catch-Up Contribution Rules](https://watkinsross.com/articles/2025-11-26-understanding-the-new-roth-catch-up-contribution-rules/) **Published:** November 26, 2025 **Author:** Watkins Ross Team **Content:** [![What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/wp-content/uploads/kelly-sikkema-8XrYtOYQDRU-unsplash-400x250.jpg)](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) ##### [What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) Jul 27, 2026 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Sponsoring a defined contribution plan like a 401(k) is an excellent way to attract and retain employees, but it also comes with significant administrative and compliance responsibilities. Between IRS regulations, Department of Labor (DOL)... [read more](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) **Categories:** 401(k) Plans, 403(b) Plans **Tags:** 401k Plans, Government Regulation, Retirement Plans --- ### [How To: Get Your 401(k) Plan Organized in the New Year](https://watkinsross.com/articles/2026-01-22-how-to-get-your-plan-organized-in-the-new-year/) **Published:** January 22, 2026 **Author:** Watkins Ross Team **Content:** [![What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/wp-content/uploads/kelly-sikkema-8XrYtOYQDRU-unsplash-400x250.jpg)](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) ##### [What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) Jul 27, 2026 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Sponsoring a defined contribution plan like a 401(k) is an excellent way to attract and retain employees, but it also comes with significant administrative and compliance responsibilities. Between IRS regulations, Department of Labor (DOL)... [read more](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) **Categories:** 401(k) Plans, 401K Plan Compliance **Tags:** 401k Plans, Compliance --- ### [Involuntary Distributions and Force Out Limits](https://watkinsross.com/articles/2025-10-30-involuntary-distributions-and-force-out-limits/) **Published:** October 30, 2025 **Author:** Watkins Ross Team **Content:** When employees leave your company, their retirement plan balances don’t always go with them. Over time, those small, inactive accounts can pile up. This creates extra work, higher administrative costs, and potential compliance headaches for your team. That’s where involuntary distributions (also known as force outs) come in. These provisions allow plan sponsors to automatically cash out or roll over small account balances for former participants who meet certain thresholds. It’s a simple way to keep your plan clean, efficient, and compliant. Of course, it’s important to understand the rules that come with initiating 401(K) forced distributions or forced IRA withdrawals. In this blog, we explain more about why these provisions are important and how the rules work. ## Why Force Out Provisions Matter Cleaning up these accounts isn’t just about convenience. Managing former participant balances properly can reduce plan fees, limit audit exposure, and make annual reporting easier. More importantly, it ensures you’re following IRS and DOL requirements – helping protect both your plan and your participants. ## How the Rules Work Retirement plans are allowed to automatically “[force out](https://watkinsross.com/articles/2021-08-09-understanding-your-retirement-plans-force-out-provisions/),” or cash out, balances for former terminated participants. Here are some guidelines: - These participants must have a vested balance of less than $7,000 without participant consent. - For balances between $1,000 – $7,000, the plan may process an automatic rollover to a qualified IRA custodian. - For balances under $1,000, a check can be issued directly to the participant. ## Understanding Rollover Balances Rollover balances can be excluded when determining which accounts qualify, so it’s important to understand exactly how your plan defines “**vested balance**.” **For example**, if a terminated participant has a $20,000 total account balance, but $16,000 of that came from a rollover, the participant is eligible for an automatic IRA rollover because only $4,000 counts toward the threshold. ## Following Compliance Requirements If involuntary [distributions](https://watkinsross.com/articles/2018-12-05-year-end-required-minimum-distributions-defined-contribution-plans/) are selected in your plan document, you must follow the mandatory cash-out rules. That means reviewing all terminated participant accounts at least once a year and taking the necessary action to distribute eligible balances. These distributions can occur without the participant’s authorization, as long as you’ve provided at least 30 days’ notice of the pending distribution. That notice must: - Explain what will happen if the participant doesn’t make an election (for example, whether the account will be paid by check or rolled over) - Include the special tax notice - Specify the deadline for making an election If the account is rolled into an IRA, the notice must also disclose details about the IRA provider, associated fees, and contact information. Balances under $200 can be cashed out without notice. If the balance is smaller than the processing fee, it’s common practice to pay the account balance as a fee to the recordkeeper to clear out the account. Cleaning up these former participant accounts can save time and money by reducing plan fees, audit risk, and administrative workload – all while keeping your plan in compliance. ## Ready to Simplify Your Involuntary Distributions? At Watkins Ross, we help our clients streamline their company’s retirement plans by identifying and processing eligible force outs, updating plan documents as needed, and ensuring every step complies with IRS and DOL requirements. Our goal is to make plan administration easier, reduce unnecessary costs, and keep your plan running smoothly. If you have any questions about force-out limits or involuntary [distributions ](https://watkinsross.com/articles/2020-04-27-required-minimum-distribution-rmd-law-changes-to-the-secure-act-and-the-cares-act/)such as 401(K) forced distributions or forced IRA withdrawals, or how these rules apply to your plan, we’re here to help. Give us a call at **616-456-9696**, or [send us a message](https://watkinsross.com/contact/) online. Our team can help you stay compliant and confident in managing your retirement plan responsibilities. **Categories:** Retirement Plans **Tags:** 401k Plans, Compliance, Plan Administration, Retirement Plans --- ### [Potential Consequences of Not Providing Notices and Required Disclosures (Pt. 3 of 3)](https://watkinsross.com/articles/2025-09-30-potential-consequences-of-not-providing-notices-and-required-disclosures-pt-3-of-3/) **Published:** September 30, 2025 **Author:** Watkins Ross Team **Content:** As a plan administrator or employer, it is your responsibility to provide specific notices and required disclosures to plan participants about their defined contribution (DC) plans. And of course, there are a number of guidelines you’re required to follow when distributing them. This blog is the third installment in our series to explain what these notices are, when and how you must provide them, and finally what happens when you don’t. If you have not done so already, please read [Part 1](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/) and [Part 2](https://watkinsross.com/articles/2025-08-29-plan-sponsor-best-practices-disclosures-and-notices-part-2-of-3/) of this series. It is extremely important that you follow the notices and required disclosures rules set forth by the U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), and the Employee Retirement Income Security Act (ERISA). If you fail to provide them (or fail to provide them correctly), you may find yourself facing various legal, financial, and operational consequences. **Potential consequences could be:** ## 1. Penalties and Fines ### Civil Penalties The DOL may impose civil penalties for: - Failing to provide required disclosures - Providing incomplete information - Providing incorrect information. For example, failure to provide a summary plan description (SPD) within the prescribed time frame could result in a fine of up to **$110 per day** for each violation. ### Late Filing Penalties If the required annual reports ([Form 5500](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/)) are not filed on time, penalties could range from $25 per day, up to a maximum of **$15,000 per report**, depending on the level of delay. ## 2. Plan Disqualification If you do not provide proper notices and required disclosures – especially those required under ERISA – the plan could risk **disqualification**. This could mean losing the plan’s critical tax-qualified status. Without the status, the plan may no longer be tax-deductible, and participants may face **negative tax consequences**. ## 3. Legal and Fiduciary Liability ### Fiduciary Breach Plan fiduciaries like you have a legal duty to act in the best interest of plan participants. If you fail to provide required notices, it could be seen as a breach of fiduciary duty. You could be subject to **lawsuits** or claims by participants, as well as enforcement action by the DOL or IRS. ### Participant Lawsuits Participants may choose to **sue the plan sponsor**, plan administrators, or fiduciaries. In these cases, they may seek damages for any losses suffered as a result of the failure to provide timely or accurate information. ## 4. Loss of Participant Trust and Engagement Employees need information to make informed decisions about their retirement savings. If they’re not receiving proper communication, employees may lose [trust in the plan](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/). Trust is vital to a healthy DC plan. Without trust, employers typically see reduced participation, lower contribution rates, or even plan withdrawals. This lack of communication could **hurt your employees financial well-being** in the long run. ## 5. Potential for IRS Audits Failing to provide the required disclosures may trigger an [IRS audit](https://watkinsross.com/articles/2025-06-25-401k-audit-requirements-a-guide-for-employers/). The **IRS can impose additional penalties** or fines and/or require corrective action, like providing the required notices retroactively. An audit is a headache in its own right, and you run the risk of uncovering other issues within the plan, leading to more extensive penalties. ## 6. Delayed or Incorrect Participant Elections If participants do not receive proper notices about investment options, fees, or plan changes, they may make **uninformed decisions** regarding their investments or retirement savings. This could have a negative effect on the DC plan, resulting in financial losses or suboptimal investment outcomes. ## 7. Increased Plan Administration Costs Imposed penalties and fees aside, correcting disclosure issues after the fact alone (such as providing backdated notices or retroactive corrections) will **cost you**. Consider the expenses associated with this task: - Administrative costs - Legal fees - Time spent resolving the issue ## 8. Reputational Damage As well as losing trust with your employees, you’ll also lose trust outside your organization. Failing to meet regulatory requirements for transparency and participant communication can **harm your reputation** – both internally among employees *and* externally with regulators and stakeholders. ## 9. Disruptions in Plan Operation [Non-compliance](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/) with required disclosures can **disrupt the normal operation** of the plan. If notices are not provided on time, participants may not receive necessary information about plan design changes, investment options, or administrative procedures. **This could lead to operational inefficiencies, such as:** - Increased call volumes to HR or the plan administrator - Delays in processing transactions - Additional administrative costs to correct errors **It can also result in employee confusion:** - Confusion about how their contributions are invested - Uncertainty about plan rules - Frustration from making uninformed decisions that negatively impact retirement savings ## 10. Disqualification from Certain Plan Features Some plan features, such as automatic enrollment or safe harbor provisions, may require specific participant notices to be effective. Without the required disclosures, these features are not valid, leading to **potential tax and legal ramifications**. ## Do Right by Your Employees. Protect Your Plan. Failing to provide required notices and disclosures can result in penalties, audits, and loss of participant trust. Worst of all, it hurts your employees and your plan. Protect your employees’ retirement security – make sure you’re following the guidelines for providing notices and required disclosures. Remember, for a more detailed look at what those notices are and when/how they should be distributed, be sure to read [Part 1](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/) and [Part 2](https://watkinsross.com/articles/2025-08-29-plan-sponsor-best-practices-disclosures-and-notices-part-2-of-3/) of this series. At Watkins Ross, we’re here to support you. If you have any questions or need help managing these responsibilities, we would love to chat. [Contact us today](https://watkinsross.com/contact/) to keep your plan on track. **Categories:** 401(k) Plans, 401K Plan Compliance, Plan Documents **Tags:** 401k plan Compliance, 401k Plans, Compliance, Plan Documents --- ### [Plan Sponsor Best Practices: Understanding Disclosures and Notices (Pt. 2 of 3)](https://watkinsross.com/articles/2025-08-29-plan-sponsor-best-practices-disclosures-and-notices-part-2-of-3/) **Published:** August 29, 2025 **Author:** Watkins Ross Team **Content:** If you are a plan sponsor (or you’ve read [Part 1](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/ "Protect Your Participants: Understanding Plan Participant Disclosures and Notices (Pt. 1 of 3)") of this guide), you know that you are responsible for overseeing retirement plans (such as 401(k)s or pensions). As such, you must also provide participants with various notices throughout the year. These notices ensure compliance with regulatory requirements and inform 401(k) participants of their rights and plan details. Managing roughly [15 types](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/ "Protect Your Participants: Understanding Plan Participant Disclosures and Notices (Pt. 1 of 3)") of notices demands strong organization and clear internal communication to ensure accurate, on-time delivery. To help you stay ahead of any potential confusion, our team at Watkins Ross has shared some best practices for issuing participant notices. ## 1. Plan Sponsor Responsibilities: Understand Regulatory Requirements Plan sponsors need to be aware of the various notices required under both federal and state law. These include but are not limited to: - Summary Plan Description (SPD) - Automatic Enrollment Notices - Qualified Default Investment Alternative (QDIA) Notice - Safe Harbor Notices (if applicable) - 404a-5 Fee Disclosure Notices - Annual 404c Notice (for plans offering participant-directed investments) - 401(k) Safe Harbor Notice (if applicable) - Retirement Plan Blackout Period Notice - Required Minimum Distribution (RMD) Notices (for participants nearing retirement age) You can find a more detailed version of this list in [Part 1](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/ "Protect Your Participants: Understanding Plan Participant Disclosures and Notices (Pt. 1 of 3)") of this guide. ## 2. Plan Sponsor Best Practices: Provide Clear, Concise, Understandable Notices Clear communication builds trust and reduces confusion. **Keep it simple and transparent.** Notices should be written in plain language that 401(k) participants can easily understand. Avoid using legal jargon or technical language unless absolutely necessary. The goal is to ensure participants can make informed decisions about their retirement plans. **Deliver notices on time.** Notices must be provided within specific timeframes. For example, the 404a-5 Fee Disclosure Notice must be sent at least once per year, and the QDIA notice must be sent at least 30 days but not more than 60 days before the plan’s automatic enrollment takes effect. ## 3. Plan Sponsor Strategies: Use Multiple Delivery Methods There are three primary delivery methods available. Consider when to use each: **Electronic Delivery (preferred):** When possible, plan sponsors can take advantage of electronic delivery, as it’s efficient and cost-effective. However, the plan sponsor must ensure that 401(k) participants consent to electronic delivery, and the notices must be accessible and easily printable. **Paper Copies:** Participants who opt-out of electronic delivery or don’t provide an email address should receive paper copies. Make sure to use reliable mailing practices to confirm delivery. **Ensure Confirmation:** For key notices, such as those related to a blackout period or plan changes, obtaining proof of delivery (e.g., return receipt for mailed notices or read receipt for emails) can help ensure that participants received the information. ## 4. Plan Sponsor Compliance: Stay Ahead of Deadlines Proactive planning keeps you compliant. **Track key dates:** Ensure the deadlines for notices are tracked and met. Use tools like calendar reminders, automated systems, or third-party record-keepers to help. **Provide notices early:** If a notice must be delivered by a certain date, plan sponsors should err on the side of caution. Send the notices earlier than the deadline, particularly in cases where they rely on postal delivery. ## 5. Maintain Records of Notices Good records protect you during audits. **Document and keep an audit trail:** Keep thorough records of all notices sent, including when and how they were delivered. This will be essential in case of Department of Labor (DOL) or the Internal Revenue Service (IRS) [audits](https://watkinsross.com/articles/2025-06-25-401k-audit-requirements-a-guide-for-employers/) and will help ensure compliance. **Confirm compliance with ERISA:** The Employee Retirement Income Security Act (ERISA) mandates that certain documents be made available to plan participants. Maintaining proof of proper delivery (both electronic and paper) helps demonstrate compliance with ERISA’s disclosure rules. ## 6. Be Transparent About Fees and Investments Transparency empowers informed decisions. **Disclose fees:** Under Section 404a-5 of ERISA, plan sponsors must provide annual disclosures of investment options, associated fees, and other related expenses to plan 401(k) participants. This helps participants make informed decisions about where to invest. **Provide investment performance data:** While it’s not always mandatory, providing participants with investment performance data and comparative benchmarks can be helpful and improve participant engagement. ## 7. Provide Relevant Information at Key Times Timely updates keep participants prepared. **Provide notice of plan changes:** If there are any plan amendments, changes to investment options, or alterations to features (such as a change to automatic [enrollment](https://watkinsross.com/articles/2022-03-14-enrolling-new-participants-in-your-retirement-plan/)), ensure participants are notified well in advance. **Provide notice of plan blackouts:** If there will be a blackout period (e.g., when plan transactions are temporarily unavailable due to system updates or plan mergers), participants must be notified at least 30 days in advance. The notice must specify the duration of the blackout period. ## 8. Make Notices Accessible to all Participants Accessibility ensures [compliance](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/) and boosts participation. **Consider diverse needs:** Ensure that all participants, including those with disabilities, can access the notices. For example, notices should be in an accessible format, such as large print or screen reader-compatible versions, if needed. **Language accessibility:** If you have participants for whom English is not their first language, consider providing notices in multiple languages. This ensures broader comprehension and compliance. ## 9. Promote Financial Education Education drives engagement and confidence. **Offer educational resources:** Along with the required notices, plan sponsors can provide educational materials to help 401(k) participants understand their retirement plan options, the investment choices available, and how to maximize their benefits. This can include webinars, workshops, or one-on-one consultations. **Offer financial wellness programs:** Consider incorporating financial wellness programs or resources that support broader retirement and financial planning. This helps participants feel more confident in making decisions. ## 10. Review and Update Notices Regularly Regular reviews keep information accurate. **Review notices annually:** At least [once a year](https://watkinsross.com/articles/2025-03-24-defined-contribution-plan-annual-review-key-steps-for-plan-administrators/), the plan sponsor should review all required notices to ensure they reflect current plan provisions and comply with any changes in federal or state law. **Stay updated on regulatory changes:** Regularly check for updates to regulations from the Department of Labor (DOL), the IRS, and other governing bodies that may impact your notice requirements. ## 11. Ensure a User-Friendly Format User-friendly formats increase retention. **Simplify notices:** Rather than overwhelming participants with long or complex documents, use summaries, bullet points, and highlights. Present key information clearly and in an easy-to-digest format. **Ensure access via plan website:** Post notices on the plan’s participant website or portal for easy access. Ensure the site is user-friendly and provides quick links to important documents. ## 12. Seek Professional Guidance as Needed Expert help keeps your plan on track. **Work with advisors or Third-Party Administrators:** Retirement plan regulations can be complex and subject to change. Collaborating with a retirement plan advisor or third-party administrator (TPA) ensures that all notices meet regulatory standards and are distributed appropriately. **Stay informed:** Stay on top of changes in laws and regulations regarding retirement plans by regularly attending webinars, reading industry publications, or consulting legal advisors. ## Don’t Miss Part 3 By following these best practices, plan sponsors can ensure they meet their legal obligations and foster 401(k) participant engagement. Most importantly, use this guide to help participants make more informed decisions about their retirement planning. In Part 3 of our guide, we will take a closer look at the legal, financial, and operational risks associated with failing to provide required notices and disclosures. If you have any questions about notices and disclosures, please feel free to contact us at 616-456-9696. Or, send us a [message](https://watkinsross.com/contact/) online. **Categories:** 401(k) Plans, 401K Plan Compliance **Tags:** 401(k) plans, 401k plan Compliance, Plan Sponsor --- ### [Protect Your Participants: Understanding Plan Participant Disclosures and Notices (Pt. 1 of 3)](https://watkinsross.com/articles/2025-08-21-protect-your-participants-understanding-plan-participant-disclosures-and-notices-pt-1-of-3/) **Published:** August 21, 2025 **Author:** Watkins Ross Team **Content:** As a plan sponsor, you are required to provide a number of communications and disclosures to the plan participant. These disclosures are critical to ensuring transparency, protecting participants, and helping participants make informed decisions about their retirement savings. At Watkins Ross, we’re committed to helping our clients stay organized, compliant, and confident in supporting their participants. As such, we’ve compiled a list of the key required notices and disclosures for [Defined Contribution](https://watkinsross.com/articles/2025-03-24-defined-contribution-plan-annual-review-key-steps-for-plan-administrators/) (DC) plans, along with the deadlines for distributing each. Be sure to follow along for parts 2 and 3 of this series for more helpful information on handling plan disclosures and notices! ## Understanding DC Plan Participant Best Practices: Providing DC notices and disclosures is an important part of the plan sponsor’s [fiduciary responsibility](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/). They are also required by regulatory bodies, such as the Department of Labor (DOL), the Internal Revenue Service (IRS), and ERISA (the Employee Retirement Income Security Act). Plan sponsors should take care to ensure compliance with these requirements to both protect plan participants and avoid potential penalties. Recommended best practices include: - Keep a copy of the notice or document in your plan records and record when these were provided. - Set up calendar reminders to track deadlines (and ensure this responsibility is transferred to new staff during transitions). - Always confirm with your service providers who will prepare these notices, and who will distribute the notices. Be proactive in asking your service providers if they will prepare and distribute these notices to participants. Some recordkeepers will automatically distribute, while others will do so for an additional fee. Ultimately, the plan sponsor is responsible for ensuring notices are provided and their distribution is documented, so communication here is key. For more best practices, be sure to follow along for Part 2 of this guide. ## Basic Plan Participant Disclosure Requirements for Defined Contribution Plans Not all participants are required to receive each notice. The following chart explains what information is provided and the deadline for each notice or document. **Notice or Document****What Information is Provided****Deadline****Summary Plan Description (SPD)**The SPD is a document that outlines the terms of the retirement plan, including eligibility, benefits, vesting schedules, contribution requirements, investment options, and distribution procedures.**Initial distribution**: Must be provided to participants **within 90 days of becoming a plan participant**. **Updates**: Any significant changes must be provided **within 210 days after the end of the plan year** in which the change occurs (or within 30 days of the change if it involves a material modification). If a participant requests the SPD, it must be provided **within 30 days** of the request.**Summary of Material Modifications (SMM)**This notice is provided when the plan’s terms or provisions change. It informs participants of any changes in eligibility, contribution formulas, or other material modifications.Plan participants must receive the SMM within **210 days after the end of the plan year in which the change is adopted.****Automatic Enrollment Notice** **Includes:ACAQACAEACA**This notice explains how automatic enrollment works, including the default contribution rate and default investment option. It also provides instructions on how participants can opt out or change their contribution rates or investment elections.**Initial notice**: Must be provided to new participants **within a reasonable time before they are automatically enrolled**, but no later than **30 days before the automatic enrollment takes effect**. **Annual notice**: Typically provided annually, with the exact timing depending on the plan’s design.**Qualified Default Investment Alternative (QDIA) Notice**This notice applies to plans that use a QDIA for participants who do not make an investment selection. It explains the plan’s default investment options and how participants can opt out or choose a different investment option. **Initial notice**: Must be provided **at least 30 days before the first contribution is made** to the plan. **Annual notice**: Must be given to participants at least **30 days before the beginning of each plan year**.**404a-5 Participant Fee Disclosure**This disclosure provides participants with information on plan-related fees, including both administrative fees and investment-related fees. It also provides participants with performance data for each investment option in the plan, including historical returns over multiple time periods.Newly eligible participants must receive this disclosure within **90 days** **of becoming eligible for the plan.** Must be distributed **annually** to all participants, within 14 months of the previous notice. If there are any changes in the plan fees, a new notice must be provided to participants within **60 days** of the change.**401(k) Safe Harbor Notice**This notice explains the employer’s safe harbor contribution (either matching or non-elective) and its impact on the plan’s testing requirements.Must be distributed **at least 30 days before the beginning of each plan year, but no more than 90 days.****Blackout Period Notice**A blackout period occurs when participants cannot make changes to their accounts, typically due to a plan transition (e.g., changing recordkeepers or plan investments).Must be distributed **at least 30 days before the start of the blackout period**. If the blackout period lasts more than 3 consecutive business days, participants must also be informed of the reason for the blackout and its expected duration.**Investment Option Change Notice**If the plan adds or removes investment options, this notice informs participants about the changes and how it may impact their accounts.Must be provided **at least 30 days before the change takes effect**.**Benefit Statements**This statement provides participants with information about their account balance, including contributions, investment performance, and vested status.**Quarterly** if the participant has an individual account balance. **Annually** if the participant does not have an individual account balance (e.g., trustee directed accounts).**Summary Annual Report (SAR)**A summary of the information reported on [Form 5500](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/).**Within 9 months** after the end of the plan year, or **within 2 months** after the extended due date of the Form 5500 filing (if an extension is filed).## Other Plan Participant Notices ### Beneficiary Designation Reminder This reminder encourages participants to review their [beneficiary](https://watkinsross.com/articles/2022-10-20-the-importance-of-maintaining-retirement-beneficiary-forms/) designations. Beneficiary information often needs updating after life events like marriage, divorce, or the birth of a child. This helps ensure the participant’s benefits are distributed according to their wishes in the event of death. **Deadline:** While this isn’t required on a set schedule, many plans encourage periodic reminders at least annually. ### Qualified Domestic Relations Order (QDRO) Notice This notice informs participants of the plan’s procedures in the event of a [QDRO](https://watkinsross.com/articles/2018-03-12-requirements-for-a-qualified-domestic-relations-order-qdro/) (a court order for the distribution of plan benefits, typically due to divorce). It must be provided when the plan receives a QDRO. **Deadline:** There is no fixed deadline for proactive distribution of this notice, but it should be provided promptly when the situation arises. ### Hardship Withdrawal Notice This notice provides participants with the rules and procedures for taking a hardship withdrawal from the plan. It outlines the types of qualifying events that allow for a hardship withdrawal. **Deadline:** Notice can be provided when a participant inquires about taking a hardship. ### Flexible Match Notice As part of the new document restatement, the IRS has a new requirement for plans that utilize the “flexible” discretionary match feature in their adoption agreement. A “summary” must be communicated to participants who are entitled to receive the allocation of the match. **Deadline:** Notice must be provided within 60 days after the employer makes the final flexible discretionary match contribution for the plan year. \*Can also be done any time before that, if the employer already knows what is going to be contributed. ### Tax Notice When a participant becomes eligible for a distribution (e.g., due to retirement, termination of employment, or age 59 ½), they must receive a notice explaining the distribution options available to them. This includes lump sum, annuity, and rollover options. **Deadline**: Notice must be provided at the time of distribution before the distribution is processed. ## New Simplified Disclosure Rules for Plan Participants in DC Plans It’s important to note recent legislation which may change how some plan sponsors handle notice distribution. [SECURE 2.0](https://watkinsross.com/articles/2023-05-11-secure-2-0-for-defined-benefit-plans/) has provided optional requirements for plan sponsors when distributing notices to plan participants. Previously, all required notices were required to be distributed to all plan participants, regardless if they had enrolled in the plan or had an account balance. Effective for plan year beginning after December 31, 2022, DC plan sponsors have the option to exclude certain employees from such notices. This pertains to employees who are not participating, and with no account balance, providing the following conditions are met: - Participants received a copy of the Summary Plan Description and all required notices when first becoming eligible for the plan - Participants receive a separate annual notice reminding them they are eligible for the plan. This notice must be provided within a reasonable period before the beginning of each plan year. - Participants are provided any notices upon request. Although plan sponsors now have the option to exclude some participants from receiving certain notices, the task of segregating participants into two categories – and tracking the notices – may be too much of an administrative burden. It may just be easier to supply all notices to all participants. ## Manage Notices and Disclosure with Confidence Keeping up with participant notice requirements is a complex yet essential part of [retirement plan administration](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/). Whether you choose to follow the standard approach or take advantage of SECURE 2.0’s optional changes, understanding your obligations is key to staying compliant and supporting your participants effectively. If you have any questions about notice requirements or need help navigating these responsibilities, our team at Watkins Ross is here to help. [Contact us](https://watkinsross.com/contact/) today to ensure your plan stays on track. **Categories:** 401(k) Plans, 401K Plan Compliance, Plan Documents **Tags:** 401(k) plans, 401k plan Compliance, Plan Documents, Plan participant --- ### [401k Plan Audit Requirements: A Guide for Employers](https://watkinsross.com/articles/2025-06-25-401k-audit-requirements-a-guide-for-employers/) **Published:** June 25, 2025 **Author:** Watkins Ross Team **Content:** As a Plan Administrator, understanding 401k audit requirements is essential for maintaining compliance and avoiding costly penalties. This guide provides a clear overview of what triggers a [401(k) audit](https://watkinsross.com/articles/2020-09-10-401k-retirement-plan-audit/), what documentation and data are reviewed, and and how our team at [Watkins Ross](https://watkinsross.com/about-our-firm/) manages the entire process on your behalf. At Watkins Ross, we manage the entire 401(k) audit process on your behalf from monitoring [participant](https://watkinsross.com/articles/2018-11-26-finding-missing-participants-in-your-defined-contribution-plan/) counts to working closely with independent auditors and ensuring timely, an accurate [Form 5500](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/) audit and filing. Our goal is to make the audit process as smooth and stress-free as possible. Read on to learn what to expect during a 401(k) retirement plan audit and how our expert team supports you at every step. ## Understanding 401k Audit Requirements: Why Your Retirement Plan May Need an Audit The 401(k) plan audit is mandated by the Employee Retirement Income Security Act (ERISA) and is intended to ensure your company’s plan is administered correctly. The audit seeks to: 1. Review 401(k) [plan documents ](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/) 2. Verify the 401(k) plan is compliant with the [IRS](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/) and DOL rules An independent accounting firm that specializes in these types of audits will perform the audit, which is different from a DOL/IRS audit. Understanding the 401(k) audit requirements helps clarify why this process is necessary and how it protects plan integrity. ## 401k Audit Requirements: When Is an Audit Required for Your Retirement Plan? Under current 401(k) audit requirements, an audit is typically triggered when the participant count exceeds 120 as of the first day of the plan year. This is generally January 1, unless your company has specified something else. However, if the plan filed as a small plan the prior year, this may not apply. These rules are a key part of complying with Form [5500 audit regulations](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/) set by the DOL and IRS. **Here’s why:** When a 401(k) plan has 100 or more participants on the first day of the plan year, it’s considered a “large plan” for DOL and IRS reporting purposes. A large plan is required to complete a Form 5500 with more Schedules and attach an audit report when filing the 5500. While 100 participants is the general threshold for large-plan status, there is what is commonly referred to as the 80-120 rule. Plans that have between 80 and 120 participants at the beginning of the plan year are permitted to file their Form 5500 in the same way they did the year prior. Only participants with an account balance are counted for purposes of the audit requirements. ## What Deadlines Apply to My Audit and Form 5500 Filing? For the Form 5500 filing, the audit will need to be completed and submitted with the Form 5500 to the IRS within seven months from the end of the plan year. If an extension is filed (Form 5558), the due date can be extended an additional two and a half months. For example, if your 401(k) [plan year ends December 31st](https://watkinsross.com/articles/2024-11-27-why-clean-data-matters-for-your-401k-plan/), the filing would need to be completed by July 31st of the following year. If an extension is filed, the deadline would then be October 15th of the following year. ## 401k Audit Requirements: What Auditors Review During a Retirement Plan Audit The following areas will be reviewed during a Form 5500 audit: 1. Documentation and Compliance 2. Financial Statements 3. Disclosures 4. Form 5500 The first things an auditor will review as part of a 401(k) plan audit are the company’s documentation and [compliance](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/). An analysis will be conducted to make sure the plan is operating within the guidelines of the plan-related documents. The plan will also be reviewed to ensure it follows specific [Department of Labor](https://watkinsross.com/articles/2022-05-19-processing-retirement-plan-participant-contributions/) and IRS regulations. After this, the plan’s financial statements, any disclosures, and Form 5500 will be reviewed to make sure the financial information is reported correctly. These steps help ensure your plan is in full compliance with 401(k) audit requirements and federal filing standards. ## What To Expect With Your Audit To ensure a smooth process, plan sponsors and administrators should maintain comprehensive records and review the auditor’s requested items well in advance of the audit start date. Here are some of the items you should prepare: - Plan documents, [adoption agreements](https://watkinsross.com/articles/2020-12-14-secure-act-plan-amendment-options/) and amendments - IRS opinion letter on the plan document - Summary Plan Description (SPD) and any modifications (SMM) - Agreements with service providers - SOC-1 report covering service providers internal control processes - Payroll records and employee [census](https://watkinsross.com/articles/2018-10-31-2018-census-request-reporting/) (list of all paid employees for the year including key demographic data) - Enrollment forms completed by participants - A list of contributions remitted to the plan, by pay period - Trust and recordkeeping reports - [Distributions](https://watkinsross.com/articles/2023-09-07-required-minimum-distributions-rmds/), loans or other plan activity; including forms completed by participants - Proof of insurance coverage for ERISA Bond - Prior Form 5500 filings and draft of current year Form 5500 - Independent appraisal for company stock or other non-traditional investments held by the 401(k), if applicable - Participant Communications and Notices - Corporate Minutes Staying organized can simplify your experience and help you meet all 401k audit requirements tied to the Form 5500 audit process. At Watkins Ross, we recommend our clients reach out to their administrator when they receive their Audit Letter. Your administrator will review items they can assist with and identify the timeframe for your needs. Audits can take several months to complete, so we also recommend starting your audit early. Audit costs may be paid from plan assets. ## Questions? If you have questions about your 401(k) audit requirements, Form 5500 filing, or what to expect during the process, don’t hesitate to [contact us](https://watkinsross.com/contact/) by calling 616-456-9696 or sending us a message online. Our [team](https://watkinsross.com/about-our-firm/) at Watkins Ross is here to guide you every step of the way and ensure your plan stays compliant. We’re happy to answer your questions and help you feel confident about what’s ahead. **Categories:** 401(k) Plans, 401K Plan Compliance **Tags:** 401k plan Compliance, 401k Plans, Audits, Form 5500 --- ### [Form 5500 Made Simple: What Every Plan Administrator Needs to Know](https://watkinsross.com/articles/2025-05-29-form-5500-made-simple-what-every-plan-administrator-needs-to-know/) **Published:** May 29, 2025 **Author:** Watkins Ross Team **Content:** As your group’s Plan Administrator, you’re on the front lines of ensuring [compliance](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/). That includes gathering the right data, filing Form 5500 accurately, and meeting critical deadlines. At Watkins Ross, we expertly prepare Form 5500 for our clients. This is an incredibly valuable service, especially as Employee Retirement Income Security Act (ERISA) and Internal Revenue Service (IRS) requirements continue to [evolve](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/). Because it’s up to Plan Administrators to review and sign the completed form, it’s important that you understand what you’re signing. This quick guide will help you better understand [Form 5500](https://watkinsross.com/articles/2023-11-10-new-audit-rules-for-2023-5500-forms/) for a defined contribution plan and offer clear, practical guidance on how to file successfully. # What Is Form 5500? If you’re new to Form 5500, the first step is understanding what it is and who needs it. Form 5500 is a filing requirement for employee benefit plans, including defined contribution plans (such as [401(k)](https://watkinsross.com/articles/2024-12-18-why-accurate-compensation-plan-definitions-are-essential-for-your-401k-plan/) plans), under the ERISA and the Internal Revenue Code (IRC). It provides the U.S. Department of Labor (DOL) and IRS with important information about the operation, financial condition, and compliance of these plans. The purpose of Form 5500 is to ensure that plan sponsors meet reporting and disclosure requirements, provide transparency, and allow the agencies to monitor whether the plans are adhering to regulatory standards. ## Why Is Form 5500 Important? As the person responsible for plan compliance, it’s critical to understand why this form matters – not just to regulators, but to your organization and plan participants. Mistakes can lead to serious consequences, and timely, accurate filing is your first line of defense. ### Form 5500 Compliance It helps ensure that plan sponsors are meeting the regulatory requirements under ERISA, the IRC, and other applicable laws. ### Transparency The filing provides employees, beneficiaries, and regulators with important information about the plan’s financial health, performance, and operations. ### Audit Trigger An improperly filed or incomplete Form 5500 could [trigger an IRS audit](https://watkinsross.com/articles/2015-06-11-bingo-to-avoid-an-audit-trigger-on-your-esop-form-5500/) of the plan or the sponsor’s tax filings. ### Data for Policymakers The information collected from these filings is also used by the federal government to make policy decisions about retirement savings and pension plans. ## Who Must File Form 5500? Knowing whether your plan is required to file – and which version to use – is one of the areas where we at Watkins Ross offer expert guidance. Here’s what you need to know to determine your filing obligation: ### Form 5500 General Requirement If your defined contribution plan (e.g., 401(k), [403(b)](https://watkinsross.com/services/403b-plans/)) has 100 or more participants at the beginning of the plan year, you are required to file Form 5500 annually. ### Small Plans Small Plans (fewer than 100 participants): These plans may be eligible for a simpler filing option, called the Form 5500-SF (Short Form), if they meet specific criteria. ### Exemptions Certain plans (such as some governmental or church plans) may be exempt from filing. ## When to File Form 5500? Form 5500 is due seven months after the end of the plan year. For example, if your plan’s year ends on December 31st, the form is due by July 31st of the following year. If you need a little more time, you can file for a two-month extension by submitting Form 5558 before the due date. ## What Information Is Included in Form 5500? Pulling together accurate and complete information can be a logistical headache. Here’s a breakdown of what’s included so you can plan accordingly: ### Form 5500 Plan Information Basic details such as the plan name, sponsor, and plan year. ### Form 5500 Financial Information The plan’s financial statements, including balance sheets, income statements, and details about plan assets and liabilities. For large plans (those with 100+ [participants](https://watkinsross.com/articles/2022-03-14-enrolling-new-participants-in-your-retirement-plan/)), an audited financial statement is required, prepared by an independent accountant. ### Participant Information Number of participants, whether the plan provides benefits to employees, and whether the plan includes both active and retired participants. ### Investments Details about the types of investments held by the plan, such as mutual funds, stocks, or bonds. ### Plan Operations and Compliance Information on the plan’s compliance with regulations, such as whether it has made required [contributions](https://watkinsross.com/articles/2025-03-24-defined-contribution-plan-annual-review-key-steps-for-plan-administrators/), if it has met fiduciary responsibility standards, and if there are any issues regarding loans, distributions, or other plan activities. ### Fees and Expenses The plan must disclose administrative and investment-related fees, as well as any changes in fee structures. ### Schedule A (if applicable) For plans that engage with service providers (e.g., third-party administrators or insurance companies), Schedule A reports the compensation paid to those providers. ### Schedule C (if applicable) For plans that engage with any parties in a relationship that could cause conflicts of interest, this schedule is required to disclose additional compensation and transaction details. ## Form 5500 vs. Form 5500-SF (Short Form) If you’re administering a smaller plan, understanding whether you qualify for the simplified short form can save you time, money, and stress. Here’s how the two compare: Form 5500-SF is a simplified version of Form 5500 used for smaller plans (fewer than 100 participants) that meet certain criteria. This could include having no employer securities in the plan or being eligible for the audit exemption. If your plan is small and meets the requirements for the short form, this is preferred. It’s generally easier to complete and less costly to file. ## Consequences of Non-Compliance Failure to complete Form 5550 correctly and file it on time can result in significant penalties. For example, the IRS can impose a fine of up to $250 per day (up to $150,000 per year). The DOL may also impose fines, and your plan could lose its qualified status – affecting tax advantages for both employers and employees. ## Key Schedules and Attachments for Defined Contribution Plans One of the most confusing aspects of Form 5500 is figuring out which schedules apply to your plan. Use this cheat sheet to navigate those decisions more confidently: - **Schedule H** (for large plans): Required for plans with 100 or more participants, and provides detailed financial statements, including audited financials. - **Schedule I** (for small plans): For plans with fewer than 100 participants, this schedule summarizes the plan’s financials and investments. - **Schedule A**: If the plan purchases insurance or annuity contracts, this schedule provides details about the insurance companies and amounts paid. - **Schedule C**: Used if there are specific service providers involved, disclosing compensation and relationships with plan service providers. - **Schedule D**: If the plan is involved in specific transactions (such as non-exempt prohibited transactions), this schedule is required. ## Where to File? # You must file Form 5500 electronically via the [EBSA’s EFAST2 system](https://www.efast.dol.gov/) (Employee Benefits Security Administration). Paper filings are not accepted. ## Need Help Navigating Form 5500? Form 5500 is essential for maintaining [compliance](https://watkinsross.com/articles/2015-02-05-will-your-esop-require-a-plan-audit-for-form-5500/) and transparency in your group’s retirement plan. As a plan administrator, managing its complexity, deadlines, and reporting requirements can be overwhelming. Let Watkins Ross take the stress out of Form 5500. [Schedule](https://watkinsross.com/contact/) a consultation with our experts today, or give us a call if you have any questions. **Categories:** 401(k) Plans, 401K Plan Compliance **Tags:** 401k plan Compliance, 401k Plans, Form 5500 --- ### [Dividing Pensions in a Divorce: What You Need to Know](https://watkinsross.com/articles/2025-01-23-dividing-pensions-in-a-divorce-what-you-need-to-know/) **Published:** January 23, 2025 **Author:** Watkins Ross Team **Content:** Dividing pensions in a divorce can be a complicated process for plan administrators to navigate, but understanding the steps and roles involved can help make things smoother. The court is ultimately responsible for determining how pension benefits will be divided, and the divorce decree plays a critical role in this. The decree might specify a percentage or a specific dollar amount of the [pension](https://watkinsross.com/articles/2018-05-14-reducing-risk-in-your-pension-plan-lump-sum-payments-to-former-employees/) to be awarded to the non-employee spouse. If the decree is unclear about how to divide the pension, it can lead to administrative and legal headaches for HR teams managing these benefits. ## Key Points for Dividing Pensions in a Divorce Typically, pensions are earned over a long period, and **only the portion accumulated during the marriage is up for division**. To help the court determine the value of this marital portion, the **present value** needs to be calculated. Here’s the key information needed to figure this out: ### Participant Details - Full legal name - Date of birth - Date of hire - Date of termination (if applicable) - Anticipated retirement date ### Marital Information - Dates of marriage and divorce or separation ### Plan Information - Pension plan name - Summary Plan Description (SPD) – Usually available from the employer ### Benefit Information - Accrued benefit (based on the participant’s pension statement or calculated using plan formulas) - Normal and early retirement dates, including any reductions for early retirement - Cost-of-living adjustments ([COLA](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/)s), if applicable ## What Happens When Pensions In a Divorce aren’t Divided In some cases, dividing the pension may not be necessary. For example, if both spouses have similar retirement benefits or other assets of comparable value, they may agree to offset one asset with another, allowing the pension to remain untouched. However, when this isn’t an option, the court may decide to allocate part of the pension to the non-employee spouse. ## The Role of QDROs and EDROs To officially allocate a portion of the pension at divorce, a court order called a Qualified Domestic Relations Order ([QDRO](https://watkinsross.com/articles/2018-03-12-requirements-for-a-qualified-domestic-relations-order-qdro/)) for private plans or an Eligible Domestic Relations Order (EDRO) for public plans is usually required. This legal document ensures the ex-spouse’s right to a share of the pension benefits and outlines how benefits will be distributed in compliance with the pension plan’s rules. ### Need Help Navigating The Process Of Dividing Pensions in a Divorce? Dividing a pension during divorce can be [tricky](https://watkinsross.com/articles/2021-05-14-common-mistakes-to-avoid-in-your-employee-benefit-plan/). If you’re helping a participant through this process, it’s essential to ensure that all the necessary [paperwork](https://watkinsross.com/articles/2022-07-12-maintaining-retirement-plan-and-participant-records-whos-responsible-and-for-how-long/) is in order, and the division is handled correctly. [Our team](https://watkinsross.com/about-our-firm/) can assist you in understanding the specifics of QDROs, EDROs, and the steps involved. [Contact us](https://watkinsross.com/contact/) today to get the support you need! **Categories:** dividing pensions in divorce, pensions, Pensions in a divorce **Tags:** Compliance, dividing pensions in divorce, pensions, pensions in a divorce --- ### [Your Plan Document: The Backbone of Retirement Plan Administration and Legal Compliance](https://watkinsross.com/articles/2025-04-28-your-plan-document-the-backbone-of-retirement-plan-administration-and-legal-compliance/) **Published:** April 28, 2025 **Author:** Watkins Ross Team **Content:** Employee benefits, like retirement plans, play a powerful role in boosting engagement and supporting long-term employee [retention](https://www.metlife.com/workforce-insights/employee-benefit-trends/#ebts-2025-download-report). To maximize a retirement plan’s value for both employees and the company, plan administrators *must* ensure the plan is carefully administered. Whether you’re managing a [401(k)](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/), 403(b), pension, defined benefit plan, or another type of retirement program, every plan starts with the same crucial first step: creating a comprehensive [plan document](https://watkinsross.com/services/plan-documents/). ## What Is a Plan Document? A plan document is a legally binding agreement that outlines how a retirement plan is operated and administered, including its key terms and conditions. To remain [compliant](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/), the plan document must be properly signed, dated, and executed within required timeframes. A plan document’s number one purpose is to ensure compliance with federal and state regulations — particularly, the Employee Retirement Income Security Act ([ERISA](https://watkinsross.com/articles/tags/erisa/)), which sets the legal standards for retirement plans. Having a formal document helps ensure plan sponsors adhere to these legal requirements. ## What Does a Plan Document Do? ### Clarifies Plan Structure and Rules A well-drafted plan document provides clarity about the plan’s structure and rules. It outlines eligibility criteria, [contribution](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/) limits, investment options, and distribution procedures. By having a clearly defined set of rules, the document helps reduce confusion and ensures the plan is administered consistently. This consistency fosters trust among participants, who know the plan’s rules are being applied fairly. ### Supports Plan Amendments and Updates Plan Documents outline the procedures for making amendments to the retirement plan, which may need to be updated occasionally due to changes in laws, regulations, or organizational goals. The plan document ensures that any changes are properly documented and compliant with legal standards. This adaptability is crucial for keeping the plan relevant and effective as circumstances evolve. ### Provides Critical Documentation During Audits A plan document is also often the first thing requested during a Department of Labor or IRS [audit](https://watkinsross.com/articles/2020-09-10-401k-retirement-plan-audit/). It serves as formal proof that the retirement plan is designed and operated according to legal requirements. This makes it a critical resource for demonstrating compliance and avoiding potential penalties. ### Helps Protect Plan Sponsors From Legal Risk Having a comprehensive plan document can help protect plan sponsors from potential legal liability. In the event of disputes or challenges, the document serves as evidence of the plan’s structure and compliance with regulations. This protection can be invaluable in mitigating risks associated with mismanagement or misunderstandings. ### How Does the Plan Sponsor Use the Document? The plan sponsor is responsible for understanding the plan’s features and operating in accordance with the terms of the plan. This would include: - [Eligibility](https://watkinsross.com/articles/2018-07-30-401k-plan-eligibility-requirements-for-summer-help/) requirements - Contributions - Definition of compensation - Distribution options Plan sponsors, HR managers and any other employees who are involved in the day-to-day operations of the plan should review the document, adoption agreements, Summary Plan Description and any other documents provided to be sure they understand the plan’s features and operate accordingly. ### Can Plan Documents Be Changed? Amendments to the plan document may be made; either required by law (interim amendments) to reflect new regulatory changes, or by the plan sponsor choosing to make a change (discretionary). Plan sponsors are required to keep their plan in compliance with any changes to the document made by these amendments. Generally, the documents must be “restated’ every [six years](https://watkinsross.com/articles/2022-07-12-maintaining-retirement-plan-and-participant-records-whos-responsible-and-for-how-long/) to keep compliant with regulatory changes in the law. ### Worth the Time Investment A plan document is not merely a regulatory requirement; it is the backbone of a [defined contribution plan](https://watkinsross.com/articles/2025-03-24-defined-contribution-plan-annual-review-key-steps-for-plan-administrators/). From ensuring legal compliance and clarifying participant rights to providing a framework for effective administration and protection against liability, the importance of this document cannot be overstated. For employers looking to establish or maintain a defined contribution plan, it is well worth the time and [resources](https://watkinsross.com/resources/) invested to create a comprehensive plan document. A well-crafted document lays the foundation for consistent, transparent plan administration that supports employee confidence and long-term retention while protecting the company from legal risk. In short, it’s a key step in building a retirement program that benefits everyone involved. ### Is Your Plan Document Up To Date? Ready to review your plan document or ensure it’s up to date? At [Watkins Ross](https://watkinsross.com/about-our-firm/), we’ve been partnering with West Michigan plan administrators since 1948 to ensure retirement plans that work — for both employers and their employees. [Contact us](https://watkinsross.com/contact/) today to get started. **Categories:** 401K Plan Compliance, Plan Documents **Tags:** 401k plan Compliance, Plan Documents --- ### [Defined Contribution Plan Annual Review: Key Steps for Plan Administrators](https://watkinsross.com/articles/2025-03-24-defined-contribution-plan-annual-review-key-steps-for-plan-administrators/) **Published:** March 24, 2025 **Author:** Watkins Ross Team **Content:** As a plan administrator, you play a vital role in managing a **Defined Contribution Plan**, you play a crucial role in keeping [retirement plans](https://watkinsross.com/articles/2023-01-09-retirement-plan-enrollment-best-practices/), benefit programs, and [pension](https://watkinsross.com/articles/2025-01-23-dividing-pensions-in-a-divorce-what-you-need-to-know/) systems running smoothly. Your responsibilities include overseeing compliance, financial management, and participant engagement to keep the plan operating efficiently. This involves verifying accurate contribution processing, maintaining fee transparency, and providing participants with essential educational [resources](https://watkinsross.com/resources/). Accurate record-keeping is critical, as proper documentation simplifies reporting and ensures timely filings—helping you avoid costly penalties for late or incomplete submissions. ### **Defined Contribution Plan** **Annual Recordkeeping Requirements** Each year, the following records must be maintained: - A list of current employees and participants, including: - Date of birth - Date of original hire - Marital status - Hours worked by each employee - Each employee’s compensation - Dates of termination and rehire - Records of the plan’s investment activities Your third-party administrator ([TPA](https://watkinsross.com/articles/2018-05-29-why-an-unbundled-tpa-is-better-for-a-defined-contribution-plan/)) typically conducts an annual plan review and provides a valuation report. These reviews ensure that the Defined Contribution Plan remains effective, compliant, and aligned with participants’ long-term retirement goals. To keep your plan running smoothly and compliant, focus on these key areas during your annual review: ### ****Defined Contribution Plan** Levels** - **Employer and Employee Contributions:** Verify that all contributions match [payroll](https://watkinsross.com/articles/2024-09-30-tracking-payroll-deposits-to-a-401k-a-guide-for-plan-sponsors/) reports, align with the plan document, and are remitted timely and accurately. - **Government Limits:** Ensure contributions comply with IRS limits, including annual caps and tax-advantage rules. - **Automatic Escalation:** If the plan includes automatic contribution increases, confirm that they have been correctly applied. ### **Plan Costs and Fees** - **Administrative Fees:** Review all costs, including administrative and investment management [fees](https://watkinsross.com/articles/2022-09-16-what-is-a-top-heavy-retirement-plan/), to ensure they remain reasonable compared to industry standards. - **Fee Transparency:** Clearly communicate all fees to participants, as high costs can erode investment returns over time. ### **Plan Design and Features** - **Contribution Options:** Assess whether pre-tax and [Roth](https://watkinsross.com/articles/2024-02-29-guidance-for-roth-employer-contributions/) deferrals, employer contributions, and other plan features remain beneficial. - **Withdrawal and Distribution Rules:** Ensure the Defined Contribution Plan’s distribution options align with participant needs. ### **Regulatory Compliance** - **Legal and Regulatory Updates:** Stay informed of [changes](https://watkinsross.com/articles/2022-08-09-the-new-irs-pre-examination-retirement-plan-compliance-program/) in pension laws, contribution limits, retirement age rules, tax treatment, and reporting requirements. - **Fiduciary Responsibilities:** Confirm that fiduciaries act in participants’ best interests and monitor plan performance. - **Tax-Advantaged Status:** Verify continued compliance with tax rules to maintain the plan’s benefits. ### **Participant Communication and Education** - **Participant Statements:** Review the accuracy and clarity of annual [participant](https://watkinsross.com/articles/2022-07-12-maintaining-retirement-plan-and-participant-records-whos-responsible-and-for-how-long/) statements, including account balances, contributions, investment performance, and fees. - **Educational Resources:** Ensure participants have access to tools and workshops that help them make informed investment decisions. ### **Defined Contribution** **Plan Participation and Enrollment** - **Participation Rates:** Monitor participation trends and implement [strategies](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/) to increase enrollment, particularly among younger or lower-income employees. - **Automatic Enrollment:** Ensure employees are enrolled correctly and given opt-out options. - **Opt-Out and Opt-Up Features:** If automatic escalation is included, verify its proper implementation. ### **Audits and Financial Oversight** - **Internal or External Audits:** Conduct annual [audits](https://watkinsross.com/articles/2024-11-27-why-clean-data-matters-for-your-401k-plan/) to review contributions, distributions, and investment performance. - **Financial Reporting:** Review the plan’s financial reports for accuracy and transparency, verifying that all contributions, investments, and withdrawals are accounted for properly. ### **Technology and Data Integrity** - **Data Accuracy:** Ensure participant data, including contribution histories, investment choices, and personal details, is correct. Address discrepancies promptly. - **Plan Administration Systems:** Evaluate the efficiency and [security](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/) of the platform used to manage the plan. Consider changes if necessary to improve the participant experience. ### **Investment Performance** - **Asset Performance:** Assess whether investments (e.g., stocks, bonds, mutual funds, etc.) are meeting performance [expectations](https://watkinsross.com/articles/2024-11-05-how-mergers-and-acquisitions-impact-401k-plans-what-plan-sponsors-should-know/) relative to benchmarks. - **Risk Profile:** Review the investment mix to ensure it aligns with participant risk tolerance, especially as they near retirement. - **Fund Choices:** Evaluate available investment options to ensure that they remain appropriate, competitive, and diversified. ### **Defined Contribution Plan** **Actionable Recommendations** - **Plan Enhancements:** Identify opportunities for plan improvements, such as adding investment options, adjusting contribution limits, or offering new educational resources. - **Participant Engagement:** Implement outreach efforts to educate and re-engage [employees](https://watkinsross.com/articles/2018-02-26-celebrating-your-employees/) about the benefits of participating in the plan or adjusting their contributions. Your service providers, including your TPA, investment advisor, and recordkeeper, can assist with these critical tasks. Regular plan reviews ensure compliance, enhance performance, and ultimately help participants achieve their retirement goals with a well-maintained Defined Contribution Plan.Never hesitate to [contact us](https://watkinsross.com/contact/) with any questions you may have. At [Watkins Ross](https://watkinsross.com/about-our-firm/), we’re here to help! **Categories:** 401(k) Plans, 401K Plan Compliance, Defined Contribution Categories **Tags:** 401(k) plans, 401k plan Compliance, Defined Contribution Categories --- ### [Why Plan Sponsors Need a Strong Cybersecurity Policy for 401(k) Plans](https://watkinsross.com/articles/2025-02-24-why-plan-sponsors-need-a-strong-cybersecurity-policy-for-401k-plans/) **Published:** February 24, 2025 **Author:** Watkins Ross Team **Content:** If you’re responsible for managing your company’s 401(k) plan, cybersecurity might not be at the top of your to-do list—but it should be. [Retirement plans](https://watkinsross.com/articles/categories/retirement-plans/) contain highly sensitive financial and personal data, making them a prime target for cybercriminals. A cybersecurity policy is essential for protecting participant information, ensuring compliance, and most of all, keeping your employees’ hard-earned retirement savings *safe*. With cyber threats constantly evolving, it’s imperative to implement a [401(k)](https://watkinsross.com/articles/2024-11-05-how-mergers-and-acquisitions-impact-401k-plans-what-plan-sponsors-should-know/) cybersecurity strategy. Failing to do so could lead to data breaches, fraud, and serious financial consequences. Here’s what plan sponsors, employers, and benefits administrators need to know: ## 1. Protecting Sensitive Data: A Strong Cybersecurity Policy Is A Must Have 401(k) plans contain sensitive personal and financial data such as Social Security numbers, banking details, and investment information—exactly the kind of data cybercriminals look for. A strong policy helps safeguard this data from breaches, identity theft, and fraud. ## 2. Cybersecurity Policy Compliance Matters More Than Ever Regulatory bodies like the Department of Labor (DOL) and the Internal Revenue Service (IRS) require plan sponsors to take reasonable steps to protect participant data. A solid cybersecurity framework can help ensure [compliance](https://watkinsross.com/articles/2023-09-07-required-minimum-distributions-rmds/) with these regulations and avoid penalties. ## 3. Employee Trust Depends on A Strong Cybersecurity Policy Your employees trust you to safeguard their retirement savings. A data breach can severely damage that trust and harm the sponsor’s reputation, potentially leading to lower plan participation and litigation. Implementing a clear [401(k)](https://watkinsross.com/articles/2024-12-18-why-accurate-compensation-plan-definitions-are-essential-for-your-401k-plan/) cybersecurity policy reassures employees that their information is safe, fostering confidence in the retirement plan and the organization. ## 4. Ignoring Cybersecurity Increases Liability A data breach can have serious financial consequences, from regulatory fines to legal fees and even ransom demands. Cyber threats are increasingly sophisticated; thus being proactive with a comprehensive policy helps plan sponsors identify, assess, and mitigate risks, reducing the likelihood of a successful cyberattack. ## 5. Cybersecurity Impacts Employee Engagement Employees are more likely to actively contribute to their 401(k) plans when they feel their data is secure. A transparent policy that provides guidance on cybersecurity best practices—like recognizing phishing attempts and using strong passwords—offers reassurance and often leads to more employee engagement and higher [plan](https://watkinsross.com/services/plan-documents/) contribution. ## 6. An Incident Response Plan Is Crucial Even the most secure systems can be compromised. That’s why a well-defined policy should include a strong incident response plan. This ensures quick and effective action in the event of a breach, minimizing damage and restoring operations promptly. ## 7. Vendor Security is Your Responsibility, Too Many plan sponsors work with third-party service providers for areas such as payroll, recordkeeping, and benefits administration. A strong policy ensures that these vendors also adhere to 401(k) cybersecurity best practices, reducing the overall risk to the plan. What Plan Sponsors Can Do Next Not sure where to start? The Department of Labor (DOL) has released cybersecurity guidance specifically for retirement plans. These resources provide actionable steps to help you strengthen your policy: [DOL News Release on Cybersecurity](https://www.dol.gov/newsroom/releases/ebsa/ebsa20240906-0) [DOL Compliance Assistance for 401(k) Cybersecurity](https://www.dol.gov/agencies/ebsa/key-topics/retirement-benefits/cybersecurity/compliance-assistance-release-2024-01) Need Guidance on Strengthening Your Cybersecurity Policy? 401(k) cybersecurity is a critical component of retirement plan [management](https://watkinsross.com/articles/2022-07-12-maintaining-retirement-plan-and-participant-records-whos-responsible-and-for-how-long/), but knowing where to begin can be overwhelming. [Contact us](https://watkinsross.com/contact/) for further assistance. **Categories:** 401(k) Plans, 401K Plan Compliance, Cybersecurity policy **Tags:** 401(k) plans, 401k plan Compliance, Cybersecurity --- ### [Why Accurate Compensation Plan Definitions Are Essential for Your 401(k) Plan](https://watkinsross.com/articles/2024-12-18-why-accurate-compensation-plan-definitions-are-essential-for-your-401k-plan/) **Published:** December 18, 2024 **Author:** Watkins Ross Team **Content:** Using the correct definition of your compensation plan in your [401(k) plan](https://watkinsross.com/services/401k-plans/) is essential. When it’s wrong, it can cause headaches like failed plan tests, incorrect contributions, or even IRS penalties. Here’s what you need to know to avoid these issues. ## What Happens When You Use the Wrong Compensation Plan Definitions? If you’re not following the plan’s definition of compensation, you might run into problems like: - **Incorrect Plan Testing**: Mistakes can lead to inaccurate results for Average Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. This could trigger unnecessary refunds or corrections. - **Wrong Contribution Calculations**: Errors affect employee deferrals, employer matches, and profit-sharing amounts. Fixing these mistakes later can be costly. ## How to Get It Right Start by checking your plan document. It explains how different types of compensation such as salary, overtime, bonuses, and commissions are treated for testing, contributions, and other purposes. Be aware of: - **Excluded Compensation**: Your plan might exclude certain types of pay, like bonuses or overtime. - **Statutory Limits**: Compensation used for calculations must stay within [IRS limits](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/). - **Correct Timeframes**: Ensure you’re using data from the right periods. For more guidance, check out the [IRS 401(k) Fix-It Guide](https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-you-did-not-use-the-plans-definition-of-compensation-correctly-for-all-deferrals-and-allocations). ## Tips to Avoid Common Mistakes in Your Compensation Plan - **Review the Plan Regularly**: Understand the definition of compensation and ensure it aligns with plan operations. - **Verify Payroll Systems**: Make sure your payroll system uses the correct compensation codes. - **Update After Plan Changes**: If the plan document changes, compare the new and old definitions and communicate updates to everyone involved. - **Train Your Team**: Teach in-house personnel how compensation is defined and used. - **Coordinate with Third-Party Administrators (TPAs)**: Know what your TPA needs from you, like compensation data and deferral amounts. Keep copies of contracts and summaries of their services. - **Simplify Where Possible**: Use the same compensation definition for multiple purposes to reduce confusion. ## Watch Out for IRS Limits Every year, the IRS sets limits for: - **Maximum Deferrals**: How much an employee can contribute. - **Catch-Up Contributions**: Extra contributions allowed for participants age 50+. - **Compensation Limits**: The maximum amount of compensation used to calculate contributions. If these limits aren’t monitored, employees might contribute too much, requiring corrections and refunds. ## Why It Matters Getting the definition of compensation right isn’t just about avoiding errors—it impacts key parts of your 401(k) plan, including: - **Accurate Contributions**: Contributions are typically based on a percentage of compensation. Errors mean over- or under-contributions. - **Compliance**: The IRS enforces limits on compensation and contributions. Missteps could result in penalties. - **Fairness**: Applying the rules consistently ensures equal treatment and avoids discrimination issues. - **Testing Success**: Non-discrimination and [contribution limit](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/) tests depend on accurate compensation figures. - **Employee Trust**: Clear rules help employees understand how their retirement savings are calculated. ## Ready to ensure your 401(k) Plan is on Track? Understanding how compensation is defined in your plan is necessary to keep your plan running smoothly, avoid costly errors, and ensure compliance with IRS rules. Take the time to review your plan, train your team, and coordinate with payroll and TPAs to get it right the first time. **Categories:** 401(k) Plans, 401K Plan Compliance **Tags:** 401k plan Compliance, 401k Plans, compensation plan --- ### [Why Clean Year-End Data Matters for Your 401(k) Plan](https://watkinsross.com/articles/2024-11-27-why-clean-data-matters-for-your-401k-plan/) **Published:** November 27, 2024 **Author:** Watkins Ross Team **Excerpt:** Ensure accurate year-end 401(k) data for correct contributions, smooth audits, compliance, and efficient plan management. **Content:** Think of your year-end data as the GPS for your 401(k) plan—it needs to be accurate, or everyone’s going to end up lost! Here’s why having clean data is a big deal: ### 1. Accurate Contributions Think of your [401(k) plan](https://watkinsross.com/services/401k-plans/) like a puzzle, and accurate data is the key piece. Contributions from both employees and employers depend on factors like salary, age, and job status. Clean data ensures that these contributions are calculated correctly. Mistakes can lead to over- or under-contributing, which creates extra costs and headaches. It’s much easier and less stressful to get it right the first time! ### 2. Staying Compliant with IRS and DOL Rules The IRS and [Department of Labor (DOL)](https://www.dol.gov) have strict rules for 401(k) plans, and your [year-end census](https://watkinsross.com/articles/2016-12-07-census-request-the-data-requested/) helps you follow them. For example: - **Form 5500**: An annual report filed with the DOL. - **Nondiscrimination Testing (NDT)**: Checks like ADP, ACP, and top-heavy tests make sure your plan treats everyone fairly and doesn’t inequitably benefit higher-paid employees. Clean data helps ensure accurate filings and prevents audits or penalties. ### 3. Clear, Accurate Statements for Employees At the end of the year, employees receive statements showing how much they’ve saved in their accounts. If the data is wrong, the statements can show incorrect balances, which can confuse and upset your team. Clean data ensures everyone gets the right information and builds trust. ### 4. Clean Data Means Smooth and Efficient Audits Plans with 100 or more participants often need an independent [audit](https://watkinsross.com/articles/2020-09-10-401k-retirement-plan-audit/). Auditors rely on clean data to check that the plan is managed properly. If the data is messy, it can lead to delays and potential issues during the audit process. ### 5. Easier Plan Management Plan administrators use the year-end data for tasks like checking eligibility, processing loans or distributions, and handling employee changes. Clean data helps keep everything running smoothly, while errors can cause delays and extra work. ### 6. Clean Data Reduces Legal Risks As a plan sponsor or fiduciary, you’re responsible for managing the plan in the best interests of your employees. Clean data helps you meet your responsibilities and reduces the risk of legal issues. ## Tips for Keeping Clean Data: - **Use technology**: Export data directly from your payroll system to reduce manual entry errors. - **Double-check totals**: Compare your year-end data with payroll reports, W-2s, and W-3s to spot any discrepancies early. - **Include everyone**: Make sure the file includes all employees—it’s easy to miss someone. - **Verify completeness**: Ensure all requested information is provided. If something isn’t clear, don’t hesitate to ask. Clean year-end data is essential for getting contributions correct, staying compliant, providing accurate employee statements, and making plan management easier. It’s worth the effort to ensure everything is correct from the start. **Categories:** 401K Plan Compliance, Retirement Plans **Tags:** 401k Plans, Clean Data Year end, Compliance, Retirement Plans --- ### [How Mergers and Acquisitions Impact 401k Plans: What Plan Sponsors Should Know](https://watkinsross.com/articles/2024-11-05-how-mergers-and-acquisitions-impact-401k-plans-what-plan-sponsors-should-know/) **Published:** November 5, 2024 **Author:** Watkins Ross Team **Content:** When companies engage in mergers and acquisitions (M&A), the focus is often on operational integration, financial restructuring, and human resources. However, one area that deserves particular attention is the impact on [401k plans](https://watkinsross.com/services/401k-plans/). As a plan sponsor, understanding how to navigate the complexities of retirement benefits during an M&A is necessary to ensure compliance, safeguarding employee assets, and maintaining a positive employee experience. Here’s what plan sponsors need to consider and prepare for when overseeing 401(k) plans during mergers or acquisitions. ## 1. Due Diligence: Assessing Existing 401k Plans Before any merger or acquisition, conducting thorough due diligence on both the acquiring and target companies’ 401k plans is essential. This helps you understand the similarities, differences, and potential legal and administrative challenges that may arise from consolidating or maintaining two separate plans. ### Key Steps: - **Review Plan Documents**: Analyze plan documents, including Summary Plan Descriptions (SPDs), vesting schedules, and eligibility criteria. - **Evaluate Fiduciary Responsibilities**: Identify who holds fiduciary responsibility for each plan, as this could shift post-merger. - **Check for Compliance Issues**: Ensure both plans comply with ERISA, IRS regulations, and Department of Labor requirements. Non-compliance could lead to costly penalties or legal issues. By fully understanding the structures of both plans, you can avoid surprises during the integration process. ## 2. Deciding on the Fate of the 401k Plans There are generally three options for handling 401k plans post-merger: - **Plan Merger**: This involves combining the target company’s 401(k) plan into the acquiring company’s plan. This is often the most streamlined approach, but it requires careful coordination to ensure that the transition is seamless. - **Plan Termination**: In some cases, the target company’s 401(k) plan is terminated, and employees are required to roll over their funds into the acquiring company’s plan or into individual retirement accounts (IRAs). - **Maintaining Separate Plans**: While less common, some companies may choose to maintain both plans separately for a period of time. This can simplify immediate administrative challenges but may create complexity in the long term. Each of these options comes with its own legal, financial, and administrative implications. Plan sponsors should collaborate with legal counsel and Watkins Ross retirement plan advisors to determine the best approach. ## 3. 401k Plans Compliance Considerations The regulatory environment surrounding [retirement plans](https://watkinsross.com/articles/categories/retirement-plans/) is stringent, and M&A activity can bring new compliance risks. Plan sponsors should be aware of the following: - **ERISA Requirements**: Any changes to the 401(k) plan post-merger must comply with the Employee Retirement Income Security Act (ERISA). This includes following fiduciary standards, maintaining fairness to participants, and avoiding conflicts of interest. - **IRS Rules**: Ensure that the plan(s) continue to meet IRS requirements for qualified retirement plans. This includes adherence to [contribution limits](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/), nondiscrimination rules, and tax-deferred status. - **Vesting Schedules**: Pay close attention to vesting schedules in the target company’s 401(k) plan. During a merger, employees may be fully vested in employer contributions, or the acquiring company may choose to honor the existing vesting schedule. Ensure any changes comply with plan documents and regulations. - **Plan Testing and Nondiscrimination**: After merging plans, you’ll need to conduct nondiscrimination testing to ensure that highly compensated employees do not disproportionately benefit from the plan. Failure to pass this test can lead to significant penalties and required plan corrections. ## 4. Communication with Employees Effective communication is an important element in managing a 401(k) plan during a merger or acquisition. Plan sponsors should develop a clear communication strategy to explain any changes to employees and address their concerns. ### Important Topics to Communicate about 401k Plans: - **Changes in Plan Structure**: Whether the plans will be merged, terminated, or maintained separately. - **Impact on Contributions and Matching**: Any changes to matching contributions or other plan features. - **Vesting and Rollovers**: How vesting schedules may change and what options employees have for rolling over their assets. - **Investment Options**: If the new plan offers different investment choices, educate employees on their options and the importance of reviewing their portfolios. Providing timely, clear information helps reduce confusion, keeps employees engaged, and demonstrates that their retirement savings are a priority for the company. ## 5. Handling Investment Options If the acquiring company decides to merge the 401k plans, there may be differences in investment options. For plan sponsors, the integration process will likely include reviewing both plans’ investment lineups to decide which funds to retain or replace. Plan sponsors should work closely with their Watkins Ross investment advisors to make sure the investment transition is handled smoothly and transparently. ## 6. Understanding Potential Cost Implications Merging 401(k) plans can be costly. Administrative, legal, and consulting fees can add up quickly, particularly if the process involves terminating a plan and rolling over assets. Additionally, plan sponsors may need to invest in new recordkeeping systems or amend plan documents to accommodate changes. ### Cost Factors Include: - Plan document restatements - Investment manager fees - Legal and compliance costs - Employee education and communication efforts A thorough cost-benefit analysis should be performed early in the planning process to evaluate how much the merger will cost versus maintaining separate plans or terminating one. ## 7. Fiduciary Responsibilities Post-Merger Once the merger or acquisition is complete, the fiduciary responsibilities associated with the 401(k) plan do not disappear. In fact, they may increase, as the new plan will now serve a larger pool of participants. Plan sponsors must continue to uphold their duties to act in the best interest of the participants, which includes monitoring plan fees, reviewing investment options, and ensuring compliance. ## Final Thoughts For plan sponsors, mergers and acquisitions bring significant challenges, especially when it comes to managing 401k plans. By conducting thorough due diligence, ensuring compliance, and maintaining clear communication with employees, sponsors can help ease the transition and protect the long-term retirement goals of their workforce. As you navigate the complexities of M&A transactions, partnering with the experienced legal and financial advisors at Watkins Ross is crucial to ensure that both the company and its employees are set up for success in the post-merger environment. It is important to communicate any potential M&A changes to your legal, investment and administration (TPA) team ahead of any such changes before paperwork is signed. This will ensure all parties can assist with these changes and guide you through the process for a smooth transition and avoid any complications. **Categories:** 401(k) Plans, Retirement Plans **Tags:** 401k Plans, Compliance, Retirement Plans --- ### [Tracking Payroll Deposits to a 401(k): A Guide for Plan Sponsors](https://watkinsross.com/articles/2024-09-30-tracking-payroll-deposits-to-a-401k-a-guide-for-plan-sponsors/) **Published:** September 30, 2024 **Author:** Watkins Ross Team **Excerpt:** Learn how to track 401(k) payroll deposits, ensure compliance, maintain employee trust, and avoid penalties with best practices and helpful strategies for plan sponsors. **Content:** As a plan sponsor, one of your key responsibilities is ensuring that employee payroll deposits are accurately and timely processed into your participants’ 401(k) accounts. While this may seem straightforward, tracking these deposits involves a range of considerations and diligent monitoring to ensure compliance, maintain employee trust, and avoid potential penalties. Read more to learn the importance of tracking payroll deposits, best practices for managing the process, and the tools and strategies that can help plan sponsors stay on top of their 401(k) deposit responsibilities. ## Why Tracking Deposits to 401(k) Matters 1. **Compliance with Regulatory Requirements**: The U.S. Department of Labor (DOL) and the Employee Retirement Income Security Act (ERISA) have strict guidelines regarding the timely remittance of employee contributions to their [401(k) plans](https://watkinsross.com/services/401k-plans/). Generally, these contributions must be deposited as soon as they can be reasonably segregated from the employer’s assets, but no later than the 15th business day of the following month. The Department of Labor provides a 7-business-day safe harbor rule for employee contributions to plans with fewer than 100 participants. Failure to comply with these timelines can result in fines and penalties, making tracking an essential task for plan sponsors. 2. **Ensuring Employee Trust and Satisfaction**: Employees expect their 401(k) contributions to be invested promptly so they can benefit from market gains. Delays in depositing these contributions can lead to missed investment opportunities and may reduce employee confidence in the retirement plan’s management. 3. **Maintaining Accurate Financial Records**: Regular and accurate tracking helps maintain the integrity of financial records, which is critical for annual audits, [Form 5500](https://watkinsross.com/articles/tags/form-5500/) filings, and other compliance requirements. It also helps prevent errors such as overpayments or missed contributions. ## Best Practices for Tracking 401(k) Payroll Deposits 1. **Automate Where Possible**: Leveraging payroll integration with your 401(k) service provider can help streamline the process of transmitting contribution data and remittances. Automated systems reduce the risk of human error and ensure contributions are deposited within the regulatory time frame. 2. **Set Up a Reconciliation Process**: Develop a reconciliation process to match payroll records with the contributions sent to the 401(k) plan. This involves verifying that the source (Pre -Tax or Roth) and amount deducted from employees’ paychecks matches the amount deposited into their accounts. This step is essential for catching discrepancies early. 3. **Maintain a Payroll Calendar**: Establish a payroll calendar that clearly outlines payroll processing dates, deposit deadlines, and other important tasks. This visual tool can help prevent missed deadlines and ensure all team members are aware of their responsibilities. 4. **Regularly Monitor Deposits and Perform Internal Audits**: Assign a dedicated team member or department to monitor 401(k) deposits regularly. This includes checking for timely deposits and ensuring they align with the amounts deducted from employees’ wages. Regular monitoring helps identify any issues before they escalate. 5. **Communicate with Service Providers**: Maintain open lines of communication with your 401(k) plan provider, payroll provider, and any third-party administrators. Regular communication ensures that any issues or discrepancies are quickly identified and resolved. Plan sponsors should also review the service agreements to understand the roles and responsibilities of each party. 6. **Prepare for Audits**: In the case of an audit, plan sponsors need to provide detailed documentation of payroll deductions and 401(k) deposits. Keeping meticulous records, including payroll reports, bank statements, and communication logs with providers, can help ensure a smooth audit process. Tracking payroll deposits to a 401(k) plan is an important responsibility for plan sponsors. Proper tracking not only ensures compliance with regulatory requirements but also builds trust with employees and helps maintain accurate financial records. By adopting best practices, leveraging technology, and maintaining clear communication with service providers, plan sponsors can effectively manage 401(k) deposits and minimize risks. By staying vigilant and proactive in managing 401(k) deposits, plan sponsors can provide a more secure and reliable [retirement savings plan](https://watkinsross.com/articles/categories/retirement-plans/) for their employees, fostering confidence and satisfaction in the workforce. **Categories:** 401(k) Plans **Tags:** 401k Plans, Retirement Plans --- ### [Catching Up to the New Age-Based Catch-Up Contribution Limits](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/) **Published:** August 30, 2024 **Author:** Watkins Ross Team **Excerpt:** Explore SECURE 2.0's new age-based catch-up contribution limits for 401(k), 403(b), and 457(b) plans starting January 1, 2025. **Content:** Effective January 1, 2025, participants who reach ages 60-63 by the end of the calendar year may be allowed to make additional catch-up contributions. This provision is optional; plans must adopt it as part of SECURE 2.0 to permit these extra catch-up contribution limits. A participant who reaches age 60 but not older than 63 by the end of the calendar year can benefit from the additional catch-up contribution if they have already met the maximum 402(g) deferral limit. Once the participant turns 63, the standard catch-up contribution limits for those aged 50 and over will apply starting from the calendar year in which they turn 64. If allowed by a [401(k)](https://watkinsross.com/services/401k-plans/), [403(b)](https://watkinsross.com/services/403b-plans/), or [457(b) Plan](https://watkinsross.com/services/457-plans/), the increased catch-up limit is the greater of $10,000 or 150% of the standard catch-up limit, with adjustments for cost of living by the IRS in $500 increments. While the 2025 catch-up limit is not yet known, the limit for 2024 is $7,500. For example, using 2024 limits in 2025 the catch-up limit could be $11,250 (150% x 7,500), plus the deferral limit of $23,000; bringing the total deferral to $34,250 but only for participants ages 60-63. Plan Sponsors will also need to consider the following if allowing for the optional increased catch-up limits: - Communicate to participants of the higher catch-up limits - Enrollment/Deferral agreement forms will need to be updated to reflect this option - Your payroll provider must have this functionality and be able to track eligible participants and allow for the increase in limits **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Retirement Plans **Tags:** 401k Plans, Retirement Plans --- ### [Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?](https://watkinsross.com/articles/2024-06-07-part-2-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-what-does-it-mean-that-a-plan-is-100-funded/) **Published:** June 7, 2024 **Author:** Watkins Ross Team **Excerpt:** Understanding what it means for a plan to be 100% funded and the implications for future benefits and contributions. **Content:** If you read the [introduction to this series](https://watkinsross.com/articles/2024-04-30-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets/ "Contributions To And Benefit Payments From Retiree Healthcare Plan Assets") last month, you might recall that we are looking at a series of questions intended to assist in making decisions about funding Retiree Healthcare plan assets and OPEB plans. This week we consider the question: ### What does it mean that a plan is 100% funded? Because the “value” of future retiree healthcare benefits is being recognized in exchange for employee service, the liability against which plan assets are being measured for funding purposes represents only that portion of future benefits attributed to past service. In other words, as an active employee continues to work for the plan sponsor, she/he “earns” more liability – more of a portion of the value of the future, retiree healthcare benefit. This additional liability is called the “service cost” or sometimes, “normal cost”. If a plan is 100% funded, it means assets are sufficient to cover benefits “earned” to date but doesn’t cover any portion of the value of future healthcare benefits that will be earned or credited to the employee with future service. Therefore, even a 100% funded plan can expect to have a recommended contribution equal to the “service cost” of the active employees. Christian Veenstra, ASA, FCA, MAAA, EA President, Watkins Ross Watkins Ross is a 100% Employee-Owned Consulting, Actuarial & Administrative Firm Providing Retirement Plan Services Read the rest of the OPEB series: - [Part 1: Contributions To And Benefit Payments From Retiree Healthcare Plan Assets](https://watkinsross.com/articles/2024-04-30-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets/ "Contributions To And Benefit Payments From Retiree Healthcare Plan Assets") - [Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/ "Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?") - [Part 4: Contributions and benefit payments from Retiree Healthcare Plan Assets – What other funding consideration should be kept in mind?](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/ "Part 4: OPEB Funding Considerations: Understanding Laws & Benefits") **Categories:** Other Post-Employment Benefits **Tags:** OPEB --- ### [Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets - If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/) **Published:** June 28, 2024 **Author:** Watkins Ross Team **Excerpt:** Learn about the considerations involved in funding OPEB plans and the importance of managing plan assets effectively. **Content:** If you have been following this [series](https://watkinsross.com/articles/2024-06-07-part-2-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-what-does-it-mean-that-a-plan-is-100-funded/), you will recall that we are looking at a series of questions intended to assist in making decisions about funding retiree Healthcare Plan aka OPEB plans. This week we consider the question: If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust? Yes. It is important to be aware of the types of investments held in the OPEB trust. Unless a portion of assets are already in a checking or other readily liquid account, if assets are not readily liquid – that is, not easily available from which to pay retiree healthcare benefits – care must be used when taking assets from the plan. Unrealized losses can quickly become realized if liquidating in a down market. Consult with your investment advisor to establish a strategy for paying benefits from plan assets. Changes in the investment strategy could result in lower-than-expected returns on investments that could impact the funded status of the plan and could require additional funding. Read the rest of the OPEB series: - [Part 1: Contributions To And Benefit Payments From Retiree Healthcare Plan Assets](https://watkinsross.com/articles/2024-04-30-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets/ "Contributions To And Benefit Payments From Retiree Healthcare Plan Assets") - [Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?](https://watkinsross.com/articles/2024-06-07-part-2-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-what-does-it-mean-that-a-plan-is-100-funded/ "Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?") - [Part 4: Contributions and benefit payments from Retiree Healthcare Plan Assets – What other funding consideration should be kept in mind?](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/ "Part 4: OPEB Funding Considerations: Understanding Laws & Benefits") **Categories:** Other Post-Employment Benefits **Tags:** OPEB --- ### [Part 4: OPEB Funding Considerations: Understanding Laws & Benefits](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/) **Published:** July 31, 2024 **Author:** Watkins Ross Team **Excerpt:** Explore essential funding considerations for OPEB plans in Part 4 of our series. Understand VEBA rules, state laws, and strategies for effective benefit payments. **Content:** If you have been following this [series](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/), you will recall that we are looking at a series of questions intended to assist in making decisions about funding OPEB plans. This week we consider the question: **What other funding considerations should be kept in mind?** For private employers funding the OPEB plan through a VEBA, there are deductibility rules to follow. For public employers, there might be state laws requiring a contribution equal to the service cost (cost of additional liability earned by active employees) and/or an amortization (payment) of the unfunded liability. Other laws such as Public Act 202 in the State of Michigan require that at minimum, the service cost (cost of additional liability) earned by active employees hired after June 30, 2018 be contributed in addition to paying current retiree benefits from general operating funds. The plan’s actuary can assist in navigating any funding requirements and consult on devising a benefit payment strategy that recognizes the cash flow and other budgeting considerations of the plan sponsor. Read the rest of the OPEB series: - [Part 1: Contributions To And Benefit Payments From Retiree Healthcare Plan Assets](https://watkinsross.com/articles/2024-04-30-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets/ "Contributions To And Benefit Payments From Retiree Healthcare Plan Assets") - [Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?](https://watkinsross.com/articles/2024-06-07-part-2-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-what-does-it-mean-that-a-plan-is-100-funded/ "Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?") - [Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/ "Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?") **Categories:** Other Post-Employment Benefits **Tags:** OPEB --- ### [Contributions To And Benefit Payments From Retiree Healthcare Plan Assets](https://watkinsross.com/articles/2024-04-30-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets/) **Published:** April 30, 2024 **Author:** Watkins Ross Team **Excerpt:** Discover payment strategies for Retiree Healthcare (OPEB) plans funded by OPEB trusts. Maximize future benefit payments for retirees. Learn more now **Content:** Many Retiree Healthcare Plan or (Other Post-Employment Benefit or OPEB) sponsors have established OPEB trusts to pre-fund future benefit payments for retirees. As these funds have accumulated substantial sums, plan sponsors are now considering payment strategies from those funds. Plan sponsors often have questions about the best time to use money from the OPEB trust to pay benefits, what it means for a plan to be 100% funded, and what is a good spend-down approach if the plan is closed to future hires/participants. They also wonder if the annual recommended contribution to the trust matters and how to coordinate or reconcile any recommended contribution with annual benefit payments. Each month we’ll look at one of those questions beginning next month with a response to the question: What does it mean that a plan is 100% funded? Stay tuned. - [Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?](https://watkinsross.com/articles/2024-06-07-part-2-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-what-does-it-mean-that-a-plan-is-100-funded/ "Part 2: Contributions to and benefit payments from Retiree Healthcare Plan Assets – What does it mean that a plan is 100% funded?") - [Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?](https://watkinsross.com/articles/2024-06-28-part-3-contributions-to-and-benefit-payments-from-retiree-healthcare-plan-assets-if-the-recommended-contribution-is-0-may-benefits-be-paid-from-the-opeb-plan-trust/ "Part 3: Contributions to and benefit payments from Retiree Healthcare Plan Assets – If the recommended contribution is $-0-, may benefits be paid from the OPEB plan trust?") - [Part 4: Contributions and benefit payments from Retiree Healthcare Plan Assets – What other funding consideration should be kept in mind?](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/ "Part 4: OPEB Funding Considerations: Understanding Laws & Benefits") Christian Veenstra, ASA, FCA, MAAA, EA President, Watkins Ross Watkins Ross is a 100% Employee-Owned Consulting, Actuarial & Administrative Firm Providing Retirement Plan Services **Categories:** Other Post-Employment Benefits **Tags:** OPEB --- ### [2024 Plan Limits Released](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) **Published:** January 22, 2024 **Author:** Watkins Ross Team **Excerpt:** The 2024 Cost-Of-Living Adjustments affecting employee benefit plans include the annual limits for Social Security Taxable Wage Base. **Content:** The IRS recently announced the 2024 Plan Limits increasing the annual 401(k)/403(b) participant deferral limit to $23,000. The Catch-up limit remains at $7,500 for the year. Review all of the [2024 Plan Limits](https://watkinsross.com/wp-content/uploads/2024-Cost-of-Living-Plan-Limits.pdf "2024 Cost-of-Living Plan Limits") here. If you have questions regarding the limits that apply to your plan, please contact your Watkins Ross team member. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Defined Benefit Plans, Employee Stock Ownership Plans, Profit Sharing Plans **Tags:** Plan Limitations --- ### [Guidance for Roth Employer Contributions](https://watkinsross.com/articles/2024-02-29-guidance-for-roth-employer-contributions/) **Published:** February 29, 2024 **Author:** Watkins Ross Team **Excerpt:** Explore Roth Employer Contributions under Secure 2.0 Act. Optional provision for plan sponsors. Consider implications for taxation and administration. **Content:** With the Secure 2.0 Act, you can now offer your participants in 401(k), 403(b) and 457(b) plans the option to treat their Roth employer contributions (match and nonelective) as Roth contributions. ### **Things to Consider if You’re a Roth Employer Contributions Plan Sponsor** This is an optional provision for plan sponsors. - Even if you currently allow Roth deferrals, you are not required to offer Roth Employer contributions. - You can offer this option even if your plan does not offer Employee Roth deferrals. - An employee must irrevocably elect Roth treatment for matching and nonelective contributions before they are allocated to their plan account. - Participants must be allowed to make or change the Roth designation for their future employer contributions at least once each plan year. - These contributions must be maintained in a separate designated Roth account for Employer Matching contributions or Employer Nonelective contributions. - Designated Roth match and nonelective contributions are not considered compensation but are includable in the employee’s taxable income when made, even if the contribution is deemed to have been attributed to the prior tax year. Designated Employer Roth contributions are reported on Form 1099-R for the year the contributions are allocated to the Participant’s account. - These contributions are not subject to FICA, FUTA, or federal income tax withholding. However, participants electing Roth treatment may need to adjust their tax withholding elections or make estimated payments to account for the tax due on these contributions. Sponsors may want to communicate this to their participants. - Only participants fully vested in matching or nonelective contributions when they are allocated can make a Roth designation for those contributions. This means that if there is a vesting schedule for employer contributions, the participant must have met the service to be fully vested before they can elect to have their employer contributions made on a Roth basis. - Minimum Distributions are not required from Roth accounts. - It does not appear that a separate 5-year waiting period for qualified distributions (you must also be age 59.5) is needed if the participant has already been making Roth deferrals to the Plan. - You will want to confirm the capabilities of your current payroll provider and your plan recordkeeper as they must be able to account for these contributions separately for tracking and taxation purposes. - You will need to draft Administrative procedures and a Participant election form if you elect to offer Roth Employer contributions. **Categories:** 401(k) Plans, 403(b) Plans **Tags:** 401k Plans, Employer Matching, Secure Act 2.0 --- ### [GASB Discount Rate Calculation - A Proposal For A Different Approach](https://watkinsross.com/articles/2019-09-04-gasb-discount-rate-calculation-a-proposal-for-a-different-approach/) **Published:** September 4, 2019 **Author:** Watkins Ross Team **Content:** You are tasked with determining an appropriate discount rate for determining the Net OPEB liability under the Governmental Accounting Standards Board Statement (GASB) Nos. 74/75 for a closed, underfunded retiree healthcare plan whose plan sponsor plans to make minimal if any future contributions to the existing OPEB trust. The plan sponsor will, however, continue to pay retiree healthcare payments from general operating funds. What is the appropriate discount rate? Is it 1. A rate that reflects the long term expected rate of return on the existing OPEB Plan investments 2. A tax-exempt, high quality municipal bond rate 3. A blend of the two rates in choices ‘A and ‘B’ Based on the limited information provided in this example one would be inclined to choose ‘C. A blend of the two rates’ as that would seem to meet the spirit of the GASB Standard. However, a literal interpretation of the Standard (and supported by GASB’s implementation Guide No. 2017-3) would lead one to conclude ‘A. A rate that reflects the long term expected rate of return on the existing OPEB Plan Investments’ so long as those funds are never used (or at least not to the extent they become depleted) to pay retiree healthcare benefits. While this approach would likely please the entity responsible for carrying an OPEB liability on the balance sheet, this interpretation is one that in my opinion runs contrary to the intent of GASB. Because, according to the GASB Implementation guide, “the determination of the results of an alternative approach in making the evaluation required are sufficiently reliable for \[the purpose of evaluating the sufficiency of future plan fiduciary net position to make projected benefits payments\] is subject to professional judgment” I propose the following: - Project future assets taking into account all appropriate distributions and contributions (per the current recommended approach) - Discount all payments from general operating funds (PVB) – whether or not the payment is considered a contribution to the trust, reimbursement to the trust of retiree benefit payment or direct payment of retiree healthcare costs or premiums – using the tax-exempt, high quality municipal bond rate - Choose the single rate such that the sum of all projected benefit payments discounted at this rate equals the sum of the discounted payments from general operating funds (PVFC) plus the market value of assets (MVA) used to pay benefits My rationale for using the market value of assets as a proxy for the sum of discounted projected benefit payments from these assets is that the market value of assets is implicitly the sum of the future benefit payments discounted at the long term expected rate of return only to the extent those future benefit payments come from plan assets and not general operating funds. And, to the extent that future contributions from general operating funds delay (or prevent) the depletion of plan assets – i.e. fund future benefit payments – under this approach the future benefit payments funded by those contributions will implicitly be discounted at the long term rate of return only while part of the OPEB trust and otherwise discounted at the tax-exempt rate from the time it was contributed from general operating funds. To illustrate, assume $5,000,000 initial plan assets, 7.0% long term rate of return and 3.0% bond rate, with benefit payments and contributions made at beginning of year; *projections only shown through year 20* ## Scenario 1 - No future contributions to the OPEB trust - future benefits funded on a pay-as-you-go basis ![Scenario 1](https://watkinsross.com/wp-content/uploads/Scenario-1-Copy.jpg "Scenario-1-Copy - Watkins Ross")Note: if payments are not taken from the trust in this example (assets not depleted) those assets would not be added to the Present Value of Future Contributions (as only assets used to pay benefit are included) and the average effective rate would be 3.0% ## Scenario 2 - Annual contribution to OPEB trust (or payment/reimbursement of benefit payments) of $800,000 per year for 15 years ![Scenario 2](https://watkinsross.com/wp-content/uploads/Scenario-2-Copy.jpg "Scenario-2-Copy - Watkins Ross")## Scenario 3 - Annual contribution necessary to cover the normal cost for current covered lives and level dollar amortization of the unfunded liability of the plan over 20 years assuming 7.0% annual return on plan assets ![Scenario 3](https://watkinsross.com/wp-content/uploads/Scenario-3-Copy.jpg "Scenario-3-Copy - Watkins Ross")One will notice that under the third scenario the single discount rate is less than 7.0% despite a funding policy to fully fund the plan. This is due to the need to reflect the financing of future contributions until such time as the plan is sufficient to pay benefits. The only time the long term rate of return will be the single rate used for determining the Net OPEB Liability would be when the plan is fully funded. This proposed approach reflects GASB’s stated intent that the “projections of the OPEB plan’s fiduciary net position … incorporate all cash flows for contributions from employers…, if any, intended to finance benefits of current active and inactive plan members.” It is my hope that GASB will reconsider its support of a method that, while consistent with a literal reading of the Standard, runs contrary to the intention that the “information about rates of return on OPEB plan investments will inform financial users about the effects of market conditions on the OPEB plan’s assets over time and provide information for users to assess the relative success of the OPEB Plan’s investments strategy and the relative contribution that investment earnings provide to the OPEB plan’s ability to pay benefits to plan members when they come due.” This blog was authored by [Christian R. Veenstra](mailto:cveenstra@watkinsross.com), President of Watkins Ross. **Categories:** Other Post-Employment Benefits **Tags:** GASB --- ### [An Explanation of 401(k) Plan Forfeitures, How and When They Should be Used](https://watkinsross.com/articles/2023-12-10-an-explanation-of-401k-plan-forfeitures-how-and-when-they-should-be-used/) **Published:** December 10, 2023 **Author:** Watkins Ross Team **Excerpt:** Discover the ins and outs of 401(k) plan forfeitures – when and how to leverage them effectively. Uncover the key insights for smart financial planning. **Content:** ## What Are Forfeitures? Forfeitures are non-vested employer contributions in Defined Contribution Plans when employer contributions are subject to a vesting schedule specified in the plan document, such as a 2/20 six-year graded or 3-year cliff vesting schedule. Participants earn vesting based on years-of-service; typically when working 1,000 hours in a plan year. ## When Do Forfeitures Occur? - A participant’s non-vested employer money is forfeited when they request a distribution from the plan due to termination of employment. ### Example: Susan terminates employment and requests a distribution shortly after her employment ends. She has $1,000 in employer match but only has two years of vested service. The employer match is subject to a 2/20 vesting schedule; therefore, she is only 20% vested. She is entitled to $200 of her employer match and the remaining $800 of match is forfeited. - A participant’s non-vested employer money is forfeited when they have five consecutive years of breaks-in-service. ### Example: John terminates employment on January 15, 2017, and never requests a distribution. He has $1,000 in employer profit sharing but only has two years of vested services. The employer profit sharing is subject to a 3-year cliff vesting schedule; therefore, he is 0% vested. On December 31, 2022, John incurred five consecutive years of breaks-in-service. He has no vested interest in her employer profit sharing and 100% of the account is forfeited. ## How Are Plan Forfeitures Used? Plan forfeitures can never revert back to the employer. The plan document specifies how forfeitures are used and can only be used for the specific plan purposes: - Reduce employer contributions - Pay plan expenses - Allocate as an additional employer contribution - Or a combination of any the above ## When Must Forfeitures Be Used? Most plan documents stipulate that forfeitures need to be used by the end of the plan year following the year that the forfeitures occurred. If forfeitures are not used by that date, it is considered an operational failure. The IRS noted back in 2010 forfeitures are to be exhausted during the year in which they are incurred, but no later than the end of the following plan year. In short, forfeitures should not accumulate and be left untouched. Recently the IRS has proposed regulations to clarify that the deadline is a requirement. The proposed regulations require that all forfeitures be used no later than 12 months following the end of the plan year in which the forfeitures occurred. The proposed regulations also provide a transition rule in which all prior forfeitures occurring before January 1, 2024 will be treated as having been incurred in the first plan year prior to 2024. This means all forfeitures that have accumulated and not been used prior to 2024 will need to be used by December 31, 2025 for calendar year plans. The regulations are proposed to be effective for plan years beginning on or after January 1, 2024 but may be relied upon now by plan sponsors. It is critical that you work with your plan administrator and/or recordkeeper to use any forfeitures as required to keep your plan in compliance. **Categories:** 401(k) Plans **Tags:** 401k Plans, Plan Forfeitures --- ### [New Audit Rules for 2023 5500 Forms](https://watkinsross.com/articles/2023-11-10-new-audit-rules-for-2023-5500-forms/) **Published:** November 10, 2023 **Author:** Watkins Ross Team **Excerpt:** Navigate the 401(K) 'Large Plan' Status: Understand the 80-120 Rule, Audit Requirements, and Changes for 2023. Ensure Compliance and Save Time **Content:** When a 401(K) plan has 100 or more eligible participants on the first day of the plan year, it’s considered a “large plan” for DOL and IRS reporting purposes. A large plan is required to complete a Form 5500 with more schedules and attach an audit report when filing the 5500. While 100 eligible participants is the general threshold for large-plan status, there is what is commonly referred to as the 80-120 rule. Plans that have between 80 and 120 eligible participants at the beginning of the plan year are permitted to file their Form 5500 in the same way they did the year prior. For example, a plan that had 70 participants on January 1, 2022 and filed as a small plan for 2022, and then grew to 115 participants by January 1, 2023, may elect to file as a small plan again—and avoid an audit—for the 2023 plan year. An audit would not be required in this example until the eligible participant count exceeded 120 as of the first day of a plan year. Prior to plan years beginning in 2023, the eligible participant count included active employees even if they have never elected to participate and don’t have an account balance. Former employees who have left their 401(k) funds in the plan are also included in the participant count. Therefore, it was possible for you to meet the audit requirement if you have, for example, 121 eligible participants as of January 1st, but only 50 with an account balance. For plan years beginning on or after January 1, 2023, only participants with an account balance at the beginning of the year (or the end of the year in the case of the first plan year) are counted for purposes of requiring an audit. Using the example above, if you have 121 eligible participants but only 50 with an account balance, you can now file a short form 5500 (5500-SF) and no audit will be required. This will begin with 2023 tax forms filed in 2024. If you are still close to the participant count threshold, consider looking at your terminated participants with account balances and make efforts to force out small account balances as your plan may allow. **Categories:** 401(k) Plans **Tags:** 401k Plans, Audit, Audits, Form 5500 --- ### [New Simplified Disclosure Rules for Plan Participants in DC Plans](https://watkinsross.com/articles/2023-10-17-new-simplified-disclosure-rules-for-plan-participants-in-dc-plans/) **Published:** October 17, 2023 **Author:** Watkins Ross Team **Excerpt:** Discover simplified disclosure rules for DC plan participants under SECURE 2.0. New options for plan sponsors explained. Effective Dec 31, 2022. **Content:** SECURE 2.0 has provided new options for plan sponsors when distributing notices to plan participants. Previously, all required notices must be distributed to all plan participants whether or not they had enrolled in the plan or had an account balance. Effective for plan years beginning after December 31, 2022, plan sponsors of defined contribution plans now have the option to forgo providing notices to those eligible but not participating and with no account balance, providing the following conditions are met: - Participants received a copy of the Summary Plan Description and all required notices when first becoming eligible for the plan. - Participants receive a separate annual notice reminding them of their eligibility for the plan. This notice must be provided within a reasonable period before the beginning of each plan year. - Participants must be provided any notices upon request. Although plan sponsors now have the option to exclude some participants from receiving certain notices, the task of segregating participants into two categories and tracking the notices may be too much of an administrative burden. It may just be easier to supply all notices to all participants. **Categories:** Plan Documents **Tags:** Plan Disclosures, Plan Documents, Secure Act 2.0 --- ### [Mandatory Roth Catch-Up Contributions – Another Secure Act 2.0 Provision](https://watkinsross.com/articles/2023-07-27-mandatory-roth-catch-up-contributions-another-secure-act-2-0-provision/) **Published:** July 27, 2023 **Author:** Watkins Ross Team **Excerpt:** Explore mandatory Roth catch-up contributions and vital insights for plan sponsors. Prepare for upcoming changes now. **Content:** The Secure Act 2.0 made an important change for both qualified 401(k) and 403(b) plans regarding catch-up contributions. Effective January 1, 2024, highly compensated participants earning over $145,000 in FICA wages during the prior calendar year (adjusted annually for cost-of-living) are required to make their catch-up contributions as Roth contributions. Plan Sponsors will need to make decisions on how to implement the Roth catch-up contributions in the plan document. The plan must allow for Roth contributions or amend the plan to allow for Roth contributions. If the plan does not allow for Roth contributions, highly compensated participants cannot make catch-up contributions. In addition, the plan must allow all eligible participants to make Roth catch-up deferrals. There are some concerns on Roth catch-up contributions that are awaiting guidance including: - It is not clear how these rules affect ADP test failures for contributions that are recharacterized as catch-up. - It is uncertain if the rules will allow for retroactive corrections to change pre-tax contributions to Roth contributions. The Department of Treasury has received requests to delay or provide immediate guidance. If there is no delay or guidance, Plan Sponsors will be required to operationally comply with the Roth catch-up provisions beginning January 1, 2024. Amendments for the operational provisions will not be required until later in 2025. It will be important that Plan Sponsors communicate these new rules with their employees and highly compensated participants that are catch-up eligible. Plan Sponsors should also coordinate with their payroll provider, recordkeeper and third-party plan administrator as soon as possible to update systems, understand responsibilities and facilitate the changes necessary to operationally comply with the Roth catch-up provision. **Categories:** 401(k) Plans, 403(b) Plans **Tags:** Government Regulation, Highly Compensated Employees, Plan Administration, Secure Act 2.0 --- ### [Required Minimum Distributions (RMDs)](https://watkinsross.com/articles/2023-09-07-required-minimum-distributions-rmds/) **Published:** September 7, 2023 **Author:** Watkins Ross Team **Excerpt:** Understand RMDs: Mandatory withdrawals from retirement accounts explained. Learn deadlines, calculations, exemptions. **Content:** ## What is an RMD? Required Minimum Distributions (RMDs) are minimum amounts that a retirement plan account owner must withdraw annually. If you are still actively employed with the employer that sponsors your retirement plan, you may waive taking your RMD. However, if the retirement plan account is an IRA or the account owner is a 5% or more owner of the business sponsoring the retirement plan, the RMDs must begin regardless of whether he or she is still working. Retirement plan participants and IRA owners are responsible for taking the correct amount of RMDs on time every year from their accounts. You may have to pay a 25% excise tax penalty (reduced from 50%) on the amount not distributed as required. This could be reduced to 10% if certain requirements are met. The RMD rules apply to all employer sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs, IRA-based plans. Roth 401(k) accounts will be exempt from the RMD rules beginning in 2024. The RMD rules do not apply to Roth IRAs while the owner is alive. ## When am I required to begin taking RMDs? You must take your RMD for the year in which you turn your RMD age. A participant may take the first RMD as late as April 1 of the year following the year of the RMD age. For all subsequent years you must take the RMD annually by December 31. If you delay your first RMD distribution until April 1, you will be required to take a second RMD by December 31 of that same year. All years thereafter will only require one RMD to be taken by December 31. Date of Birth**RMD Age**Before July 1, 194070 1/27/1/1949-12/31/1950721/1/1951-12/31/195973After 1/1/196075## What are my options for taking my RMD? Your retirement plan will determine if you have the ability to receive this in one lump-sum annually or in installments through the year; please check with your Plan Administrator for details on this. If you have money in more than one plan, you must take the RMD from each plan separately (qualified plans and IRAs have different rules). RMD’s are not eligible to be rolled over into another plan or IRA account. ## How is my RMD calculated? The required minimum distribution is determined by taking the prior account balance as of December 31 and divided by a life expectancy factor published by the IRS. You may access worksheets and tables on the IRS website at: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions. Your Plan Administrator may provide you the current RMD amount however the account owner is ultimately responsible for calculating and taking the RMD. ## IRS Provides Guidance and Relief Secure Act 2.0 modified RMD rules that delayed RMDs for 401(k), 403(b) and 457(b) plans. The change created a delay in the Required Beginning Date for those participants born in 1951 that would turn age 72 in 2023. Under Secure Act 1.0 those participants would have had a required beginning date of April 1, 2024. Then came along Secure Act 2.0. Secure Act 2.0changed the RMD age to 73. Consequently, this caused a one-year delay in RMDS for participants born in 1951 and would have a Required Beginning Date of April 1, 2025. Due to the delay, this created a situation for those participants born in 1951 because recordkeepers and financial institutions already began processing auto-mated RMDS for participants based on Secure Act 1.0. Two problems occurred with this situation: - Due to the change in the Required Beginning Date for participants born in 1951, there was no RMD due (unless the RMD was otherwise required under the plan document). - Also, the distribution violated the terms of the plan document because there was not an RMD due. Therefore, the distribution was not treated as eligible for rollover and the 20% mandatory federal tax withholding was not withheld. On July 14, 2023, the IRS granted a transitional relief for RMDS for those participants born in 1951 and that have already received an RMD: - The IRS is allowing the 60-day rollover rule for RMDs processed from January 1, 2023 to July 31, 2023 for participants born in 1951. Those affected participants (including a participant’s surviving spouse) will have until September 30, 2023 to rollover their “mischaracterized RMDs”. This also allows the participant to rollover the distributed funds back into the plan. - Plans will not be penalized for failing to treat the distributions as eligible for rollover. The notice does not cover if the plan sponsor is responsible for notifying the affected participants about the mischaracterized RMD and the extended rollover deadline date. If participants are not notified, they may not find out about this window of opportunity to rollover their mischaracterized RMD. **Categories:** 401(k) Plans, 403(b) Plans, 457 Plans, Profit Sharing Plans, Retirement Plans **Tags:** Compliance, Government Regulation, IRA, Required Minimum Distributions (RMDs) --- ## Pages ### [Home](https://watkinsross.com/) **Published:** December 12, 2022 **Author:** Watkins Ross Team **Excerpt:** Watkins Ross is a 100% employee owned consulting, actuarial and administration firm based in Grand Rapids, MI providing retirement & health plans. **Content:** ###### 100% Employee-Owned # Watkins Ross Consulting, Actuarial & Administration Firm Providing Retirement Plan Services in Grand Rapids, MI [Discover Our Services](https://watkinsross.com/services/) [Meet Our Team](https://watkinsross.com/about-our-firm/#our-team) ![Watkins Ross team members photo](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "WATKINS-ROSS-TEAMcropped+sized - Watkins Ross") ## Who We Are Watkins Ross is a dedicated team of actuaries, consultants, and retirement plan professionals. We’re ready to help you administer a retirement plan designed to meet your corporate objectives and help you navigate the complex world of health benefits offered to your employees. ## Start Optimizing Your Retirement Plans Today: Let us know your business’ needs, and we will reach out to begin discussing more details shortly. Select Reason for Contact401(k) PlansEmployee Stock Owned Plans (ESOPs)Defined Benefit PlansCash Balance PlansDefined Contribution PlansOther Post-Employment Benefits (OPEBs)Other This site is protected by reCAPTCHA and the Google [Privacy Policy](https://policies.google.com/privacy) and [Terms of Service](https://policies.google.com/terms) apply. 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[About Our Approach](https://watkinsross.com/about-our-firm/) [Read the Latest From Our Team](https://watkinsross.com/articles/) ![We care about your success, because, together, we value ours](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "100% Employee Owned Consulting Firm - Watkins Ross") ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### DB Calendar [Defined Benefit Compliance Calendar](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross-2.pdf)  ##### DC Calendar [Defined Contribution Compliance Calendar](https://watkinsross.com/wp-content/uploads/WR_Compliance_Calendar-1-2.pdf)  ##### Guide [Cost of Living Plan Limitations](https://watkinsross.com/cola-chart-2025/)  ##### Checklist [Reporting & Disclosure Requirements](https://watkinsross.com/wp-content/uploads/reporting-disclosure-requirements-watkins-ross-2.pdf) #### Scott C. said: “I’ve had the pleasure of working with Watkins Ross for the past several years and can’t say enough about their professionalism and service. If you are looking for a TPA that is proactive, detailed and resourceful, look no further. Make the call.” ## What can we help you with? [401(k) Plans](https://watkinsross.com/services/401k-plans/) [403(b) Plans](https://watkinsross.com/services/403b-plans/) [457 Plans](https://watkinsross.com/services/457-plans/) [Cash Balance Plans](https://watkinsross.com/services/cash-balance-plans/) [Defined Benefit Plans](https://watkinsross.com/services/defined-benefit-plans/) [Employee Stock Ownership Plans](https://watkinsross.com/services/employee-stock-ownership-plans/) [Multiemployer Plans](https://watkinsross.com/services/multiemployer-plans/) [Non-Qualified Plans](https://watkinsross.com/services/non-qualified-plans/) [Plan Documents](https://watkinsross.com/services/plan-documents/) [Profit Sharing Plans](https://watkinsross.com/services/profit-sharing-plans/) [Calculation of IBNR Reserves](https://watkinsross.com/services/calculation-of-ibnr-reserves/) [Other Post-Employment Benefits](https://watkinsross.com/services/other-post-employment-benefits/) [Contact Us to Get Started!](https://watkinsross.com/contact/) --- ### [Terms of Service](https://watkinsross.com/terms-of-service/) **Published:** December 15, 2022 **Author:** Watkins Ross Team **Excerpt:** By registering with, accessing, or otherwise using this website, you hereby agree to be bound by these Terms and conditions set forth here. **Content:** Please wait while the policy is loaded. If it does not load, please [click here to view the policy](https://policies.termageddon.com/api/policy/Wmt0alRGaENUVXBrUTJodk0wRTlQUT09). --- ### [Opt-Out Preferences](https://watkinsross.com/opt-out-preferences/) **Published:** December 14, 2022 **Author:** Watkins Ross Team **Excerpt:** Our website uses cookies. Learn more about which cookies we use and why here. You may also opt out of our usage of cookies if you prefer! **Content:** Please wait while the policy is loaded. If it does not load, please [click here to view the policy](https://policies.termageddon.com/api/policy/TDFGclJYWTBOMDkxWW5kMVFtYzlQUT09). --- ### [Privacy Policy](https://watkinsross.com/privacy-policy/) **Published:** December 12, 2022 **Author:** Watkins Ross Team **Excerpt:** Watkins Ross is committed to protecting your privacy. Please read to understand how your personal information will be treated when you use this site. **Content:** Please wait while the policy is loaded. If it does not load, please [click here to view the policy](https://policies.termageddon.com/api/policy/YTIxV2QwMVpWbWhJUW1aRGJWRTlQUT09). --- ### [Cash Balance Plans](https://watkinsross.com/services/cash-balance-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Cash balance plans are defined benefit plans that specify the benefit as a hypothetical account balance, popular with professional service corporations. **Content:** #### Retirement Plan Services # Cash Balance Plans [Get Started Today!](#cta)  Certain defined contribution plans are only available to certain types of employers. State and local governmental employers, along with certain non-profits, can establish **457 plans**. A 457 plan is a non-qualified, tax-advantaged plan established for your employees. Some rules applicable to 457 plans are similar to 401(k) plans, however other rules differ. It’s important to understand the terms of your 457 plan and how to best design it to meet your employees’ needs. ## Cash Balance Plans with Watkins Ross High-income earners that have been maxing out their profit sharing or 401(k) contributions but want to save more for retirement are good candidates for a CBP: - Professional Service Groups (Ex. Medical Practice Groups) - Multi-Generational Family Owned Businesses - Single Member S-Corporations Taking Large S-Corporation Distributions In a CBP, the hypothetical account is credited with a principal credit and an interest credit each year, as defined by the plan document. Since these are pension plans, CBPs are required to allow an annuity form of payment, but the standard payment form is a lump sum equal to the participant’s hypothetical account balance. Watkins Ross has been designing and administering cash balance plans to provide strategically targeted benefits and increased tax-deferred savings since 1999. We allocate resources specifically to cash balance administration and make it a primary focus of our business including personnel, technology and education resources. Our [Cash Balance Plans Brochure](#cbp-brochure) includes additional information. Our expert team can help you determine the best plan design to achieve your corporate goals and better prepare your employees for retirement. [3](#cta) ### [Get Started Today](#cta) Contact Watkins Ross using the form below if you have questions or would like help determining if you should implement a Cash Balance Plan. Name Phone Number Email Address Message 12 + 6 = Submit #### To start your cash balance plan today or for additional questions regarding your cash balance plan, please contact: ![David Paauwe | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "David Paauwe | Watkins Ross - Watkins Ross") ## David Paauwe ###### President [Contact David Today](mailto:dpaauwe@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Checklist [Is Your Business A Good Candidate for a Cash Balance Plan?](https://watkinsross.com/wp-content/uploads/Cash-Balance-Plan-Checklist-1.pdf)  ##### Brochure [Cash Balance Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_Cash-Balance-Brochure-2.pdf)  ##### Article [Cash Balance Plan Considerations](https://watkinsross.com/articles/2019-06-20-cash-balance-plan-considerations/) #### Related Articles ## Cash Balance Plans [All Articles](https://watkinsross.com/articles/) [![Cash Balance Plans – Pitfalls of Using an Investment Rate of Return as the Plan’s Interest Crediting Rate](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2019-10-28-cash-balance-plans-pitfalls-of-using-an-investment-rate-of-return-as-the-plans-interest-crediting-rate/) ##### [Cash Balance Plans – Pitfalls of Using an Investment Rate of Return as the Plan’s Interest Crediting Rate](https://watkinsross.com/articles/2019-10-28-cash-balance-plans-pitfalls-of-using-an-investment-rate-of-return-as-the-plans-interest-crediting-rate/) Oct 28, 2019 | [Cash Balance Plans](https://watkinsross.com/articles/categories/cash-balance-plans/) There are a number of potential issues a plan sponsor may face if they use the investment rate of return as the plan’s interest crediting rate. [read more](https://watkinsross.com/articles/2019-10-28-cash-balance-plans-pitfalls-of-using-an-investment-rate-of-return-as-the-plans-interest-crediting-rate/) --- ### [Defined Benefit Plans](https://watkinsross.com/services/defined-benefit-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Defined benefit (DB) plans are retirement plans that provide a specific benefit to eligible participants in the plan at their retirement date. **Content:** #### Retirement Plan Services # Defined Benefit Plans [Get Started Today!](#cta)  A defined benefit (DB) plan is a retirement plan that provides a specific benefit to eligible participants in the plan at their retirement date. The benefit paid at retirement is based on a formula in the plan document, and not on the asset performance. DB plans are usually funded entirely by the sponsoring employer, although certain plans do require employee contributions. Like other qualified plans, DB plans offer tax incentives to employers and participating employees. ## Defined Benefit Plans with Watkins Ross Defined benefit plans are subject to minimum funding requirements that must be certified by an actuary each year. It’s important that you to understand the rules/regulations governing the ongoing administration of your plan so that it remains in compliance with the IRS and other federal laws. Your team at Watkins Ross works with you to make sure you are aware of the rules and upcoming deadlines to maintain compliance and avoid costly penalties. Many employers have previously frozen or partially frozen their defined benefit plans and are looking at additional ways to reduce their pension plan risk. These actions employ strategies to lessen a plan’s sensitivity to factors such as market swings, improvements in life expectancy, PBGC premiums, pension legislative changes, changes in tax code, and other unforeseen events. Each approach requires careful consideration of the benefits and trade-offs such as cost, tax advantages, philosophical positions, administration, time horizon, etc. with regard to the particular pension plan and its company sponsor. Watkins Ross has the expertise and resources to assist you and your advisors in exploring how these opportunities. At Watkins Ross, we partner with you to clearly define your objectives to make sure your plan is operating in alignment with your corporate goals. We are not only experienced in administration and consulting for defined benefit plans, but we also clearly communicate the regulations so that you can focus on the success of your business. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in customized retirement plans. #### To start your defined benefit plan today or for additional questions regarding your defined benefit, please contact: ![Troy Schnabel | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Troy Schnabel | Watkins Ross - Watkins Ross") ## Troy Schnabel ###### Enrolled Actuary [Contact Troy Today](mailto:tschnabel@watkinsross.com) “First State Bank has used the services of Watkins Ross & Co since 1987. One of the best business relationships that I have experienced since joining the bank in 1978. Their support of both our original pension plan and current 401(k) has been exceptional and has made my administration of these benefits as simple as possible. Their team is the best!” **– James C.** President and CEO First State Bank of Decatur ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Calendar [Defined Benefit Compliance Calendar](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross-2.pdf)  ##### Article [Reducing Pension Plan Risk](https://watkinsross.com/articles/2019-03-10-reducing-pension-plan-risk-updated-to-reflect-irs-notice-2019-18/)  ##### Article [Retirement and Gig Workers](https://watkinsross.com/wp-content/uploads/retirement-policypaper-GigWorkers9.9.25.pdf) #### Related Articles ## Defined Benefit Plans [All Articles](https://watkinsross.com/articles/) [![2024 Plan Limits Released](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) ##### [2024 Plan Limits Released](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) Jan 22, 2024 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/), [457 Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/457-plans/), [Defined Benefit Plans](https://watkinsross.com/articles/categories/defined-benefit-plans/), [Employee Stock Ownership Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/employee-stock-ownership-plans/), [Profit Sharing Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/profit-sharing-plans/) The 2024 Cost-Of-Living Adjustments affecting employee benefit plans include the annual limits for Social Security Taxable Wage Base. [read more](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) --- ### [401(k) Plans](https://watkinsross.com/services/401k-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** At Watkins Ross, we partner with you to clearly define your objectives and create 401(k) plans that will be successful for your business. **Content:** #### Retirement Plan Services # 401(k) Plans [Get Started Today!](#cta)  A 401(k) plan is one of the most commonly known retirement saving plans sponsored by an employer. A 401(k) plan allows your employees to set aside money from their paycheck and invest it in the market. You can offer them the option to defer taxes on their account until retirement (pre-tax contributions) or pay the taxes upfront (Roth contributions) to withdrawal the money tax-free in retirement. ## 401(k) Plans with Watkins Ross It’s a great option for employers because you will receive additional tax deductions while encouraging your employees to prepare for retirement. Employers may choose to match employee contributions or make a profit sharing contribution to the plan. Matching contributions are based on the amount an employee contributes, but Profit Sharing contributions may be made regardless of whether the employee is deferring into the plan. **What are your goals as an employer?** To provide a comprehensive retirement plan as part of your benefits package that is competitive in your industry? To take advantage of tax breaks available to your company? To save more for your own retirement as a business owner? At Watkins Ross, we partner with you to clearly define your objectives and create the 401(k) plan that will be successful for your business. Our team members are experienced experts in plan design, development and advanced compliance testing methods that allow you the optimal flexibility in the administration of your plan. We will communicate the complex 401(k) regulations in an easy to understand manner to your team so they can perform their roles with success. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in customized retirement plans. #### To start your 401(k) plan today, or for additional questions regarding your 401(k), please contact: ![Chris Scharf](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Scharf - Watkins Ross") ## Chris Scharf ###### DC Department Manager [Contact Chris Today](mailto:cscharf@watkinsross.com) #### Mike B. said: “There has been no one among our professional providers over the last nearly 20 years that matches Pat Curtis at Watkins Ross. Every single interaction with her has been professional, beneficial, and enjoyable. I know there are others at the firm that back her up in delivering such outstanding service, but words cannot describe her reliability, accuracy, and dedication to client service year after year. She should be considered a treasure by her colleagues in how she performs her customer service.” ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### DC Calendar [Defined Contribution Compliance Calendar](https://watkinsross.com/wp-content/uploads/WR_Compliance_Calendar-1-2.pdf)  ##### Blog Post [What a Failed ADP/ACP Test Means](https://watkinsross.com/articles/2018-02-12-what-a-failed-adp-acp-test-means/) #### Related Articles ## Maximize Your 401(k) [All Articles](https://watkinsross.com/articles/) [![What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) ##### [What Is a Third-Party Administrator (TPA)? A Guide for 401(k) Plan Sponsors](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) Jul 27, 2026 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Sponsoring a defined contribution plan like a 401(k) is an excellent way to attract and retain employees, but it also... [read more](https://watkinsross.com/articles/2026-07-27-what-is-a-third-party-administrator-tpa/) --- ### [Thank You!](https://watkinsross.com/thank-you/) **Published:** March 3, 2023 **Author:** GreenCup.Kendra **Content:** - [616-456-9696](tel:+16164569696) - [Message Us](https://watkinsross.com/contact/) --- ### [457 Plans](https://watkinsross.com/services/457-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** State & local governmental employers can establish 457 plans that are non-qualified, tax-advantaged plans established for your employees. Start a 457 plan! **Content:** #### Retirement Plan Services # 457 Plans [Get Started Today!](#cta)  Certain defined contribution plans are only available to certain types of employers. State and local governmental employers, along with certain non-profits, can establish **457 plans**. A 457 plan is a non-qualified, tax-advantaged plan established for your employees. Some rules applicable to 457 plans are similar to 401(k) plans, however other rules differ. It’s important to understand the terms of your 457 plan and how to best design it to meet your employees’ needs. ## 457 Plans with Watkins Ross Although many employers in these sectors are familiar with 457 plans, many are not aware of how to leverage the plan to meet their employees’ goals. Similar to a 401(k) plan, you can elect to allow employees to defer money into a 457 plan on a pre-tax or after-tax basis; plus the employer can contribute to the plan. However, the plan limits applicable to the total contributions made are handled differently than a 401(k) plan. For example, both types of plans allow for catch up contributions, but 457 plans also feature a “Double Limit Catch-up” provision. This feature is designed to allow participants who are nearing retirement to compensate for years when they were eligible but didn’t contribute to the plan. At Watkins Ross, we partner with you to clearly define your objectives and ensure you are setting up the ‘right’ retirement savings plan for your business. With the complex rules governing 457 plans, we clearly communicate the regulations so that you can focus on the success of your business. The Watkins Ross team consults on retirement plan designs, administration and consulting for 457 plans. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in customized retirement plans. #### To start your 457 plan today, or for additional questions regarding your 457 plan please contact ![David Bosch | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "David Bosch | Watkins Ross - Watkins Ross") ## David Bosch ###### Consultant [Contact David Today](mailto:dbosch@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Guide [Cost of Living Plan Limitations](https://watkinsross.com/cola-chart-2025/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## 457 Plans [All Articles](https://watkinsross.com/articles/) [![Catching Up to the New Age-Based Catch-Up Contribution Limits](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/) ##### [Catching Up to the New Age-Based Catch-Up Contribution Limits](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/) Aug 30, 2024 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/), [457 Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/457-plans/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Explore SECURE 2.0’s new age-based catch-up contribution limits for 401(k), 403(b), and 457(b) plans starting January 1, 2025. [read more](https://watkinsross.com/articles/2024-08-30-catching-up-to-the-new-age-based-catch-up-contribution-limits/) --- ### [403(b) Plans](https://watkinsross.com/services/403b-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Public school systems, hospitals, and certain 501(c)(3) tax-exempt organizations can establish ERISA 403(b) plans, also known as a tax sheltered annuity. **Content:** #### Retirement Plan Services # 403(b) Plans [Get Started Today!](#cta)  Certain defined contribution plans are only available to certain types of employers. Public school systems, hospitals, and certain 501(c)(3) tax-exempt organizations can establish an ERISA **403(b) plan**, also known as a tax sheltered annuity. Although the rules governing an ERISA 403(b) plan are very similar to those governing a 401(k) plan, it’s important to understand the terms of your plan and how to best design it to meet your employees’ needs. ## 403(b) Plans with Watkins Ross In an ERISA 403(b) plan, you can elect to allow employees to defer money on a pre-tax or after-tax basis. Similar to a 401(k) plan, participants are subject to a 10% early withdrawal penalty if they withdrawal the funds before reaching age 59.5. Although the annual contribution limits may be the same as in a 401(k) plan, an ERISA 403(b) plan may also allow some participants with at least 15 years of service to contribute additional funds to their plan. Although many employers in these sectors are familiar with an ERISA 403(b) plan, many aren’t aware of the options available to leverage the plan to meet their goals. At Watkins Ross, we partner with you to clearly define your objectives and ensure you are setting up the ‘right’ retirement savings plan for your business. The Watkins Ross team consults on retirement plan designs, administration and other components for ERISA 403(b) plan. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in customized retirement plans. #### For additional 403(b) questions please contact ![Chris Scharf](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Scharf - Watkins Ross") ## Chris Scharf ###### DC Department Manager [Contact Chris Today](mailto:cscharf@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Guide [Cost of Living Plan Limitations](https://watkinsross.com/cola-chart-2025/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## 403(b) Plans [All Articles](https://watkinsross.com/articles/) [![Your Guide to 2026 Elective Deferral Limits](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2026-03-03-your-guide-to-2026-elective-deferral-limits/) ##### [Your Guide to 2026 Elective Deferral Limits](https://watkinsross.com/articles/2026-03-03-your-guide-to-2026-elective-deferral-limits/) Mar 3, 2026 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/), [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) Each year the IRS sets limits on the amount an individual can contribute (known as income they defer) through elective... [read more](https://watkinsross.com/articles/2026-03-03-your-guide-to-2026-elective-deferral-limits/) --- ### [Advisor Relations](https://watkinsross.com/advisor-relations/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** Watkins Ross is committed to our partnerships with Financial Advisors. Our diverse skill set enables us to consult on retirement & health plans! **Content:** #### Leverage Our Expertise, Set the New Standard # Advisor Relations [Download Our Brochure](https://watkinsross.com/set-the-new-standard_rev/) ## Financial Advisor Partnerships Watkins Ross is committed to our partnerships with Financial Advisors. Our diverse skill set enables us to consult on various retirement and health plan related concerns. We work with you to provide the highest levels of retirement plan and health actuarial services. Teaming with WR can help you increase client retention, enhance service offerings, grow your business and beat your competition by setting a new standard of service for Plan Sponsors. > ### Increase Client Retention WR teams up with Financial Advisors, providing a unified front to Plan Sponsors. We work together to develop the best solutions to meet plan needs. This team approach builds trust and loyalty with Plan Sponsors, increasing client retention.  ### Enhanced Service Offerings Leverage our expertise to offer additional value to Plan Sponsors and participants. Whether there are questions regarding another type of plan or if you’d like a member of the WR team to join you at enrollment meetings to offer additional education to participants, our knowledge and expertise can be utilized to enhance your service offerings.  ### Grow Your Business Utilizing our expertise in plan design and other consulting areas allows you to spend your time focused on what you do best: GROWING. YOUR. BUSINESS.  ### Beat Your Competition Through a partnership with WR, your enhanced service offerings and available time to focus on growing your business will give you an advantage over your competition. ## What can we help you with? [401(k) Plans](https://watkinsross.com/services/401k-plans/) [403(b) Plans](https://watkinsross.com/services/403b-plans/) [457 Plans](https://watkinsross.com/services/457-plans/) [Cash Balance Plans](https://watkinsross.com/services/cash-balance-plans/) [Defined Benefit Plans](https://watkinsross.com/services/defined-benefit-plans/) [Employee Stock Ownership Plans](https://watkinsross.com/services/employee-stock-ownership-plans/) [Multiemployer Plans](https://watkinsross.com/services/multiemployer-plans/) [Non-Qualified Plans](https://watkinsross.com/services/non-qualified-plans/) [Plan Documents](https://watkinsross.com/services/plan-documents/) [Profit Sharing Plans](https://watkinsross.com/services/profit-sharing-plans/) [Calculation of IBNR Reserves](https://watkinsross.com/services/calculation-of-ibnr-reserves/) [Other Post-Employment Benefits](https://watkinsross.com/services/other-post-employment-benefits/) [Contact Us to Get Started!](https://watkinsross.com/contact/) --- ### [Make a Payment](https://watkinsross.com/pay/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** Access our easy & secure online payment portal here. We accept ACH transfers and credit cards. We appreciate your business! **Content:** # Make a Payment ###### Access our easy & secure online payment portal [Open Payment Portal](https://link.zixcentral.com/u/22a6dfdc/Onio7Ssf7RGOzHjO-uoD4Q?u=https%3A%2F%2Fqsop.quickfee.com%2F%23%2Fcompany%2Fquickfeeus%2Ffirm%2FWATKINSR) ###### We Accept:  ### ACH Bank Transfer Securely transfer your funds from your bank account with no additional fees.  ### Credit Card A 3% processing fee will be applied to all credit card transactions. ***Unfortunately, we cannot accept d******ebit cards.*** --- ### [Other Post-Employment Benefits](https://watkinsross.com/services/other-post-employment-benefits/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Other Post-Employment Benefits (OPEB) provide retirement benefits other than pensions – typically health, life, disability. **Content:** #### Health Plan Services # Other Post-Employment Benefits [Get Started Today!](#cta)  An Other Post-Employment Benefit (OPEB) plan is a plan that provides retirement benefits other than pensions – typically health, life, disability not covered by a pension plan, legal or other services. OPEB benefits are often used to encourage employment until retirement as they are usually not vested benefits and can be a way of defraying high medical costs or medical costs not otherwise covered by Medicare. ## Other Post-Employment Benefit Plans (OPEB) With Watkins Ross Rising healthcare costs make it more challenging for workers to retire since leaving employment often means losing healthcare coverage. Many employers have offered OPEB plans to employees as a way to continue to provide healthcare coverage during retirement – at least until Medicare eligibility. The Financial Accounting Standards Board (FASB) – an accounting standard setting body for private employers – and the Government Accounting Standards Board (GASB) – the comparable body for public employers – have established rules for how employers must recognize the costs of these benefits for financial reporting purposes. These standards require actuarial calculations to determine financial liabilities associated with OPEB plans. Recently, those same rising healthcare costs that make OPEB plans attractive to employees, however, have made it increasingly difficult – if not impossible – for OPEB plan sponsors to continue to provide that type of coverage. As a results, many OPEB plan sponsors are looking for ways to either lower their OPEB liability or eliminate it altogether. Watkins Ross not only has the expertise required to determine your OPEB liability for financial reporting purposes but we also have experience and resources to assist you in identifying ways to manage those liabilities. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in OPEB valuations and plan designs. #### To start your OPEB plan today, or for additional other post-employment benefit questions please contact ![Chris Veenstra | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Veenstra | Watkins Ross - Watkins Ross") ## Christian Veenstra ###### President [Contact Christian Today](mailto:cveenstra@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/)  ##### Article [GASB Discount Rate Calculation](https://watkinsross.com/articles/2019-09-04-gasb-discount-rate-calculation-a-proposal-for-a-different-approach/) #### Related Articles ## Other Post-Employment Benefit Plans [All Articles](https://watkinsross.com/articles/) [![Part 4: OPEB Funding Considerations: Understanding Laws & Benefits](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/) ##### [Part 4: OPEB Funding Considerations: Understanding Laws & Benefits](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/) Jul 31, 2024 | [Other Post-Employment Benefits](https://watkinsross.com/articles/categories/other-post-employment-benefits/) Explore essential funding considerations for OPEB plans in Part 4 of our series. Understand VEBA rules, state laws, and strategies for effective benefit payments. [read more](https://watkinsross.com/articles/2024-07-31-part-4-contributions-and-benefit-payments-from-retiree-healthcare-plan-assets-what-other-funding-consideration-should-be-kept-in-mind/) --- ### [Calculation of IBNR Reserves](https://watkinsross.com/services/calculation-of-ibnr-reserves/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** At Watkins Ross, we apply multiple models to determine unpaid claim liabilities. Calculate your incurred but not reported (IBNR) reserves today! **Content:** #### Health Plan Services # Calculation of IBNR Reserves [Get Started Today!](#cta)  Incurred But Not Reported (IBNR) reserves or liability is an estimate of the value of the unpaid portion of medical and/or prescription drug claims that have been incurred during the current and prior periods but have not yet been reported or have been reported but are unpaid as of the reporting date. When calculating this liability, we consider factors that could influence the timing and reporting of your claim activity. ## Calculations of Incurred But Not Reported (IBNR) Reserves with Watkins Ross At Watkins Ross, we apply multiple models to determine unpaid claim liabilities. Most often utilized is a form of the claim triangle or lag method. In addition, historical payment patterns are observed in order to detect any irregularities that might be occurring that would suggest an adjustment is needed to the reserve otherwise determine by the formula. In addition to gathering claim information, we will consider plan, provider or other personnel changes that might have occurred that would impact claim processing. Average monthly claim experience will be calculated and compared with reserve estimates for reasonableness as well. Finally, a margin is added to allow for any unforeseen claim experience that actuarial approaches might otherwise have missed or not anticipated. As claim run-out becomes available, we compare IBNR calculations retroactively and inform you of any recommended adjustments. The IBNR report includes a description of the method used to determine the IBNR, the data and source of data reconciliation of prior year’s IBNR calculations and actual run-out to the current year as well as year-over-year comparisons. External factors such as extreme weather events can delay processing so, if considered in the calculations, would be disclosed as well. We review the results with you and, if necessary or desired, with the audit teams once the results of the calculations and report are completed. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for an experienced actuarial team to complete your IBNR calculations. #### To start your calculation of incurred but not reported reserves, or for additional questions regarding IBNR please contact: ![Chris Veenstra | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Veenstra | Watkins Ross - Watkins Ross") ## Christian Veenstra ###### President [Contact Christian Today](mailto:cveenstra@watkinsross.com) #### Becky B. said: “Watkins Ross is among most reliable and knowledgeable vendors that we work with. Their team is highly professional and has always been very responsive to our needs and requests. We strongly recommend their services to any business!” ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## Incurred But Not Reported (IBNR) [All Articles](https://watkinsross.com/articles/) [![An Inherent Weakness in the Completion Factor Approach to Calculating an Incurred But Not Reported (IBNR) Reserve](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2023-04-27-an-inherent-weakness-in-the-completion-factor-approach-to-calculating-an-incurred-but-not-reported-ibnr-reserve/) ##### [An Inherent Weakness in the Completion Factor Approach to Calculating an Incurred But Not Reported (IBNR) Reserve](https://watkinsross.com/articles/2023-04-27-an-inherent-weakness-in-the-completion-factor-approach-to-calculating-an-incurred-but-not-reported-ibnr-reserve/) Apr 27, 2023 | [IBNR](https://watkinsross.com/articles/categories/ibnr/) Discover the inherent weakness of using the completion factor approach to calculate IBNR reserves in healthcare finance and how to avoid costly mistakes. [read more](https://watkinsross.com/articles/2023-04-27-an-inherent-weakness-in-the-completion-factor-approach-to-calculating-an-incurred-but-not-reported-ibnr-reserve/) --- ### [Profit Sharing Plans](https://watkinsross.com/services/profit-sharing-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** A profit sharing plan is a creative strategy to motivate and reward your employees. Contact Watkins Ross to implement your profit sharing plan today! **Content:** #### Retirement Plan Services # Profit Sharing Plans [Get Started Today!](#cta)  A profit sharing plan is a creative strategy to motivate and reward your employees. Profit sharing plans are defined contribution plans that allow you as an employer to assess your company’s finances at the end of the year before deciding on an amount you want to contribute to your employee’s retirement accounts. These contributions are tax-deductible for employers. ## Profit Sharing Plans with Watkins Ross A profit sharing plan is available to any size business and can be implemented even if the employer offers other retirement plans. In fact, a profit sharing plan is often offered in conjunction with the company’s 401(k) plan. Unlike matching contributions that are based on the amount the employee defers into the plan, Profit Sharing contributions may be made regardless of whether the participant is deferring into the plan (as long as they have met the eligibility requirements). While frequently allocated based on compensation, these contributions may be allocated in any nondiscriminatory manner specified in the plan document. A profit sharing plan is sometimes paired with a defined benefit plan to maximize contribution disparity and benefits for business owners. These are known as DB/DC combo designs. At Watkins Ross, we partner with you to clearly define your objectives and design a plan that is ‘right’ for your business. We are not only experienced in administration and consulting for profit sharing plans, we clearly communicate the regulations so that you can focus on the success of your business. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you have questions or would like to discuss your plan document needs. #### To start your profit sharing plan today or for additional questions regarding your profit sharing, please contact ![Chris Scharf](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Scharf - Watkins Ross") ## Chris Scharf ###### DC Department Manager [Contact Chris Today](mailto:cscharf@watkinsross.com) #### Tom J. said: “Professionalism at the highest level, along with prompt service and attention to every detail. This creates a relationship based on trust, knowing the job will be done right and we do not need to worry about a thing.” ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Calendar [Defined Contribution Compliance Calendar](https://watkinsross.com/wp-content/uploads/WR_Compliance_Calendar-1-2.pdf) #### Related Articles ## Profit Sharing Plans [All Articles](https://watkinsross.com/articles/) [![2024 Plan Limits Released](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) ##### [2024 Plan Limits Released](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) Jan 22, 2024 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/), [457 Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/457-plans/), [Defined Benefit Plans](https://watkinsross.com/articles/categories/defined-benefit-plans/), [Employee Stock Ownership Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/employee-stock-ownership-plans/), [Profit Sharing Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/profit-sharing-plans/) The 2024 Cost-Of-Living Adjustments affecting employee benefit plans include the annual limits for Social Security Taxable Wage Base. [read more](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) --- ### [Plan Documents](https://watkinsross.com/services/plan-documents/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Our document specialist monitors plan documents for compliance with federal regulations. Contact Watkins Ross to discuss your plan document needs! **Content:** #### Retirement Plan Services # Plan Documents [Get Started Today!](#cta)  Plan documents are binding legal agreements that detail the provisions under which your retirement plan operates, the rights of plan participants, and the responsibilities of the plan sponsor and trustees. All qualified and non-qualified retirement plans are required to have a plan document and it is imperative that your plan operates in accordance with these provisions. Your plan document must be updated in accordance with applicable law changes or other amendments made to your plan. ## Plan Documents with Watkins Ross Our document services specialist monitors plan documents for compliance with federal regulations. We also assist clients in the preparation and review of plan documents and amendments when necessary, document restatements when required, the submission of plan documents to the IRS for determination letters as well as the submission of plan documents for the IRS’ Voluntary Compliance Program. Watkins Ross sponsors a volume submitter prototype formatted adoption agreement to be utilized by our clients who wish to adopt or maintain a defined contribution plan (i.e. 401(k), profit sharing, money purchase). We also utilize a volume submitter plan document for our defined benefit/cash balance clients. For our clients that do not utilize our plan documents, we provide a document compliance review service. The purpose of the review is to ensure the client’s plan documents and amendments (if applicable) are in compliance with current IRS Regulations. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you have questions or would like to discuss your plan document needs. #### To start your plan documents today, or for additional questions regarding plan documents please contact ![Chris Scharf](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Scharf - Watkins Ross") ## Chris Scharf ###### DC Department Manager [Contact Chris Today](mailto:cscharf@watkinsross.com) #### Paul G. said: “Watkins Ross has done an excellent job serving our company 401(k) plan as our TPA. Our WR team, led by Jill Northup and Pat Curtis, are extremely responsive and do a great job administering our plan. They helped guide us successfully through a complicated plan merger of four companies with three pre-existing plans. I recommend Watkins Ross.” ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## Plan Documents [All Articles](https://watkinsross.com/articles/) [![How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) ##### [How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) Aug 24, 2026 | [pensions](https://watkinsross.com/articles/categories/pensions/), [Plan Documents](https://watkinsross.com/articles/categories/plan-documents/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) By Chris Veenstra, FCA, ASA, MAAA, EA, President If you participate in a defined benefit pension plan, you likely... [read more](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) --- ### [Non-Qualified Plans](https://watkinsross.com/services/non-qualified-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Watkins Ross assists clients in maintaining & determining how to best coordinate the benefits of the non-qualified with other retirement plan offerings. **Content:** #### Retirement Plan Services # Non-Qualified Plans [Get Started Today!](#cta)  Non-qualified retirement plans are frequently offered to highly compensated employees and executives as a way to supplement beyond the limitations and restrictions on the qualified retirement plans. Employers view these plans as a valuable employee retention tool for key executive and management personnel. Watkins Ross assists clients in valuing and maintaining non-qualified plans and we work with clients’ legal counsel in determining how to best coordinate the benefits of the non-qualified with current and past qualified retirement plan offerings. ## Non-Qualified Plans with Watkins Ross There are several types of non-qualified plans (NQP) an employer may offer: Individual Account Plans: These plans allow employees to defer receipt of current income or an employee may credit a specific percentage of an employee’s current salary. These plans typically credit some type of “earnings” to the employee’s account. Phantom Stock Plans: The plan credits employees with a certain number of “hypothetical shares” which the employee “redeems” at a later date. Stock Appreciation Plans: This plans credit an employee with the net appreciation on a specified number of “performance shares”. There are also some key differences between a non-qualified deferred compensation plan and a qualified retirement plan. In a NQP, the employer may not deduct the deferred compensation at the time the benefits are earned. Instead, the employer’s deduction is postponed until the employee receives the compensation. The amounts deferred in a NQP are also not protected in the event of the employer’s bankruptcy. Therefore, if the employer defaults, there are no assurances that the deferred amounts will be paid to the employee. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals to help you implement and administer a non-qualified retirement plan. #### To start your non-qualified plan today, or for additional questions regarding your non-qualified plan please contact ![David Bosch | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "David Bosch | Watkins Ross - Watkins Ross") ## David Bosch ###### Consultant [Contact David Today](mailto:dbosch@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## Non-Qualified Plans [All Articles](https://watkinsross.com/articles/) ##### No Results Found The page you requested could not be found. Try refining your search, or use the navigation above to locate the post. --- ### [Multiemployer Plans](https://watkinsross.com/services/multiemployer-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Multiemployer pension plans are collectively bargained plans sponsored by more than one employer & a labor union. Start a multiemployer retirement plan! **Content:** #### Retirement Plan Services # Multiemployer Plans [Get Started Today!](#cta)  A multiemployer pension plan is a collectively bargained plan sponsored by more than one employer and a labor union. Like all qualified plans, they are governed by the Employee Retirement Income Security Act (ERISA), but are also subject to the Multiemployer Pension Plan Act of 1980 (MEPPA); which established the concept of “withdrawal liability” for employers who stop making contributions to the plan. These plans are managed by a joint board of union and management trustees. ## Multiemployer Plans with Watkins Ross Multiemployer plans are subject to minimum funding requirements that must be certified by an actuary each year, plus we must perform a zone certification indicating the financial health of your plan. Watkins Ross has been providing these services for over 30 years. We work on Funding Improvement Plans and Rehabilitation Plans; and also work with plans that have gone insolvent and now have payments funded by the PBGC. Your team at Watkins Ross works with you to make sure you are aware of the rules and upcoming deadlines to maintain compliance and avoid costly penalties. Withdrawal liability (WDL) calculations are required to determine the unfunded liability when an employer stops participating in a multiemployer plan. Our team understands the different methods for calculating this liability and the ways in which it is limited. We consult with our clients wanting an estimate of the future WDL charges given different variables; such as employment levels, market returns, and liability discount rates. We also provide studies to determine the effect of changes in contributions rates or the changes in benefit multipliers. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of experienced actuaries to help you administer your multiemployer pension plan. #### To start your multiemployer plan, or for additional questions regarding your multiemployer plan please contact ![Troy Schnabel | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Troy Schnabel | Watkins Ross - Watkins Ross") ## Troy Schnabel ###### Enrolled Actuary [Contact Troy Today](mailto:tschnabel@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Brochure [Watkins Ross Company Brochure](https://watkinsross.com/watkins_ross_brochure/) #### Related Articles ## Multiemployer Plans [All Articles](https://watkinsross.com/articles/) [![Further Assistance for Troubled Multiemployer Retirement Plans](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2022-11-09-further-assistance-for-troubled-multiemployer-retirement-plans/) ##### [Further Assistance for Troubled Multiemployer Retirement Plans](https://watkinsross.com/articles/2022-11-09-further-assistance-for-troubled-multiemployer-retirement-plans/) Nov 9, 2022 | [Latest News](https://watkinsross.com/articles/categories/latest-news/), [Multiemployer Plans](https://watkinsross.com/articles/categories/multiemployer-plans/) PBGC made several changes to the Final Rule issued on July 6, 2022. Learn about changes and benefits to retirement plans on the Watkins Ross blog. [read more](https://watkinsross.com/articles/2022-11-09-further-assistance-for-troubled-multiemployer-retirement-plans/) --- ### [Employee Stock Ownership Plans](https://watkinsross.com/services/employee-stock-ownership-plans/) **Published:** January 12, 2023 **Author:** Watkins Ross Team **Excerpt:** Employee Stock Ownership Plans (ESOP) are qualified, defined contribution employee retirement plans that invest primarily in company stock. **Content:** #### Retirement Plan Services # Employee Stock Ownership Plans [Get Started Today!](#cta)  An Employee Stock Ownership Plan (ESOP) is a qualified, defined contribution employee retirement plan that invests primarily in company stock. Both public and private companies can establish ESOPs. An ESOP’s unique plan provisions and leveraging capabilities require specialized consulting and expertise. Providing stock ownership benefits is a great way to reward your employees with a benefit tied to your company’s performance while affording the company substantial tax benefits. ## Employee Stock Ownership Plans (ESOP) with Watkins Ross Many companies consider creating an ESOP during their ownership succession planning. ESOPs can provide a ready market for the stock and allow shareholders with management responsibilities to sell gradually and ease out of the business, while deferring taxation on the gains from the sale of their stock. Establishing an ESOP can create a corporate “ownership” culture, enhancing employee performance, job satisfaction and retention; while preserving the company’s legacy and business continuity. As a 100% ESOP-owned company ourselves, we understand that comprehensive administration of an ESOP is required if a company intends to take full advantage of the financial opportunities sponsoring an ESOP can offer. From initial feasibility and design services to S-Corp anti-abuse testing and periodic repurchase obligation analysis, we help you maximize the benefits of having an ESOP. Curious if an ESOP is right for your company? Our [ESOP Checklist](#esop-checklist) serves as a general guide to help you determine if your company is a good candidate to sell to an ESOP. Our [ESOP Brochure](#esop-brochure) includes additional information regarding ESOP plans and the services we offer. [3](#cta) ### [Get Started Today](#cta) [Contact Watkins Ross](#cta) if you are looking for a team of professionals that specializes in customized retirement plans. #### To start your employee stock ownership plan today or for additional questions regarding your ESOP, please contact: ![David Bosch | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "David Bosch | Watkins Ross - Watkins Ross") ## David Bosch ###### Consultant [Contact David Today](mailto:dbosch@watkinsross.com) ## Financial & Management Resources [Browse All](https://watkinsross.com/resources/)  ##### Checklist [Is Your Business A Good Candidate for an ESOP?](https://watkinsross.com/wp-content/uploads/ESOP-Checklist-2.pdf)  ##### Brochure [Employee Stock Ownership Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_Brochure-ESOP-2.pdf) #### Related Articles ## Employee Stock Ownership Plans [All Articles](https://watkinsross.com/articles/) [![2024 Plan Limits Released](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) ##### [2024 Plan Limits Released](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) Jan 22, 2024 | [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/), [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/), [457 Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/457-plans/), [Defined Benefit Plans](https://watkinsross.com/articles/categories/defined-benefit-plans/), [Employee Stock Ownership Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/employee-stock-ownership-plans/), [Profit Sharing Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/profit-sharing-plans/) The 2024 Cost-Of-Living Adjustments affecting employee benefit plans include the annual limits for Social Security Taxable Wage Base. [read more](https://watkinsross.com/articles/2024-01-22-2024-plan-limits-released/) --- ### [Our Services](https://watkinsross.com/services/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** Watkins Ross' services help you bring quality retirement and health plans to your employees in ways that meet your goals. Contact us today to get started! **Content:** ##### Retirement & Health Plan Services by Dedicated Actuaries, Consultants, and Retirement Plan Professionals # Our Services [Schedule an Appointment](https://watkinsross.com/contact/)  ### Retirement Plans Retirement plan services for small businesses and large corporations, complete with easy to read definitions to find the plans that best suites you. [View Retirement Plan Services](#retirement-plans)  ### Health Plans Actuarial health plan services and calculations for state and local government, along with self-insured employers. [View Health Plan Services](#health-plans) #### Liz B. said: “I have worked with Watkins Ross since 2008. Each contact I have had has been professional, efficient, and accurate. They are quick to respond and very patient to answer my questions. I depend on Watkins Ross and highly recommend them.” ## Retirement Plan Services Watkins Ross offers a full spectrum of retirement plan services. From the owner looking to offer their employees a stake in the business, to the group of doctors looking for a retirement plan package that allows them to save more for retirement, Watkins Ross is confident we can find a retirement plan to fit your best interests. ![We Offer a Full Spectrum of Retirement Plan Services | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "We Offer a Full Spectrum of Retirement Plan Services | Watkins Ross - Watkins Ross")  #### 401(k) Plans [More Details →](https://watkinsross.com/services/401k-plans/)  #### 403(b) Plans [More Details →](https://watkinsross.com/services/403b-plans/)  #### 457 Plans [More Details →](https://watkinsross.com/services/457-plans/)  #### Cash Balance Plans [More Details →](https://watkinsross.com/services/cash-balance-plans/)  #### Defined Benefit Plans [More Details →](https://watkinsross.com/services/defined-benefit-plans/)  #### Employee Stock Ownership Plans [More Details →](https://watkinsross.com/services/employee-stock-ownership-plans/)  #### Multiemployer Plans [More Details →](https://watkinsross.com/services/multiemployer-plans/)  #### Non-Qualified Plans [More Details →](https://watkinsross.com/services/non-qualified-plans/)  #### Plan Documents [More Details →](https://watkinsross.com/services/plan-documents/)  #### Profit Sharing Plans [More Details →](https://watkinsross.com/services/profit-sharing-plans/) ![We provide actuarial health plan services and calculations for state & local governments and self-insured employers.](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Health Plan Services - Watkins Ross") ## Health Plan Services State and local governments along with self-insured employers require actuarial health plan services and calculations. Whether you are a government agency providing additional health plan benefits to your retired employees or you are self-insured and must report an estimate of the unpaid portion of medical claims, Watkins Ross can provide these health plan calculations for you.  #### Calculation of IBNR Reserves [More Details →](https://watkinsross.com/services/calculation-of-ibnr-reserves/)  #### Other Post Employment Benefits [More Details →](https://watkinsross.com/services/other-post-employment-benefits/) ###### Plan Documents ## With You Every Step of the Way Plan documents are required legal agreements that detail the provisions under which your retirement plan operates. We assist in the preparation and review of plan documents, amendments and restatements, along with the submission of plan documents to the IRS for determination letters or corrections through the IRS’ Voluntary Compliance Program. [View Our Plan Document Service](https://watkinsross.com/services/plan-documents/) ![We assist in the preparation and review of plan documents, amendments and restatements, along with the submission of plan documents to the IRS | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Plan Documents Service - Watkins Ross") --- ### [Contact Us](https://watkinsross.com/contact/) **Published:** December 15, 2022 **Author:** Watkins Ross Team **Excerpt:** Have a question or want an appointment? Tell us about your retirement and health plan needs and we will contact you to discuss more ASAP! **Content:** #### Have a Question or Want an Appointment? # Contact Us ## Send Us a Message Tell us about your retirement and/or health plan needs and we will contact you to discuss more ASAP! Reason for Contact: —Please choose an option—401(k) PlansEmployee Stock Owned Plans (ESOPs)Defined Benefit PlansCash Balance PlansDefined Contribution PlansOther Post-Employment Benefits (OPEBs)Other Name (First & Last Preferred) Phone Email Message This site is protected by reCAPTCHA and the Google [Privacy Policy](https://policies.google.com/privacy) and [Terms of Service](https://policies.google.com/terms) apply. ## Email Us ## Call Us M-F 9am – 4:30pm [616-456-9696](mailto:info@watkinsross.com) ## Visit Us 200 Ottawa Avenue Suite 600 Grand Rapids, MI 49503 [Get Directions](https://www.google.com/maps/dir/?api=1&destination=Watkins+Ross+%26+Co,+200+Ottawa+Ave+NW+Suite+%23600,+Grand+Rapids,+MI+49503) ## Team Directory #### Mishelle Becker Retirement Plan Administrator [mbecker@watkinsross.com](mailto:mbecker@watkinsross.com "Send an Email to Mishelle") [616-742-9241](tel:+1-616-742-9241 "Call Mishelle") #### David Bosch Compliance Coordinator, Consultant [dbosch@watkinsross.com](mailto:dbosch@watkinsross.com "Send an Email to David") [616-742-9236](tel:+1-616-742-9236 "Call David") #### Glen Bradley Senior Pension Analyst [gbradley@watkinsross.com](mailto:gbradley@watkinsross.com "Send an Email to Glen") [616-742-9212](tel:+1-616-742-9212 "Call Glen") #### Hunter Carr Retirement Plan Administrator [hcarr@watkinsross.com](mailto:hcarr@watkinsross.com "Send an email to Hunter") [616-742-9222](tel:+1-616-742-9222 "Call Hunter") #### Chelsey Cromer Junior Retirement Plan Administrator [ccromer@watkinsross.com](mailto:ccromer@watkinsross.com "Send an Email to Chelsey") [616-742-9220](tel:+1-616-742-9220 "Call Chelsey") #### Jodi Del Greco Retirement Plan Administrator [jdelgreco@watkinsross.com](mailto:jdelgreco@watkinsross.com "Send an Email to Christina") [616-742-9224](tel:+1-616-742-9224 "Call Christina") #### Leah Dudley Health Actuary [ldudley@watkinsross.com](mailto:ldudley@watkinsross.com "Send an Email to Leah") [616-742-9217](tel:+1-616-742-9217 "Call Leah") #### Shane Gladinus Actuarial Analyst [sgladinus@watkinsross.com](mailto:sgladinus@watkinsross.com "Send and email to Shane") [616-742-9227](tel:+1-616-742-9227 "Call Shane") #### Chris Grant Junior Retirement Plan Administrator [cgrant@watkinsross.com](mailto:cgrant@watkinsross.com "Send an Email to Chris") [616-742-9202](tel:+1-616-742-9202 "Call Chris") #### Michelle Gummerus Junior Retirement Plan Administrator [mgummerus@watkinsross.com](mailto:mgummerus@watkinsross.com "Send an Email to Michelle") [616-742-9238](tel:+1-616-742-9238 "Call Michelle") #### Brendan Hart Junior Retirement Plan Administrator [bhart@watkinsross.com](mailto:bhart@watkinsross.com "Send an Email to Brendan") [616-742-9225](tel:+1-616-742-9225 "Call Brendan") #### Marybeth Jorgensen Retirement Plan Administrator [mjorgensen@watkinsross.com](mailto:mjorgensen@watkinsross.com "Send an Email to Marybeth") [616-742-9229](tel:+1-616-742-9229 "Call Marybeth") #### Carol Meyers Senior Pension Analyst [cmeyers@watkinsross.com](mailto:cmeyers@watkinsross.com "Send an Email to Carol") [616-742-9213](tel:+1-616-742-9213 "Call Carol") #### Kayla Morrish Senior Pension Analyst [kmorrish@watkinsross.com](mailto:kmorrish@watkinsross.com "Send an Email to Kayla") [616-742-9209](tel:+1-616-742-9209 "Call Kayla") #### Connor Murphy Actuarial Analyst [616.742.9237](tel:6167429237) #### David Paauwe President, Enrolled Actuary [dpaauwe@watkinsross.com](mailto:dpaauwe@watkinsross.com "Send an Email to David") [616-742-9211](tel:+1-616-742-9211 "Call David") #### Rachel Perkins Corporate Controller [rperkins@watkinsross.com](mailto:rperkins@watkinsross.com "Send an Email to Rachel") [616-742-9206](tel:+1-616-742-9206 "Call Rachel") #### Esther Peterson Consulting Actuary [EPeterson@watkinsross.com](mailto:EPeterson@watkinsross.com "Send an Email to Esther") [616-742-9228](tel:+1-616-742-9228 "Call Esther") #### Christina Salacina Administrative Assistant [csalacina@watkinsross.com](mailto:csalacina@watkinsross.com "Send an Email to Christina") [616-742-9226](tel:+1-616-742-9226 "Call Christina") #### Chris Scharf DC Department Manager [cscharf@watkinsross.com](mailto:cscharf@watkinsross.com "Send an email to Chris") [616-742-9223](tel:+1-616-742-9223 "Call Chris") #### Troy Schnabel Enrolled Actuary [tschnabel@watkinsross.com](mailto:tschnabel@watkinsross.com "Send an Email to Troy") [616-742-9242](tel:+1616-742-9242 "Call Troy") #### Christian Veenstra President, Enrolled Actuary [cveenstra@watkinsross.com](mailto:cveenstra@watkinsross.com "Send an Email to Christian") [616-742-9244](tel:+1-616-742-9244 "Call Christian") #### Matt Wheaton Senior Pension Analyst [mwheaton@watkinsross.com](mailto:mwheaton@watkinsross.com "Send an Email to Matt") [616-742-9248](tel:+1-616-742-9248 "Call Matt") --- ### [About Our Firm](https://watkinsross.com/about-our-firm/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** Established in 1948, Watkins Ross administers employer or union-sponsored retirement benefits and health plans nationwide. **Content:** #### Getting You Back to What You Love Most # About Our Firm Watkins Ross administers employer or union-sponsored retirement benefits and health plans. We serve approximately 700 clients including one-person professional service corporations, multi-employer plans, and group health plans covering thousands of participants. We care for our team members, help the communities we live in and serve our clients with consulting, actuarial, and administration services. Established in 1948, the Watkins Ross corporate office is located in Grand Rapids, MI. With satellite offices in Wisconsin and New Orleans, we serve clients nationwide. ![Watkins Ross team members photo](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "WATKINS-ROSS-TEAMcropped - Watkins Ross")  ### Who We Help From designing your first retirement plan, to maintaining a plan for years, we help small and mid-sized employers with their retirement plan needs. Our health plan team assists you with strategies to help you manage your retiree health plan obligations.  ### How We Help The regulations that govern this industry are complex and the penalties for noncompliance can be substantial. We make sure you understand what is required to keep your plan in compliance and the options that are available as your business changes.  ### The WR Approach As a 100% employee-owned company, our employees have a personal stake in the success of your firm. We understand that your business is unique. Our diverse experience enables us to consult on your various retirement and health plan related questions. #### Becky B. said: “Watkins Ross is among most reliable and knowledgeable vendors that we work with. Their team is highly professional and has always been very responsive to our needs and requests. We strongly recommend their services to any business!” ## Our Team #### The Faces of Watkins Ross At Watkins Ross, each client is assigned a top-level associate who works closely with members of our Client Management Team. This collaborative team based approach utilizes the range and experience of our staff to ensure every client receives the highest level of consultative, actuarial and administrative services. [Join Our Team](https://watkinsross.com/careers/) ![Christian R. Veenstra, FCA, ASA, MAAA, EA](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris-Veenstra-3373-square-270 - Watkins Ross") #### Christian R. Veenstra, FCA, ASA, MAAA, EA President [616-742-9244](tel:+16167429244 "Call Christian") [cveenstra@watkinsross.com](mailto:cveenstra@watkinsross.com "Send an Email to Christian") Christian Veenstra is Co-President of Watkins Ross. Chris has been with the firm since 1991 and is credited with building the retiree medical plan division of the company. As Co-President, Chris Veenstra oversees all aspects of Watkins Ross. ![David E. Paauwe, MSEA, EA](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Dave-Paauwe-3415-square-270 - Watkins Ross") #### David E. Paauwe, MSEA, EA President [616-742-9211](tel:+16167429211 "Call David") [dpaauwe@watkinsross.com](mailto:dpaauwe@watkinsross.com "Send an Email to David") David Paauwe is Co-President of Watkins Ross. Dave has been with the firm since 1999 and is responsible for developing the company’s cash balance plan business. As Co-President, Dave Paauwe oversees all aspects of Watkins Ross. ![David Bosch](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "David-Bosch-7535-square-270 - Watkins Ross") #### David Bosch Consultant [616-742-9239](tel:+16167429239 "Call David") [dbosch@watkinsross.com](mailto:dbosch@watkinsross.com "Send an Email to David") David Bosch is a Consultant at Watkins Ross. David has been with the firm since 1999 and serves as the primary consultant in the ESOP, Defined Contribution and Cash Balance divisions of the company. David is an active member of the ESOP Association and the Michigan Chapter of the ESOP Association. ![Troy A. Schnabel, FCA, ASA, MAAA, EA](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Troy-Schnabel-7544-square-270 - Watkins Ross") #### Troy A. Schnabel, FCA, ASA, MAAA, EA Enrolled Actuary [616-742-9242](tel:+16167429242 "Call Troy") [tschnabel@watkinsross.com](mailto:tschnabel@watkinsross.com "Send an Email to Troy") Troy Schnabel is an Enrolled Actuary at Watkins Ross. Troy has been with the firm since 2013 and provides actuarial services to governmental, single employer and multiemployer pension plans. As a pension actuary, Troy oversees all facets of a defined benefit plan’s administration including cost projections, termination studies, and annual valuation reports. ![Leah A. Dudley, MAAA, ASA](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Leah-Dudley-3438-square-270 - Watkins Ross") #### Leah A. Dudley, MAAA, ASA Health Actuary [616-742-9217](tel:+16167429217 "Call Leah") [ldudley@watkinsross.com](mailto:ldudley@watkinsross.com "Send an Email to Leah") Leah Dudley is a Health Actuary at Watkins Ross. Leah joined the firm in 2016 and provides actuarial services to health care plans. Leah is an Associate Member of the Society of Actuaries and a Member of the American Academy of Actuaries. She has provided health plan actuarial services since 1990. ![Rachel Perkins, MBA, CEBS](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Rachel-Perkins-4119-square-270 - Watkins Ross") #### Rachel Perkins, MBA, CEBS Corporate Controller [616-742-9206](tel:+16167429206 "Call Rachel") [rperkins@watkinsross.com](mailto:rperkins@watkinsross.com "Send an Email to Rachel") Rachel Perkins is the Corporate Controller at Watkins Ross. Rachel has been with the firm since 2015 and serves as the manager of our Accounting and Human Resources department. Rachel’s Certified Employee Benefits Specialist [(CEBS)](https://www.youracclaim.com/badges/4248c6a4-7c75-45c4-bd9a-b01163b1f4b6/public_url) designation allows her to demonstrate an understanding of the full spectrum of employee benefits, from health care and retirement plan strategies to legal and regulatory compliance. ![Chris Scharf, CPC, QPA, TGPC](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Chris Scharf - Watkins Ross") #### Chris Scharf, CPC, QPA, TGPC DC Department Manager [616-742-9223](tel:+1-616-742-9223 "Call Chris") [cscharf@watkinsross.com](mailto:cscharf@watkinsross.com "Send an Email to Chris") Chris Scharf is the DC Manager. In this role, Chris oversees all aspects of the DC department. With nearly 20 years in the industry, Chris has extensive experience with a wide variety of DC plans. ![Esther Peterson, EA, ASA, MAAA](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Esther Peterson - square - Watkins Ross") #### Esther Peterson, EA, ASA, MAAA Consulting Actuary [616-742-9228](tel:+1-616-742-9228 "Call Esther") [EPeterson@watkinsross.com](mailto:EPeterson@watkinsross.com "Send an Email to Esther") Esther Peterson serves as a Consulting Actuary at Watkins Ross, specializing in retiree healthcare plans. She brings a diverse background in defined benefit plans, including single-employer and multiemployer pension plans. Esther volunteers at the Society of Actuaries, where she contributes to thought leadership and raises awareness of emerging trends. ## Our Contributions #### For a Better Community We believe we have an obligation to the community and industry we serve.  ### Contributing to a Green Future We believe it’s important to be environmentally conscious and reduce our carbon footprint. We are committed to decreasing consumption and limiting our waste.  ### Charity Committee Our employees are committed to giving back to the community. The employee-run charity committee raises money during the year to support various organizations.  ### WR Sponsorship Program Our goal is to financially equip local organizations to meet their community objectives and to encourage the education and advancement of industry professionals. [![Young Professionals of Color Conference (YPCC)](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Young Professionals of Color Conference (YPCC) - Watkins Ross")](http://www.ypccgr.com/) [![Proud to Sponsor the Young Professionals of Color Conference](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Young Professionals of Color Conference Sponsor Badge - Watkins Ross")](https://ypccgr.com/) [![Wedgwood Christian Services](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Wedgwood Christian Services Logo - Watkins Ross")](https://www.wedgwood.org/) [![Safe Haven Ministries](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Safe Haven Ministries Logo - Watkins Ross")](https://safehavenministries.org/) [![Grand Rapids Civic Theater](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Grand Rapids Civic Theater Logo - Watkins Ross")](https://www.grct.org/) [![County Road Association of Michigan | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "County Road Association of Michigan | Watkins Ross - Watkins Ross")](https://micountyroads.org/) [![Mapers | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Mapers | Watkins Ross - Watkins Ross")](https://www.mapers.org/) --- ### [Disclaimer](https://watkinsross.com/disclaimer/) **Published:** May 15, 2026 **Author:** Watkins Ross Team **Excerpt:** Before accessing this website please carefully read this disclaimer. **Content:** Please wait while the policy is loaded. If it does not load, please [click here to view the policy](https://policies.termageddon.com/api/policy/WVVrM1NVNWhiM0ZtWm5veGRWRTlQUT09). --- ### [Resources](https://watkinsross.com/resources/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** We've assembled a collection of our most useful information for you to reference and use in your business. Download here! **Content:** #### Helpful Links & Informative Guides for Your Business, From Our Team # Resources [Download Our Company Brochure](https://watkinsross.com/watkins_ross_brochure/) ## Retirement Resource Downloads [Cash Balance Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_Cash-Balance-Brochure-2.pdf) [Employee Stock Ownership Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_Brochure-ESOP-2.pdf) [Other Post Employment Benefit Plans Brochure](https://watkinsross.com/wp-content/uploads/Watkins_Ross_OPEB_Brochure-2.pdf) [Defined Benefit Compliance Calendar](https://watkinsross.com/wp-content/uploads/defined-benefit-compliance-calendar-watkins-ross-2.pdf) [Defined Contribution Plan Termination Procedure](https://watkinsross.com/wp-content/uploads/DC-Plan-Termination-Checklist-2.pdf) [Defined Benefit Plan Termination Procedure](https://watkinsross.com/wp-content/uploads/DB-PlanTermination-Procedures-2025.pdf) [Is Your Business A Good Candidate for an ESOP?](https://watkinsross.com/wp-content/uploads/ESOP-Checklist-2.pdf) [Is Your Business A Good Candidate for a Cash Balance Plan?](https://watkinsross.com/wp-content/uploads/Cash-Balance-Plan-Checklist-1.pdf) [Defined Contribution Compliance Calendar](https://watkinsross.com/wp-content/uploads/WR_Compliance_Calendar-1-2.pdf) [QDRO Requirements (DC Plans)](https://watkinsross.com/wp-content/uploads/DC-QDRO-Checklist-2020-2.pdf) [Reporting & Disclosure Requirements](https://watkinsross.com/wp-content/uploads/reporting-disclosure-requirements-watkins-ross-2.pdf) [Retirement Plan Check-Up (IRS)](https://watkinsross.com/wp-content/uploads/retirement-plan-checkup-irs.pdf) [Roth Catch-Up Contributions](https://watkinsross.com/wp-content/uploads/Roth-Catch-up-Contributions.pdf) [Safe Harbor Hardship Withdrawal Guidelines](https://watkinsross.com/wp-content/uploads/SH-Hardship-Withdrawal-Guidelines-2-1.pdf) [Safe Harbor Contributions for Defined Contribution Plans](https://watkinsross.com/wp-content/uploads/SH-DC-Contributions-2020-2.pdf) [Cost of Living Plan Limitations](https://watkinsross.com/wp-content/uploads/COLA-chart-2026.pdf) [Sample Special Tax Notice (Roth Monies in the Plan)](https://watkinsross.com/wp-content/uploads/Sample-402f-Roth-Notice.pdf) [Who Is Involved in a Qualified Plan?](https://watkinsross.com/wp-content/uploads/Who-is-involved-in-a-qualified-plan-2.pdf) [Sample Special Tax Notice (Non-Roth Monies in the Plan)](https://watkinsross.com/wp-content/uploads/Sample-402f-Non-Roth-Notice.pdf) [What Is a Top Heavy Plan?](https://watkinsross.com/wp-content/uploads/TOP-HEAVY-2026.pdf) [Required Minimum Distributions](https://watkinsross.com/wp-content/uploads/RMD-for-partcipant-2.pdf) [Highly Compensated Employees](https://watkinsross.com/wp-content/uploads/HCE-2026.pdf) [Fidelity Bond](https://watkinsross.com/wp-content/uploads/Fidelity-Bond_2021-2.pdf) [ADP/ACP Testing](https://watkinsross.com/wp-content/uploads/ADP-ACP-Testing-2.pdf) [401(k) Plan Form 5500 and Audit](https://watkinsross.com/wp-content/uploads/401k-Plan-Form-5500-Audit-2.pdf) [Long Term Part Time Employees](https://watkinsross.com/wp-content/uploads/LTPT-guidance-2025-2-1.pdf) [Annual Reporting and Review](https://watkinsross.com/wp-content/uploads/Annual-Reporting-and-Review-2.pdf) ## External References [](http://www.401khelpcenter.com/) #### [401(k) Help Center](http://www.401khelpcenter.com/) Collected wisdom, market news and research insight on all things 401K related [](https://benefitslink.com/index.html) #### [Benefits Link](https://benefitslink.com/index.html) One of the retirement plan industry’s top daily news sources [](https://www.asppa.org/) #### [American Society of Pension Professionals & Actuaries](https://www.asppa.org/) Practice management and legislative updates from the retirement plan industry [](https://www.dol.gov/) #### [Department of Labor (DOL)](https://www.dol.gov/) Qualified retirement plans are governed by a set of rules and regulations as defined by the DOL [](https://www.efast.dol.gov/welcome.html) #### [EFAST2 5500](https://www.efast.dol.gov/welcome.html) EFAST2 is an all-electronic filing system designed for the Form 5500 and Form 5500-SF [](https://www.irs.gov/) #### [Internal Revenue Service (IRS)](https://www.irs.gov/) Qualified retirement plans are governed by a set of rules and regulations as defined by the IRS [](https://www.plansponsor.com/) #### [PLANSPONSOR®](https://www.plansponsor.com/) Research and news for the retirement plan industry [](https://egov2.pbgc.gov/MyPAA/Login.aspx) #### [My Plan Administration Account (My PAA)](https://egov2.pbgc.gov/MyPAA/Login.aspx) This is the electronic filing system for the forms required under the PBGC [](https://www.esopassociation.org/) #### [The ESOP Association](https://www.esopassociation.org/) Research, advocacy and news for ESOP companies [](https://www.planadviser.com/cdc-says-u-s-life-expectancy-fell-76-4-years-21-lowest-since-1996/) #### [CDC: U.S. Life Expectancy Fell in 2021](https://www.planadviser.com/cdc-says-u-s-life-expectancy-fell-76-4-years-21-lowest-since-1996/) U.S. life expectancy is now 76.4 years, lowest since 1996 [![How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif)](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) ##### [How to Read a Defined Benefit Pension Plan Statement: A Guide for Plan Participants](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) Aug 24, 2026 | [pensions](https://watkinsross.com/articles/categories/pensions/), [Plan Documents](https://watkinsross.com/articles/categories/plan-documents/), [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) By Chris Veenstra, FCA, ASA, MAAA, EA, President If you participate in a defined benefit pension plan, you likely... [read more](https://watkinsross.com/articles/2026-08-24-how-to-read-a-defined-benefit-pension-plan-statement-a-guide-for-plan-participants/) --- ### [Careers](https://watkinsross.com/careers/) **Published:** December 17, 2022 **Author:** Watkins Ross Team **Excerpt:** Are you technical and looking to contribute to a team? We are 100% employee-owned and see our employees as our greatest assets. Apply now! **Content:** #### Show Your Talent & Grow Your Career with Watkins Ross # Careers Are you a technical minded person looking to contribute to a team of analysts, administrators, consultants and actuaries? As a 100% ESOP-owned company, we recognize that our employees are our greatest assets. Our team includes a diverse set of experienced professionals who help our clients achieve their goals by providing services to help them implement successful retirement programs, recognize emerging trends and understand regulatory changes that may impact their bottom line. [View Open Positions](#open-positions) ![Become a part of our team! | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "Become a part of our team! | Watkins Ross - Watkins Ross") #### Working With Watkins Ross ## Perks & Benefits Watkins Ross provides support for our employees to attend conferences, webcasts or study for exams to better themselves professionally. We also understand that your “work-self” is not your only self. You have interests and passions and we want to be a part of that. Are you passionate about charity work? You can join our charity committee to help determine and execute plans for our company to help our community. Our employees are more than number crunchers. They are mothers, fathers, runners, soccer players and more; and we recognize that an investment in our employees is an investment in our future. This is why it’s important to provide your employees with a competitive benefits package!  ###### ESOP  ###### 401(k)  ###### Defined Benefit Plan  ###### Health Benefits  ###### Education Assistance  ###### Vacation Pay #### Join Our Team ## Open Positions ### Retirement Plan Administrator **Grand Rapids, MI** Watkins Ross is looking for an experienced Retirement Plan Administrator. The Retirement Plan Administrator will serve as the primary contact relating to plan administration and consulting for an assigned group of 401(k) profit sharing plans. This individual is accountable for the implementation and administration of these plans and builds trusting relationships with clients, advisors and colleagues to exceed client service and retention standards. The Retirement Plan Administrator is resourceful and self-directed, with the ability to work cohesively as a team to continually improve our efficiency and grow as a firm. Strong communication skills, an attention to detail and the ability to meet deadlines are essential to handle the multiple responsibilities in our technical industry. This individual must have an enthusiastic, customer service oriented attitude with proven client relationship skills, and be motivated to continually broaden expertise to stay current on developments in pension law and regulations. [Download Position Details](https://watkinsross.com/wp-content/uploads/Download-Retirement-Plan-Administrator-Details.pdf "Download Position Details") #### Responsibilities - Works with the defined contribution Compliance Coordinator to prepare ADP/ACP tests, along with all other nondiscrimination testing. - Prepares Form 5500 and related schedules. - Monitors plan deadlines, contributions, return of 401(k) excess deferrals/contributions, turnaround on the preparation of the year-end reports, 5500 filings, extensions and minimum distributions. - Verifies accuracy of the processing of contributions (including various profit sharing contribution allocation methods), loans and distributions. - Provides plan sponsor with information and education about their 401(k) plan and facilitate issue resolution when necessary. #### Skills & Qualifications - Four-year degree in an analytical field or equivalent work experience ***required***. - Excellent Microsoft Office skills ***preferred.*** - ASPPA or other professional designations ***preferred***. #### To Apply: Please send your resume via email with the subject *Retirement Plan Administrator* to ### Junior Retirement Plan Administrator **Grand Rapids, MI** Watkins Ross is looking for a Junior Retirement Plan Administrator. The Junior Retirement Plan Administrator will assist the defined contribution (DC) department with processing the 400 DC plans we administer. This is an entry-level position with the opportunity to grow into the role as the primary contact relating to plan administration and consulting for an assigned group of 401(k) profit sharing plans. This position reports to the DC Manager and will work under the guidance of an experienced Retirement Plan Administrator. As the Junior Retirement Plan Administrator advances through training, the job responsibilities will also include: - Respond to general inquiries from clients/advisors - Prepare Form 5500 filings and related schedules - Collect year-end data from fund companies for valuation work - Assist with special projects as needed [Download Position Details](https://watkinsross.com/wp-content/uploads/Junior-Retirement-Plan-Administrator-Details.pdf "Download Position Details") #### Responsibilities - Process distributions, loans, hardships and in-service withdrawals - Prepare census requests and audits - Prepare the year-end data for processing - Prepare client engagement letters and participant fee disclosures - Prepare 1099R Forms - Assemble valuation reports - Assist with additional administrative tasks as needed (scanning, filing, etc.) #### Skills & Qualifications - Four-year degree in an analytical field or equivalent work experience ***preferred***. - Excellent Microsoft Office skills ***required.*** Working experience with Relius ***preferred.*** - One year of defined contribution administration experience ***preferred***. #### To Apply: Please send your resume via email with the subject *Junior Retirement Plan Administrator* to *Watkins Ross is an equal opportunity employer. We recognize our responsibility to our clients, employees and community to recruit/hire/promote qualified applicants without regard to race, creed, color, age, sex, religion, national origin, marital status, height, weight, veterans status, or physical/mental disability, to the extent required by law.* --- ### [2023 Cash Balance Plan Maximum Contributions Table](https://watkinsross.com/2023-cash-balance-plan-maximum-contributions-table/) **Published:** April 27, 2023 **Author:** Edward Smith **Excerpt:** Download our 2023 Cash Balance Plan maximum contributions table today. Boost profits, minimize taxes, and maximize retirement savings with Watkins Ross. **Content:** # 2023 Cash Balance Plan Maximum Contributions Table [Download Now](#cta) Looking for ways to minimize your company’s tax liabilities? Watkins Ross can help you achieve this goal through the implementation of a cash balance plan. One of the significant advantages of a cash balance plan is the ability to contribute more to principals than what is statutorily allowed in a profit-sharing plan. By contributing more money to a cash balance plan, individuals can potentially see larger returns in their retirement funds. Additionally, the ability to defer taxes on the contributed income until a later date when the individual’s tax bracket may be lower can be advantageous for long-term financial planning. To help businesses understand the benefits of a cash balance plan, Watkins Ross has created a chart that reflects the contributions based on age and compensation. This chart is just the starting point of the discussion to determine if the plan is suitable for your business as there are many other factors to consider. ![2023 Cash Balance Plan Maximum Contributions Table Download | Watkins Ross](//watkinsross.com/wp-content/plugins/a3-lazy-load/assets/images/lazy_placeholder.gif "2023 Cash Balance Plan Maximum Contributions Table Download | Watkins Ross - Watkins Ross")  #### Next Steps Once the chart is downloaded, the next step is to contact Watkins Ross to determine if a cash balance plan is right for your business. Our team of experts will work with you to understand your unique needs and guide you through the implementation of the plan. To get started, the business owner must submit their census data from the prior year, and Watkins Ross will prepare a proposal outlining the potential benefits of a cash balance plan. This will help the business owner make an informed decision about whether or not to proceed with the plan. ## Download Our 2023 Cash Balance Plan Maximum Contributions Table Watkins Ross is dedicated to helping businesses maximize their retirement savings and minimize their tax liabilities. Interested parties are encouraged to contact us to learn more about how we can assist in achieving their financial goals. --- ## Categories ### [401(k) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/401k-plans/) **Description:** A 401(k) plan helps your employees save for their future by giving them the opportunity to invest a portion of their paycheck into an employer-sponsored retirement account. Employees can select to invest either pre-tax or after-tax dollars into diversified investment lineup within their 401(k) portfolio. Many 401(k) plans offer employer matching, to entice employees to contribute a specific percentage of their paycheck into the plan in exchange for a matching investment from you, their employer. Employer 401(k) benefits include tax deductions and competitive retirement plan packages to attract top talent to your team. Curious about 401(k) plan options, regulatory details, and contribution rules? Head over to the Watkins Ross blog to browse 401(k) articles written by our retirement plan experts who have your goals and interests in mind. Looking for a retirement plan partner who understands the intricacies of your business and can help guide your 401(k) plan goals and compliance efforts? Connect with the Watkins Ross retirement team here. --- ### [Health Plans](https://watkinsross.com/articles/categories/health-plans/) **Description:** Seeking information on how to stay compliant with state and local governmental health plans or self-insured employer health plan actuarial requirements? Discover our collection of health plan articles on the Watkins Ross blog, written specifically for government and self-insured employers. From other post employment benefit (OPEB) financial reporting to calculations of incurred but not reported (IBNR) reserves or liability, Watkins Ross provides the health plan expertise you need to stay compliant and penalty-free. Our Watkins Ross health plan team is well-versed in navigating the various health plan benefit options available for your retired employees and determining your health plan financial reporting liabilities. We’re also experienced in assisting self-insured employers with mandatory health plan reporting regulations to comply and protect against penalties. Contact us to learn how Watkins Ross can assist with your business’s post-employment health plan service financial reporting and reserve liabilities and together let’s discover a way to attract your employees to retirement while adhering to regulatory requirements and cost control strategies. --- ### [Retirement Plans](https://watkinsross.com/articles/categories/retirement-plans/) **Description:** Choosing the right retirement plan for your employees can be a challenge. From navigating contrasting rules and regulations pertaining to various types of retirement plans to determining which type of retirement plans best suit the unique needs of your employees, small businesses and large corporations alike have a plethora of important decisions to make when it comes to retirement plan selection. The experienced retirement plan team at Watkins Ross understands these challenges, regulations, and decisions. We expertly help you navigate your retirement plan options so you can choose the perfect retirement plan for your business’s specific needs. Explore our collection of retirement plan articles on the Watkins Ross blog to learn more about the various types of retirement plans available for business owners like you, including 401(k), 403(b), 457 plans, cash balance retirement plans, defined benefit retirement plans, ESOP, profit sharing, non-qualified retirement plans, and multi-employer retirement plans. Not finding the retirement plan information you need? Connect with us here to learn more about Watkins Ross retirement plan design and administration services. --- ### [Plan Documents](https://watkinsross.com/articles/categories/plan-documents/) **Description:** Retirement plan documents form the backbone of a retirement benefit’s standards of operation and regulatory compliance. As legally binding agreements, your business’s retirement plan documents function as both proof of IRS compliance and an up-to-date record of retirement plan operating details, plan participant qualifications and rights, and your responsibilities within the plan as an employer. Failure to properly maintain retirement plan documents can result in penalties and legal recourse. Protect your business’s retirement plans by familiarizing yourself with the plan document articles shared on the Watkins Ross blog. We unpack the rules and regulations surrounding plan documents and provide sound advice for employers seeking to create or improve their plan documents. Looking for a solid, proven plan document solution for your business’s retirement plans? Watkins Ross document services specialists are experts at ensuring your plan documents meet federal compliance rules. Connect with us here to learn more about Watkins Ross plan document services and how together we can protect your business. --- ### [Latest News](https://watkinsross.com/articles/categories/latest-news/) **Description:** Retirement plans, post-employment health plan benefits, and self-insured business financial and liability reporting requirements continually evolve and change over time. Retirement and health plan regulatory parties must consequently update terms, conditions, and reporting obligations regularly. Keep your business up-to-date and compliant by connecting with the latest retirement and health plan news on the Watkins Ross blog. From 401(k) rules and pension benefit specifics to deferrals, distributions, and incurred liability considerations, Watkins Ross breaks down the latest news and important retirement and health plan updates so you can ensure your business provides the best possible benefits for your employees at the least amount of regulatory reporting risk. Interested in obtaining an expert look into your business’s current benefits and exploring how they fit within an ever-changing regulatory climate? Contact the Watkins Ross actuaries and retirement and health plan teams to obtain an in-depth assessment of your plan positioning, reporting liabilities, and cost-saving opportunities. --- ### [Multiemployer Plans](https://watkinsross.com/articles/categories/multiemployer-plans/) **Description:** In the world of multiemployer retirement and pension plans, it pays to ensure your business’s multiemployer retirement benefits are compliant, up-to-date, and properly funded. Multiemployer plans incur the same regulatory compliance standards as traditional qualified retirement plans, but at a much higher level of complexity given the number of parties involved. Multiemployer plans require coordination between a joint board of union and management trustees and fall under the governance of not only the Employee Retirement Income Security Act but also the Multiemployer Pension Plan Act of 1980. Multiemployer plans require qualified actuary approval and composition of yearly minimum funding requirements and zone certifications. Withdrawal liability calculations when an employer leaves a multiemployer plan are equally important; these calculations identify unfunded liability based on plan influences like discount rates and employment figures. Ensure you have the tools you need to manage your multiemployer plan by reading our multiemployer articles on the Watkins Ross blog and partnering with Watkins Ross actuaries. Together we can protect against penalties and verify your multiemployer plan meets all funding qualifications, reporting requirements, and deadlines. --- ### [403(b) Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/403b-plans/) **Description:** Are you a benefit plan administrator for a public school district, hospital group, or 501(c)(3) organization? 403(b) plans provide retirement benefits for employees in these specific nonprofit business sectors. Like a 401(k), 403(b) plans allow participants to diversify their investment allocations and tailor their portfolios to meet their long-term retirement goals. Unlike 401(k) plans, 403(b) plans incur limits in terms of investment options and employer matching potential. Leveraging a 403(b) plan to meet your nonprofit business goals can be tricky and complicated. Expand your 403(b) plan knowledge by exploring our 403(b) articles on the Watkins Ross blog. From minimum distribution requirements to IRS updates, Watkins Ross has everything you need to customize your retirement plan and ensure your benefits align with your long-term objectives. Contact us here to learn more about 403(b) plan designs and administration features. --- ### [Cash Balance Plans](https://watkinsross.com/articles/categories/cash-balance-plans/) **Description:** Are you a member of a medical practice group, a partner in a multi-generational family-owned business, or the owner or shareholder of a single-member S-Corp with large S-Corp distributions? A cash balance plan may be the perfect fit for you. Cash balance plans allow high-income earners to benefit beyond the limitations of a profit sharing plan or typical 401(k) by providing a principal credit and interest credit each year within an individual “hypothetical” account. Each cash balance plan maintains a set of funding limits, requirements, and risks outlined in the plan documents; maximum allocation limits typically exceed limits in defined contribution plans. Learn more about cash balance plans, including details about annuity forms of payment, tax-deferred savings, and minimum funding requirements by browsing our cash balance plan articles on the Watkins Ross blog. Interested in discovering how a cash balance plan can enhance your retirement plan benefits? Connect with the Watkins Ross cash balance plan administration team to capitalize on our decades of experience designing and administering cash balance plans for a variety of business types and industries. --- ### [Defined Benefit Plans](https://watkinsross.com/articles/categories/defined-benefit-plans/) **Description:** Defined benefit plans, also known as pensions, enhance employer retirement plan benefit packages by providing specific benefits to eligible participants upon their retirement date. Defined benefit plans are attractive to potential employees due to lifetime benefit payments, clear contribution rules, and low financial risk for non-contributing employees. Despite sounding straightforward, defined benefit plans carry a unique set of considerations and requirements for employers and plan administrators. Defined benefit plans almost always obtain funds entirely from employers, meaning employers carry the majority of investment risk, not plan beneficiaries. Defined benefit plans must prove financial stability on a yearly basis for plan funding and reporting purposes. Reduce your defined benefit plan risk by researching applicable defined benefit plan risk articles on the Watkins Ross blog. Our Watkins Ross retirement plan team has the experience and knowledge to design your defined benefit plans to fit your business’s goals; connect with us here to learn more. --- ### [Defined Contribution Categories](https://watkinsross.com/articles/categories/defined-contribution-categories/) **Description:** A Defined Contribution plan is a retirement plan in which employees contribute a fixed amount or percentage of their compensation to an individual account under the plan. Contributions are invested on the employee’s behalf and they will ultimately receive the balance in their accounts upon retirement. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans. For-profit companies can offer a 401(k) plan to help their employees save for their future by giving them the opportunity to defer pre-tax or after-tax dollars via payroll deduction into their account and select from a diversified investment menu. 403(b) plans provide retirement benefits for employees of public school districts, hospital groups, or 501(c)(3) organizations in these non-profit business sectors. An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company; this interest takes the form of shares of stock. Profit-sharing plans are a way for a company to share profits with its workers and align the financial well-being of workers with the company’s success. 457 plans cover retirement benefits for state and local government employees and some non-profit businesses. There are benefits to Employers for sponsoring retirement plans; research applicable defined contribution articles on the Watkins Ross blog. Our Watkins Ross retirement team has the experience and knowledge to help you design a plan to meet your business goals; connect with us here to learn more. --- ### [457 Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/457-plans/) **Description:** 457 plans cover retirement benefits for state and local government employees and some non-profit businesses. 457 plans are non-qualified, meaning they fall outside the guidelines, rules, and regulations of the Employee Retirement Income Security Act of 1974(ERISA). Plan administrators can choose to allow employees to contribute either pre-tax or after-tax dollars to their 457 plan, similar to a 401(k) plan. A 457 plan hasdifferent contribution limits and early withdrawal provisions than a 401k, and offers a unique “Double Limit Catch-Up” provision that allows almost-retired participants to make up for any eligible contribution years they missed. Wondering how a 457 plan might fit into your government retirement plan benefits package? Explore additional 457 plan details by reading our 457 plan articles on the Watkins Ross blog and connect with us here to get a customized look into how a 457 plan can impact your benefit structure. --- ### [Employee Stock Ownership Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/employee-stock-ownership-plans/) **Description:** An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers ownership interest in the company in the form of shares of stock. Employers can use ESOPs to align the interests of their employees with those of their shareholders. ESOPs boost employee satisfaction, retention, and job performance by linking your business’s financial success to employee retirement benefits; the better your business performs as a whole, the more your employees will benefit from their hard work. Watkins Ross is 100% ESOP-owned; we understand the intricacies and unique provisions of employee stock ownership plans. Discover the specific benefits of employee stock ownership plans by exploring our ESOP articles on the Watkins Ross blog. Wondering if an ESOP can enhance your business’s retirement benefits? Connect with us here to obtain professional insight from our retirement plan team and discover whether an employee stock ownership plan is the right fit for your business. --- ### [Profit Sharing Plans](https://watkinsross.com/articles/categories/defined-contribution-categories/profit-sharing-plans/) **Description:** Seeking a creative way to attract and retain employees while offering them an opportunity to earn rewards? A profit sharing plan may be the perfect motivational strategy for your business. Whether you’re a large corporation or a small family-owned business, profit sharing plans are strategic tools used to encourage your employees to care about and improve your business’s year-end financials. Profit sharing plans function by giving employers the opportunity to assess year-end revenue reports to determine how much they can contribute to their employees’ retirement plans. The better your business’ finances at the end of the year, the more likely you can make significant contributions to your employees’ retirements through your profit sharing plan. Learn more about profit sharing plan specifics by touring our profit sharing plan articles on the Watkins Ross blog. Hoping to add a profit sharing plan to your employee retirement benefits and retention program? Contact the Watkins Ross retirement plan team to get a customized, professional look into your retirement plan options. --- ### [IBNR](https://watkinsross.com/articles/categories/ibnr/) **Description:** Does your business struggle to itemize and compile financial figures resulting from outstanding, unreported, and unpaid medical or prescription drug claims? Watkins Ross specializes in calculating Incurred But Not Reported, or IBNR, reserves and liability. Our IBNR calculation strategies include claim triangle or lag methodology, detailed and transparent views into historical payment patterns, and consideration of IBNR-impacting factors like plan updates, provider network changes, and external factors such as extreme weather and workplace shutdowns. IBNR calculations play a vital role in determining the financial health of your employer-sponsored health plans and IBNR end-of-year reports reveal outstanding accounts receivable liabilities. Interested in learning more information about IBNR calculations and reporting requirements? Visit our Watkins Ross IBNR blog articles to learn more about IBNR reserves and how the proper calculations can reduce your liabilities and provide vital insight into the health and wellness of your health plans. Ready to partner with a professional to complete your IBNR calculations? Reach out to the experienced Watkins Ross actuarial team here. --- ### [Other Post-Employment Benefits](https://watkinsross.com/articles/categories/other-post-employment-benefits/) **Description:** A great way to encourage employees to maintain employment until retirement is with the strategic use of other post-employment benefits, or OPEB. OPEB benefits commence after retirement to enhance and add value to standard retirement plans and pensions. Examples of other post-employment benefits include legal services, health plans to supplement or precede Medicare coverage, disability plans, and life insurance plans. By providing other post-employment benefits outside of a simple monthly pension or retirement plan payment, business owners provide motivational incentives to encourage employee retention and growth within the business. Other post-employment benefits do, however, come with some specific financial reporting liabilities. Ensure you’re compliant by reviewing our expertly-written OPEB articles on the Watkins Ross blog or connect with us here to receive a professional OPEB valuation. With the help of our experienced OPEB team, Watkins Ross can enhance your other post-employment benefits strategy, design the perfect plan structure for you, and provide solutions to reduce or eliminate your OPEB liability. --- ### [Pension Risk](https://watkinsross.com/articles/categories/pension-risk/) --- ### [401K Plan Compliance](https://watkinsross.com/articles/categories/401k-plan-compliance/) --- ### [Pensions in a divorce](https://watkinsross.com/articles/categories/pensions-in-a-divorce/) --- ### [pensions](https://watkinsross.com/articles/categories/pensions/) --- ### [dividing pensions in divorce](https://watkinsross.com/articles/categories/dividing-pensions-in-divorce/) --- ### [Cybersecurity policy](https://watkinsross.com/articles/categories/cybersecurity-policy/) --- ## Tags ### [Business Management](https://watkinsross.com/articles/tags/business-management/) --- ### [Retirement Plans](https://watkinsross.com/articles/tags/retirement-plans/) --- ### 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--- ### [Deferral Limits](https://watkinsross.com/articles/tags/deferral-limits/) --- ### [RMDs](https://watkinsross.com/articles/tags/rmds/) --- ### [Temporary Employees](https://watkinsross.com/articles/tags/temporary-employees/) --- ### [Public Act 202](https://watkinsross.com/articles/tags/public-act-202/) --- ### [OMB](https://watkinsross.com/articles/tags/omb/) --- ### [Year End](https://watkinsross.com/articles/tags/year-end/) --- ### [1099-R](https://watkinsross.com/articles/tags/1099-r/) --- ### [Beneficiary Forms](https://watkinsross.com/articles/tags/beneficiary-forms/) --- ### [Opinion](https://watkinsross.com/articles/tags/opinion/) --- ### [SECURE Act](https://watkinsross.com/articles/tags/secure-act/) --- ### [CARES Act](https://watkinsross.com/articles/tags/cares-act/) --- ### [Part-Time Employees](https://watkinsross.com/articles/tags/part-time-employees/) --- ### [Missing Participants](https://watkinsross.com/articles/tags/missing-participants/) --- ### [Bonds](https://watkinsross.com/articles/tags/bonds/) --- ### [Elective Deferrals](https://watkinsross.com/articles/tags/elective-deferrals/) --- ### [402(g) Forms](https://watkinsross.com/articles/tags/402g-forms/) --- ### [Controlled Groups](https://watkinsross.com/articles/tags/controlled-groups/) --- ### [Attribution Rules](https://watkinsross.com/articles/tags/attribution-rules/) --- ### [Completion Factor](https://watkinsross.com/articles/tags/completion-factor/) --- ### [Claim Reserves](https://watkinsross.com/articles/tags/claim-reserves/) --- ### [Claim Patterns](https://watkinsross.com/articles/tags/claim-patterns/) --- ### [Secure Act 2.0](https://watkinsross.com/articles/tags/secure-act-2-0/) --- ### [Consolidated Appropriations Act of 2023](https://watkinsross.com/articles/tags/consolidated-appropriations-act-of-2023/) --- ### [Long Term Part Time Employees](https://watkinsross.com/articles/tags/long-term-part-time-employees/) --- ### [Tax 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[Plan participant](https://watkinsross.com/articles/tags/plan-participant/) --- ### [Plan Sponsor](https://watkinsross.com/articles/tags/plan-sponsor/) ---