2010 RETIREMENT PLAN LIMITS

On October 15, 2009, the IRS released the retirement plan limits that will be in place for 2010:

....................................2009..........2010

401(k) Elective Deferrals.........$16,500.......$16,500
Catch Up Contribution Limit.......$ 5,500.......$ 5,500
Annual DC Contribution Limit......$49,000.......$49,000
Annual Compensation Limit........$245,000......$245,000
Highly Compensated Employee......$110,000......$110,000
403(b)/457 Elective Deferrals.....$16,500.......$16,500
SIMPLE Employee Deferrals.........$11,500.......$11,500
SIMPLE Catch Up Deferral..........$ 2,500.......$ 2,500
SEP Minimum Compensation..........$ 550.......$ 550
SEP Annual Compensation Limit....$245,000......$245,000
Social Security Wage Base........$106,800......$106,800

CLIENT OF THE MONTH

Each month we draw attention to one of our clients that has a unique story. In this issue we are pleased to highlight one of our longest-term clients (in excess of 20 years), Daniels Oil Company of Portland, CT.

Daniels Oil Company began in the 1920s with coal and range oil; over the years, and three generations of family ownership, Daniels Oil has developed into a full-service fuel supplier, excelling in the heating and air conditioning industry by focusing on prompt and “’old fashioned’ friendly customer service.” From home heating oil and propane delivery, to boiler, A/C and water heater installation and service, Daniels Oil Company “will offer you the most in terms of quality, convenience, and value.”
With a main location in Portland, CT, Daniels Oil also has a location in Essex, CT, allowing them to service the entire region quickly and efficiently.

We encourage you to visit their website at www.danielsoil.com (or click the link in the title above) for more information on the services and products they offer.

IRS Retirement Plan Navigator

The IRS just rolled out a new web-based tool on their site, www.retirementplans.irs.gov/ (or click the title of this article above to be brought to the site automatically). This tool was deigned for small businesses, with the focus on

* Choosing a plan type
* Maintaining a plan
* Correcting a plan

Set up as a simple side-by-side comparison, the site will not recommend a particular plan, but rather highlight the plan features, with the intent on aiding the decision-making process.

Grow Your Business...Secure Your Spot Today!

Wells Thomas, LLC is pleased to announce our latest informational meeting for investment professionals working with Retirement Plans. Below is a copy of the invitation (click on the image to see full scale). If you are interested in attending, please contact Wells Thomas at seant@wellsthomas.com or Justin Terman of Meeder Financial at justint@meederfinancial.com.

We look forward to seeing you on September 30!

CLIENT OF THE MONTH

We are beginning a new feature: Client of the Month. Each month we will draw attention to a client who has a unique story. To kick this off, we are pleased to highlight Reynolds’ Garage & Marine Inc. of Lyme CT.

Reynolds’ Garage & Marine Inc. has recently celebrated their 150th year in business. Some of the highlights in the history of the business include:

• 1859 - Ephraim Otis Reynolds starts the business where he built two- and four-seat carriages
• 1890 - Wagon production ends as Studebaker beings its assembly line production. Ephraim enters the repair business
• 1909- Ephraim sells the business to son Hayden
• 1919 - Donald Grant (son of Hayden) begins repairing automobiles, including Studebakers and Model T Fords
• 1932 - the docks and dredging for the marina took place
• 1942 - Leland purchased the business from Donald
• 1977 - Gary purchased the business from Leland
• 1991 - Subaru franchise acquired
• 2009 - On April 9 Governor M. Jodi Rell officially declared "Reynolds Garage & Marine Day"
• Currently - Business also sells and services: Yamaha Outboards, Cobia, Skeeter and G3 Boats. The dealership employs all three of Gary’s children who are the sixth generation: Leland Thomas, G. Hayden Jr., and Kathryn. (“The History of Reynolds’ Garage and Marine”, Kathryn Reynolds Wayland)

We encourage you to visit their website at http://www.reynolds1859.com/ for more information on the unique history of a sixth-generation run family business, as well as the services and products they offer.

Wells Thomas, LLC is a proud sponsor of the Branford Jazz Series

Wells Thomas, LLC is pleased to be a sponsor of the 2009 Branford Jazz Series. Every Thursday night, from July 9th through August 20th a different jazz artist will be featured in a FREE concert on the Green in Branford.

Click on the title above to be taken to the official website for more information, a complete schedule, directions and parking.

Come on out and catch some great live music and enjoy the shops and award-winning restaurants in Branford..We look forward to seeing you there!

Connecticut Bill On Retirement Plans - Update

An April 15, 2009 the CT Appropriations Committee voted 30 - 24 in FAVOR of SB No. 1. Below is the language as passed by the committee.

AN ACT CONCERNING ECONOMIC SECURITY FOR CONNECTICUT FAMILIES.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (Effective from passage) (a) As used in this section, "small employer" means a business with one hundred or fewer employees.
(b) The Comptroller shall establish a tax-qualified defined contribution retirement program to provide retirement investment plans, including, but not limited to, those created under Section 401 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, to self-employed individuals, small employers and organizations qualifying as tax-exempt pursuant to Section 501(c)(3) of said Internal Revenue Code. In administering such plan, the Comptroller shall seek to minimize costs by helping small employers, such organizations and individuals purchase retirement savings plans, arrangements and investments through economies of scale, standardization and other measures.
(c) In carrying out the provisions of this section, the Comptroller shall contract with a third-party administrator for the management of such plan or plans and shall recover from program assets expenses incurred to initiate, operate and administer the program established pursuant to subsection (a) of this section.

Wells Thomas, LLC opposes this bill.

Click on the title of this article to be taken to the CT Government Website to track this bill.

Sometimes you just can't make this stuff up

Well I don't know WHY I am surprised...our local government does not seem to be in the mind-set of HELPING businesses in this state it seems. So it really should be of no surprise that, once again, a bill is being proposed for the State-Sponsored 401(k) Plan for small companies.

But wait...didn't this issue JUST come up last month?! And didn't the Commerce Committee agree it should not be pursued?

Absolutely.

This time it is being reintroduced by Senate President Pro Tempore Donald E. Williams as SB No 1, labeled fashionably: AN ACT CONCERNING ECONOMIC SECURITY FOR CONNECTICUT FAMILIES.

So...once again our fine state wants to compete with local industry. And as the financial industry is a large part of the state, what this bill is saying to others is: "Hey, the Connecticut Government doesn't have any faith in the services the institutional providers in our state offer, and we think we can do it better ourselves." Great way to instill confidence in others, don't you think?! Let's tell the rest of the country that one of our largest exports in Connecticut, the financial services industry, doesn't even have the SUPPORT of the state legislature! Great idea...

If you want to follow the latest status of the bill, click on the title of this article...it will take you to the state's site...

Bill Likely Going Nowhere

Good news! It looks like the CT Commerce Committee will NOT be voting in favor of CT SB No 971, An Act Concerning Small Company Retirement Plans. Upon further review the Committee chairs have stated that this route is not an appropriate one to take. They have asked Brian Graff of ASPPA for guidance in other alternatives, including auto-enroll IRAs.

Maybe the BEST 20 minutes in recent TV History! (or: Creamer vs. Cramer)

I've been a fan of Jon Stewart since his show on MTV in the early 90s. This past week he and Jim Cramer have been feuding publicly, and to the delight of many of us, last night Jon had Cramer on his show, "The Daily Show With Jon Stewart", and held no punches. For those of you who missed it, here are the unedited segments for your enjoyment...

Part 1 - Intro

The Daily Show With Jon StewartM - Th 11p / 10c

Intro - Brawl Street: Get Read to Buy Low! And Sell Die

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part 2 - The interview begins

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part 3 - The interview continues

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Part 4 - The conclusion

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

One of the things I love about this is that Jon says, right to Cramer's face, what many of us have been thinking and wondering. And I think these clips speak volumes. All I can say is, "Jon, you're my hero..."

Wells Thomas, LLC Is A Proud Sponsor Of The Branford Jazz Series

I am excited to announce the Wells Thomas, LLC is a 2009 Gold Sponsor of the Branford Jazz - On The Green Series, the inaugural outdoor jazz series in Branford! Click on the title above to be taken to the splash page...the website for the series should be coming live soon.

And while you're at it, check out Blue Plate Radio at http://www.blueplateradio.com/ for some great Jazz!

Update on CT Small Business Retirement Plans

A quick update on the hearing that was held on February 24th.

Brian Graff of ASPPA opened the testimony with a great visual, the 5 volume, 7000+ page ERISA Outline Book by Sal Trapodi being stacked upon the desk. In short, when Brian finished his testimony one of the co-chairs of the committee stated that there are obvious 'weaknesses' in the proposed bill, at which time Brian was asked for suggestions on alternative solutions. Brian indicated that payroll deducted IRAs is the route other states are venturing down.

In the end, a number of us testified against the proposed bill, and the sense is that the committee will not vote it through this year, but rather look at other avenues to help small companies set up some type of retirement savings plan. I am hopeful, but will continue to monitor the bill and let you know of any changes.

Thank you for those who called or emailed me with their support!

CT SB No 971

Tomorrow I will be joining colleagues from around the state, as well as representatives of ASPPA, at the CT Commerce Committee hearing on SB No. 971, An Act Concerning Small Business Retirement Plans. Below is the text of the testimony I will be submitting:

February 24, 2009

Commerce Committee

Room 110

Capitol Building

Hartford, CT 06106

Re: Raised Bill No. 971 An Act Concerning Small Business Retirement Plans

Dear Members of the Connecticut Committee on Commerce:

My name is Sean Thomas and I am the president of Wells Thomas, LLC, a Third Party Administrative company in Branford, Connecticut. With a staff of ten retirement plan administrators and support personnel, our company provides retirement plan consulting, design and administrative services to approximately 375 small companies. I strongly oppose Raised Bill Number 971 – An Act Concerning Small Business Retirement Plans.

This Act would permit the State Comptroller to “establish a tax-qualified defined contribution retirement program to provide retirement investment plans, including, but not limited to, those created under Sections 401 of the Internal Revenue Code, of 1986…” with the goal of minimizing costs by “helping small employers and individuals purchase retirement savings plans…through economies of scale…”

While we agree that efforts should be made to entice small companies to establish qualified retirement plans for their employees, we do not agree with the method proposed in this bill. A similar bill was proposed in 2008 (SB No. 652), which had a funding amount of $500,000 in the first year. As SB No 971 is written, this amount would be recoverable from plan assets, which would result in an increase in the underlying investment cost. If the costs were to be equitable and “competitive” in the current market, this additional cost would have to be in the range of 25 basis points (or 0.25%) of the total assets. This would mean that, in order to recover 100% of the start-up costs, and remain at the 25 bps level, the total assets under the program would have to average $200,000,000 for the year. This would be quite the accomplishment, given the current economic environment.

Indeed, we are seeing our clients scale back the level of contributions to their existing plans because cash-flow has decreased dramatically in the past months for so many. In this economic environment, most small company plan sponsors will look at the plan contribution from a tax-savings point of view. An Employer Contribution to a plan will make sense if the ‘employee cost’ is less than the amount the owner(s) would pay in taxes if the same dollar amount were kept as profit. If the ‘employee cost’ is greater than the taxes would otherwise be, many plan sponsors are opting to retain the profits for themselves and simply pay the taxes.

In short, most small company owners opt to implement a plan and make ongoing contributions to the plan only if the owners are able to see a tax advantage in doing so. Often this can only be achieved through more complicated plan designs. Therefore, the key stumbling block we see in designing retirement plans for potential clients is not the administrative costs, nor the investment fees, but the restrictions in plan contributions.

In our profession, we strive to provide each client with an individually designed retirement plan that suits the need of that particular company. In an effort to accumulate sufficient retirement benefits for all level of employees, this often results in complex plan design and testing. In addition, we recognize the need for ongoing monitoring of all aspects of retirement plans as well as continuous education and service to both the employer and employees.

We understand that the reason SB No 971 is being introduced is the intent to reduce plan fees. However in the current marketplace, fund and asset management expenses under retirement plans have already been decreasing. Several providers have released new products with lower expense ratios in order to compete in the qualified plan market. Many funds offered are Institutional or Retirement Class shares, with front and back end loads waived. Recent focus on fee disclosure has helped drive down Investment Advisor Fees.

In addition, there are already a number of low- or no-cost plan design alternatives available to small companies, such as SIMPLE 401(k) Plans (which have very little administrative costs) and SIMPLE IRAs (which have no administrative costs). In addition, Safe Harbor Plans have been available for a number of years, which reduce administrative costs by eliminating certain plan testing requirements. These plans generally require the employer to make only a 3% of pay contribution to the employees and allow all employees to contribute higher amounts to the plan.

In operation, if SB No 971 were to pass, an RFP for the state sponsored plans would be issued each time the current contract expires. If a change in the provider occurs, this would result in forced changes in investments by plan participants, mandating notices and education to all those affected in order to meet Fiduciary Requirements. This would create an extremely large administrative burden, with associated costs going to plan participants or Connecticut taxpayers.

I believe one of the more immediate concerns is that of Fiduciary Liability. The fact that the State Comptroller will put out RFPs and make the decision on which investment provider will be offered, would, under the terms of ERISA, make the State Comptroller a Fiduciary to EACH of the individual small company plans that elect to take part in this. This matter should be looked into very carefully as it could potentially bring liability.Thanks to the Committee for your time today.

Sincerely,
Sean W. Thomas, QKA

President

Here We Go Again

Harrison Ford said it best in the original Star Wars (A New Hope), when looking at the mass of Stormtroopers in the hanger bay, "Didn't we just leave this party?"

That's how I'm feeling today when I received notice that CT is proposing, once again, "An Act Concerning Small Business Retirement Plans," just as it did in March of last year.

The bill, CT SB No 971, is virtually the same as last time; once again the intent is to establish a state run defined contribution retirement plan program for small companies in Connecticut. I'll be posting a copy of my latest letter to the CT Commerce Committee when I have completed it...but in the meantime, feel free to click on the title of this article to be taken to the site with the full language of the proposed bill.

And here's hoping we don't end up using that other classic Harrison Ford quote from Star Wars..."I've got a bad feeling about this..."

A Great Link To Check Out

Every once in a while an article or link I receive really grabs my attention. Recently I received an email from a colleague, Michael Pacowta, which linked his website: http://www.mikepacowta.com/.



But what I took notice of was his reference to a book he recently completed, "The 21 Biggest Mistakes Business Owners Make with Their Company Retirement Plans...and How to Avoif Them" (click on the title of this article to be directed to Mike's site.



About the book, Mike has this to say: "It contains important information primarily focused upon company retirement plans. Within it, I highlight my report on The 21 Biggest Mistakes Business Owners Make with Their Company Retirement Plans…and, How to Avoid Them. It presents 21 “eye opening” issues every business owner must be aware of, especially if they sponsor a company retirement plan or are contemplating doing so. The full report (in book form) has been sent to the Library of Congress in Washington, DC for copyrighting and will hopefully be available soon."



This is a very interesting piece...check it out.

ADP Refunds No Longer Cause You To Go Back In Time

It's finally here. No longer do you have to take Mr. Sherman by the hand and step into the Way-Back Machine when figuring out just WHEN to report those dreaded ADP refunds on your taxes. (The ADP test is the non-discrimination test on Employee Deferrals, which must be performed annually on all non-Safe Harbor 401(k) Plans.)



Starting with plan years that began on or after January 1, 2008, if refunds are required due to a failed ADP test, those refunds are now taxable in the year DISTRIBUTED. For example, if you receive an ADP Refund in February 2009, due to failed non-discrimination testing for the plan year-ended December 31, 2008, the refund will be taxable to you in 2009. You will receive a Form 1099 in January 2010 reflecting the refunded amount, which will then be reported on your personal tax return for the year.

In years past, ADP refunds made on/before March 15 (for calendar year plans), were reported on your PRIOR YEAR'S tax return. So refunds received in February 2008 were to be reported on your 2007 tax return...even though the 1099 would not be received until 2009!

And to make matters worse, if the refund were made timely (within 2 1/2 months of the close of the plan year) for off-calendar year plans, you would have to go back and amend your tax filing for the year in which the plan year STARTED! No WONDER people were always confused about the reporting requirements of the refunds.

But all is well with the universe now...so put away your time machine, and know that life just got simpler. Well, this piece of it at least.

2009 Required Minimum Distribution Waived

Due to the current economic environment, there is a temporary relief of the Required Minimum Distribution (RMD) from qualified retirement plans. Normally, if a participant subject to RMDs does not take the distribution in a given year, an excise tax of 50% is assessed against the amount that failed to be distributed. For 2009 ONLY, this excise tax has been waived, thereby making the 2009 RMD "optional".



If you are currently receiving RMDs annually, and wish to take the RMD in 2009, you may do so with no consequences. You do have the option to elect not to receive the RMD if you desire.



Anyone opting not to take an RMD in 2009 will be required to recommence the annual distributions in 2010.



A participant that was subject to the first RMD in 2008, and pushed the distribution out to April 2009 (permissible in the first year of the RMD only), this distribution is still required. The waiver applies only to those distribution applicable for 2009.