403(b) Plans Get Extension to Complete Written Plan Documents

On December 11, 2008 the IRS issued a notice announcing relief for retirement plans covering employees at public schools, colleges and universities, and other tax exempt organizations (usually referred to as 403(b) plans), that do not have a written plan document in place by January 1, 2009.

Due to the difficulty in satisfying the written document requirement by January 1, 2009 that many plan sponsors have expressed, the IRS will treat these plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if:

* By December 31, 2009, the sponsor of the plan has adopted a written 403(b) plan that is intended to satisfy the requirements of 403(b) and the regulations.

* During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations.

* By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.

Further guidance is expected from the IRS regarding 403(b) plans, including a revenue procedure establishing programs for 403(b) plans to obtain IRS approval of the plan document and allowing these plans to make remedial amendments to retroactively fix plan provisions under rules similar to those that apply for 401(a) qualified plans.

Plan Your Budget Today For 2008 & 2009 Safe Harbor Plans

As we approach the end of the year, now is the perfect time to review your company's retirement plan to determine if there are any design changes you want to make BEFORE 2009 begins. One of the most important design considerations is that of the 401(k) Safe Harbor.

For those companies that currently maintain a 401(k) Safe Harbor plan, reviewing your budget today could save you some financial grief down the road, especially in the current economic conditions. Keep in mind that:

• Safe Harbor Contributions are NOT optional. If your plan has a Safe Harbor provision in it for 2008, the company WILL be obligated to make the required Safe Harbor Contribution by the time the 2008 company tax return is filed, REGARDLESS OF YOUR CASH FLOW SITUATION.
• As you review your projected budget, if you feel the company's cash flow will not allow for the contribution for the 2009 plan year, the Safe Harbor provision must be amended out of the plan document prior to December 21, 2008.
• If the Safe Harbor provision is removed from your plan, the Employee Deferrals will be subject to the ADP testing, and the Employer Matching Contributions (if applicable) will be subject to the ACP testing. This could result in a significant decrease in the amount the Highly Compensated Employees may defer in 2009. You should speak to your Third Party Administrator about the possible impact this change could have on your participants.

For those companies that do not currently maintain a Safe Harbor 401(k) plan, but are considering doing so:

• If you currently have a 401(k) provision in your plan, the Safe Harbor feature may only be added at the START of the next plan year.
• Due to the notices that must be provided to participants 30 days prior to the start of a plan year, any company that wishes to maintain a new Safe Harbor 401(k) provision for 2009 must have the plan documents in place, and the notices provided to the participants by December 1, 2008.
• The Safe Harbor provision will allow the Highly Compensated Employees to defer up to the IRS maximum each year, and not be restricted by what the Non-Highly Compensated Employees defer.

As this is an extremely brief summary of the requirements of stopping, or starting at Safe Harbor 401(k) plan, we suggest you contact your Third Party Administrator as soon as possible to review the impacts on your particular plan.

The IRS Has Released the 2009 Cost Of Living Adjustments

The IRS has recently announced the Cost Of Living Adjustment for 2009. For the complete listing, click on the title of this post above to be taken to the IRS Announcement 2008-118. For your convenience, below are the major limitations that impact retirement plans:

401(k) & 403(b) Deferral Limit: $16,500

401(k), 403(b), 457 Catch-Up Contribution Limit: $5,500

SIMPLE Deferral Limit: $11,500

SIMPLE 401(k) & IRA Catch-Up Contribution Limit: $2,500

Annual Compensation Limit: $245,000

DB 415 Limit: $195,000

DC 415 Limit: $49,000

Dollar Limit for HCE: $110,000

Dollar Limit for Key Employee: $160,000

Social Security Taxable Wage Base: $106,8000

Fee Disclosure Is Coming

It looks like it is going to be reality. On September 23, the 408(b)(2) regulation (which will require disclosure of fees and potential conflicts of interests of all service providers to ERISA retirement plans) was submitted to the Office of Management and Budget. This is generally the last step in the process before final approval.

It is expected that "final regulations should be issued by November 1, 2008."

If approved by November 1, the regulation should be issued in final form by Thanksgiving. If the effective date of 408(b)(2) for all new contracts is January 1, 2009, this will not provide a great deal of time to update and modify all service contracts to meet the new requirements.

Stay tuned for more information...

Oops they did it again

In a classic instance of the left hand not knowing what the right hand is doing, the IRS has sent out a number of DENIALS for the Application For Extension Of Time to File an Employee Plan Return in error.

On the latest Form 5558, the instructions specifically state that no signature is required on the Application for Extension of Time, however the IRS began rejecting those submitted without signature, until someone there realized their mistake.

After speaking with a representative at the IRS, our office was given the following instructions for responding to the DENIAL letter:

* Write a letter back to the IRS explaining the form was not signed due to the change in the instructions

* Include a copy of the original Application for Extension of Time

* Include a copy of the DENIAL Letter

If you (or your clients) receive a DENIAL letter from the IRS, please forward it to our office immediately so that we may respond in the above manner timely.

Just another day in the Retirement Plan world...

Learn More about ASPPA's QPFC Program

In a recent post I mentioned that ASPPA has rolled out a new designation for Investment Professionals of Qualified Retirement Plans, QPFC. I am pleased to announce that ASPPA will be hosting a FREE on-line seminar with more information about the designation, course materials and costs. Below is information about this from the ASPPA website:


WEBCAST –(FREE) ASPPA’s QPFC Program – The “Gold Standard” of the Industry
Presented by: Sarah Simoneaux, CPC, and Chris Stroud, MSPA

Join ASPPA for a free webcast designed especially for financial consultants and sales/marketing support staff who specialize in retirement plans. Learn more about ASPPA’s QPFC (Qualified Plan Financial Consultant) credentialing program, which has become the “gold standard” in the industry for financial advisors who wish to distinguish themselves in the retirement plan marketplace. The webcast will provide an overview of the QPFC program and why it is important to you, as well as details about course materials, costs, benefits, etc. One significant benefit is that the exams required to earn the QPFC credential provide significant continuing education credits for CFP, ChFC and CLU. There will be time allocated during the webcast for additional questions on the QPFC program of ASPPA.

Sarah Simoneaux, CPC, and Chris Stroud, MSPA, will be hosting the webcast. They are both recent past presidents of ASPPA and currently work as E&E Program Advocates. Sarah has worked in the employee benefits industry since 1981 and Chris has worked in the industry since 1978. Sarah is the author of Retirement Plan Consulting for Financial Professionals, the required textbook for ASPPA's first Plan Financial Consultant exam (PFC-1), and Chris is the Editor of The ASPPA Journal. Sarah and Chris offer consulting services through Simoneaux and Stroud Consulting Services to for-profit companies providing retirement services and to non-profit organizations. Their firm specializes in business planning, business consulting, professional development, industry research and customized skill building workshops.

To register via fax, download the registration form at: http://www.asppa.org/archive/gac/2008/webcasts/goldstandard/promofax-092408.pdf, complete it, and fax it to ASPPA at 703.516.9308.

EGTRRA Document Restatements

Well, we've FINALLY started the latest mandatory document restatement process. One of our document providers has, at last, released 401(k) and profit sharing plan documents on their system! So we're now beginning to go through all of our clients' documents to update them to the EGTRRA approved document. In the process we will be:

* Informing our clients of recommended plan design changes
* Letting our clients know of various options in the designs available
* "Cleaning up" some of those pesky take-over plans

What does this mean to you? Be sure that you (or your clients) are aware this restatement MUST be completed. If the plan is a Defined Contribution Plan, and is using a Volume Submitter or Prototype Document, the restatement must be completed by April 2010. THIS INCLUDES SOLO 401(k) PLANS!

If you, or your client, has a Solo 401(k) Plan, and you need a non-proprietary plan document which will not restrict the investment provider to be used under the plan, contact our office for pricing. We have a standard Solo(k) document available that is cost effective, and meets all EGTRRA requirements.