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.

Western Benefits Conference

This year's Western Benefits Conference was held in Seattle, WA, and as always there were some interesting topics and speakers. One of the highlights for me personally was attending the ASPPA PAC reception, and meeting Sal Trapodi, among others.

ASPPA (a co-sponsor of the event) had a large presence. All of our employees are required to pass at least the first two ASPPA exams, and Administrators are encouraged to obtain various ASPPA designations. While discussing this with ASPPA's educational representative, I was informed about one of their latest initiatives: Certifications for Investment Professionals, being slated as the "CFP for retirement plans". More information will be posted on this shortly.

A hot topic over the course of the conference was the DOL's focus on 2 things: 1. PPA Implementation; and 2. Fee Transparency. For the DOL's summary on these topics go to www.dol.gov/ebsa, however future postings to this site will focus on these issues.

Other issues discussed (which, again, will be covered in future postings) include: updated 402(f) notices to terminated participants, the HEART Act, 401(k) Safe Harbor Deposit Timing, Cash Balance Plans, and various proposed bills.

Seattle is a beautiful, and CLEAN, city...if you ever get the chance, take a few days to walk around the city and check out Pike Street Market and, of course, the Space Needle. On another note, I rounded out the week by attending day 1 of the inaugural Mile High Music Festival in Denver, CO. Though there were many great acts there that night (Tom Petty & The Heartbreakers, Mike Gordon, Moe. and more), I have to say that once again Steve Winwood blew me away. He sounds as great today as he did 40 years ago!

Economy Going Down, Participant Loans Going Up

For those of us in the Retirement field, the latest survey released by the Transamerica Center for Retirement Studies came as no surprise. What the survey found was that 'the number of workers with loans outstanding on retirement accounts...rose to 18 percent in 2007 from 11 percent a year earlier.'

As retirement plan administrators, we can predict fairly accurately when the upswing in participant loan requests will occur: the start of the school year when tuition bills arrive and just before and just after the Christmas holiday shopping time. But with the recent trends in the market, the rising costs of living, and the current mortgage 'crisis', we have certainly witnessed a significant, and steady rise, in loan requests in the past months.

As a rule of thumb, we encourage plan sponsors to hold off adding loan provisions to a plan as long as possible, because we often see that once the floodgates have opened, participants see the loan option as a quick fix to their current situations. In reality participants are damaging their retirement savings, while (in many cases) just delaying the inevitable.

Many participants look at plan loans as a viable option because they pay THEMSELVES back the interest instead of a bank or lending institution. But what they fail to realize, especially in a downward trending market, is that when the assets are liquidated, and the loan check cut from their account, they have most likely just committed the cardinal sin of investing: they bought when the market was high, and sold when the market was low. Worse still, if the market turns around while the loan payments are still ongoing, they will then be buying back in at a higher value.

What is more troubling, in real world applications of loans, is that there are a number of participants that terminate employment with outstanding loan balances. If these loans are not paid in full immediately (or if an arrangement is not made for ongoing loan payments), the loan balance is deemed in default, and will be a taxable event to the participant. This can certainly further the financial strain on those already feeling the crunch.

Take time to educate participants about the pros and cons of taking a loan from a retirement plan, and when possible, have them look for other alternatives. They may not realize it now, but come retirement they'll be glad...