FIVE THINGS TO DO BEFORE YEAR END FOR A HEALTHY RETIREMENT PLAN
At the end of the year there are a lot of checklists to go through. Here at BRI we are no different! Retirement plans need a periodic review too, so here’s a list of five things you should do before the end of the year to keep your retirement plan in good health.
1. TAKE INVENTORY
Check your plan documents file. Ideally you should keep a copy of every plan document that was ever adopted for your plan. Make sure that all of your amendments are properly signed, and that you’ve returned a signed copy to your TPA and/or plan record keeper.
Check your ERISA bond. If you’re required to maintain an ERISA bond, make sure that your policy covers the proper amount (generally 10% of plan assets up to a maximum of $500,000).
2. DOCUMENT NOTICE DELIVERY
Plan participants must be provided information about the plan. The information required depends on your plan design. For example, notices may include: Summary Plan Description, Summary of Material Modifications (amendments adopted after the SPD was drafted), Automatic Enrollment notices, or Safe Harbor notices (for 401(k) and 403(b) plans that have Safe Harbor provisions); and for participant directed accounts you may have Fee Disclosure notices, and Qualified Default Investment Arrangement updates. Pension plans may have Annual Funding Notices to deliver.
Make sure that you develop internal policies and procedures to make sure that the notices that are required for your plan are provided to both current and new employees timely. We recommend that you keep track of the delivery date, the method and the delivery list for every notice for which you are responsible. Check with your provider to confirm that they are meeting your needs with respect to delivery if they are providing assistance in this area.
3. PRELIMINARY CONTRIBUTIONS OR TESTING
Before you close your accounting books for the year you may want to get an estimate from your TPA about your company contribution liability for the year. Or perhaps you want to make sure that you’re funding the maximum contribution available for your own 401(k) or 403(b) plan for the year. Don’t try to guess or do this yourself – there are too many nuances involved! Let us help you – it may cost a few hundred dollars to run a projection, but it may save you thousands in unexpected taxes. Payroll closes out on 12/31 for many companies, so now is the time to make adjustments if necessary!
4. DISTRIBUTION PROCESSING
For business owners over age 70 ½ a Required Minimum Distribution is required before December 31. See our recent blog post on this topic for more details by clicking here.
Get terminated employees with small balances paid out or rolled over to an IRA before the end of the year to avoid having to pay participant fees for them next year.
Annual ESOP valuations are good up to the day before the last day of the year, so checks must be issued prior that to be able to use the prior year price – otherwise, the plan participant will have to wait until the next valuation is complete (this is often several months after the end of the year).
5. DATA GATHERING
Your TPA will need to understand what happened at your company during the year. Start gathering up employee records (hire/termination/rehire, birth date), compensation information (watch for special definitions or exclusions in your plan), hours worked (if applicable – track in one of 3 categories; 1-500, 501-999, 1000 or more). If any shareholders or partners were added or deleted, or if corporate officers changed, then gather that information. If there any family members of the business owners working for the company then let your TPA know (especially if the names are different).
At BRI we will also ask for your contribution history throughout the year so that we can help confirm that none of your contribution deposits were late. If you don’t have that information handy, you can start putting that together.
As your TPA, your plan’s health is important to us! It’s easier to keep a plan healthy than to resuscitate a sick one. If you have concerns about your plan, or if you need help with any of the five steps outlined here, call us or request someone to call you here. We’re happy to serve as your pension doctor!
At the end of the year there are a lot of checklists to go through. Here at BRI we are no different! Retirement plans need a periodic review too, so here’s a list of five things you should do before the end of the year to keep your retirement plan in good health.
1. TAKE INVENTORYCheck your plan documents file. Ideally you should keep a copy of every plan document that was ever adopted for your plan. Make sure that all of your amendments are properly signed, and that you’ve returned a signed copy to your TPA and/or plan record keeper.
Check your ERISA bond. If you’re required to maintain an ERISA bond, make sure that your policy covers the proper amount (generally 10% of plan assets up to a maximum of $500,000).
2. DOCUMENT NOTICE DELIVERY
Plan participants must be provided information about the plan. The information required depends on your plan design. For example, notices may include: Summary Plan Description, Summary of Material Modifications (amendments adopted after the SPD was drafted), Automatic Enrollment notices, or Safe Harbor notices (for 401(k) and 403(b) plans that have Safe Harbor provisions); and for participant directed accounts you may have Fee Disclosure notices, and Qualified Default Investment Arrangement updates. Pension plans may have Annual Funding Notices to deliver.
Make sure that you develop internal policies and procedures to make sure that the notices that are required for your plan are provided to both current and new employees timely. We recommend that you keep track of the delivery date, the method and the delivery list for every notice for which you are responsible. Check with your provider to confirm that they are meeting your needs with respect to delivery if they are providing assistance in this area.
3. PRELIMINARY CONTRIBUTIONS OR TESTING
Before you close your accounting books for the year you may want to get an estimate from your TPA about your company contribution liability for the year. Or perhaps you want to make sure that you’re funding the maximum contribution available for your own 401(k) or 403(b) plan for the year. Don’t try to guess or do this yourself – there are too many nuances involved! Let us help you – it may cost a few hundred dollars to run a projection, but it may save you thousands in unexpected taxes. Payroll closes out on 12/31 for many companies, so now is the time to make adjustments if necessary!
4. DISTRIBUTION PROCESSING
For business owners over age 70 ½ a Required Minimum Distribution is required before December 31. See our recent blog post on this topic for more details by clicking here.
Get terminated employees with small balances paid out or rolled over to an IRA before the end of the year to avoid having to pay participant fees for them next year.
Annual ESOP valuations are good up to the day before the last day of the year, so checks must be issued prior that to be able to use the prior year price – otherwise, the plan participant will have to wait until the next valuation is complete (this is often several months after the end of the year).
5. DATA GATHERING
Your TPA will need to understand what happened at your company during the year. Start gathering up employee records (hire/termination/rehire, birth date), compensation information (watch for special definitions or exclusions in your plan), hours worked (if applicable – track in one of 3 categories; 1-500, 501-999, 1000 or more). If any shareholders or partners were added or deleted, or if corporate officers changed, then gather that information. If there any family members of the business owners working for the company then let your TPA know (especially if the names are different).
At BRI we will also ask for your contribution history throughout the year so that we can help confirm that none of your contribution deposits were late. If you don’t have that information handy, you can start putting that together.
As your TPA, your plan’s health is important to us! It’s easier to keep a plan healthy than to resuscitate a sick one. If you have concerns about your plan, or if you need help with any of the five steps outlined here, call us or request someone to call you here. We’re happy to serve as your pension doctor!
