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How and When to Pay Plan Expenses with Plan Assets

Some retirement plan expenses can be paid for with plan assets – but many can’t. Which are the “reasonable and necessary” retirement plan expenses that can be paid out of plan assets? Generally, services required to maintain the plan’s compliance and administration can be paid from plan assets. Obvious examples include the annual nondiscrimination testing and preparation of the annual Form 5500. Another example is a plan amendment or restatement that is required because of a legislative change. Optional…

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Beware of the IRS & DOL: Four Red Flags They Seek on Form 5500

The Form 5500 is an ERISA requirement for retirement plans to report and disclose operating procedures. Advisors use this to confirm that plans are managed according to ERISA standards. The form also allows individuals access to information, protecting the rights and benefits of the plan participants and beneficiaries covered under the plan. Make sure you are compliant. Be aware of red flags that the IRS and DOL look for on Form 5500 filings: Not making participant deferral remittances “as…

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Hey Joel! – Answers from a recovering former practicing ERISA attorney

Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney. Hey Joel, What’s the appropriate number of members and positions for a retirement plan committee? – Plannin’ in Pennsylvania Dear Plannin’, There is no specific guidance on the appropriate number of committee members. It’s important to have committee members who can contribute to the topics to be focused on. When there is one committee, as opposed to…

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How many Investment Options Should You Offer?

Many plan sponsors struggle with deciding how many investment options to offer in their retirement plans. While people generally like to have lots of options when making other decisions, having too many plan options can potentially lead to poor investment decisions by plan participants. In addition, increasing plan options can also increase plan costs, as well as the administrative paperwork associated with the plan. In a study on retirement plan options, researchers concluded that it is possible to present…

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Four Ways to Increase Employee Retirement Contributions

Michael Viljak, Manager, Advisor Development As a retirement plan sponsor, you want your employees to save the most they can in order to reach their maximum retirement potential. A significant amount of research says that you can improve both employee participation and their saving rates. Here are four ways you can help your employees start building a confident retirement: Boost employee participation with automatic enrollment. Choosing to automatically enroll all new employees in your retirement plan can dramatically improve…

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Staying the Course

Covid-19 Market Crash

“Stay Calm” is the advice from Pat Zumbusch, Wellspring’s Founder and CEO. “Unless something dramatic has changed in someone’s life, then don’t let the current market volatility cause you to change your 30-year financial horizon and road map.” We have been here before. Coronavirus and Past Market Epidemics As of February 28, 2020, global stock markets have entered “correction” territory, defined as a 10% decline from the index high. This is in large part due to the uncertainty surrounding…

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Tips for Preventing Uncashed Retirement Checks

Managing uncashed retirement checks may be considered a nuisance by plan administrators. Nevertheless, the employer still has fiduciary responsibility when a former employee fails to cash their distribution. Search efforts to locate a missing plan participant consume time and money and may fail to locate the participant. Likewise, going through the process of turning over dormant accounts to the state can also consume time and resources. Decrease the burden of uncashed checks by: Discussing with terminating employees during the…

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Is Your Turnover Rate Routine? What You Need to Know About Partial Plan Terminations

A partial plan termination is presumed by the IRS to occur when 20 percent or more of a company’s employees are no longer eligible to participate in the plan in a determined span of time (typically one plan year, but it can be other spans of time based on facts and circumstances). Routine turnover during the year is generally not considered a partial plan termination. To determine whether your turnover rate is routine, consider the following factors: What was…

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Considering a Traditional Safe Harbor Retirement Plan?

It may be advantageous for a plan sponsor to consider adopting a traditional safe harbor design for their retirement plan. Adopting a safe harbor retirement plan design permits an employer to essentially avoid discrimination testing (the testing is deemed met). Remember, this testing limits highly compensated employees’ contributions based upon non-highly compensated employees’ contributions. By making a safe harbor contribution highly compensated employees can defer the maximum amount allowed by their plan and Internal Revenue Code limits, without receiving…

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Target Date Funds and Fiduciary Obligations

Target date funds (TDFs) – which rebalance investments to become more conservative as a fixed date approaches – are a convenient way for plan participants to diversify their portfolios and reduce volatility and risk as they approach retirement, making them an increasingly popular choice. However not all TDFs are created equal, and selecting and monitoring them can pose unique challenges for plan sponsors and fiduciary advisors. TDFs were first introduced in 1994. A little over ten years ago, just…

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