paisboa carroll consultants, ltd. patrick gallagher, cebs

PAISBOA

Carroll Consultants, Ltd.Patrick Gallagher, CEBS

Presenters

403(b) Plan Documents WebinarWritten Plan Requirements and Common

Issues

The Written Plan Requirement

Following the Terms of the Plan

Mandatory vs. Optional Provisions

Operational Issues & Common Written Plan Errors

Avoiding Plan Errors

Other IRS Violations

Fix-It Guides – Common Problems, Real Solutions

Types of Plans◦ERISA

◦Church Plans

◦Non-ERISA

The Written Plan Requirement

Types of Documents

◦Prototype

◦Volume Submitter

◦Individually Designed

The Written Plan Requirement

Following the Terms of the Plan

Eligibility

Compensation

Employer Contribution Distrib

ution Option

s

Written Plan

Mandatory

Eligibility

Benefits

LimitationsDistributions

Investments

Mandatory vs. Optional Provisions

Universal availability for employee deferrals

Can exclude: Student Employees Participants in another plan Non-Resident Aliens Employees who normally work less

than 20 Hours per week

Eligibility

o Non-Discrimination requirements

o Definition of Compensation

oYear of Service definition

Benefits

o Employee deferral – 402(g) Limit

o All contributions – 415 Limit

o Compensation – 401(a)(17) Limit

Limitations

Timing of Benefits

Form of Benefits

Distributions

Vendors available

Participant Directed Provisions

Investments

Mandatory vs. Optional Provisions

Optional Automatic Enrollment

Mandatory Employee Deferrals

Roth

In-Service withdrawals

Rollovers & Plan to Plan

Transfers

Catch-up contributions Termination of

the Plan

Hardships

Loans

Employer contributions

Vesting

Advantages Increase ParticipationSolve failing ACP Test

DisadvantagesAnnual NoticesParticipants with small balances

Automatic Enrollment

Condition of employment

Do not count toward 402(g) Limit

Mandatory Employee Deferrals

After-Tax employee deferrals

Earnings grow tax-free

New 1/1/2013 – In Plan Roth Conversion

Roth Elective Deferrals

• Age 59 ½ - earliest date for employee deferrals

• Define Sources Available

In-Service Withdrawals

• Helps employees consolidate and manage retirement investments

• Transfers are difficult to administer

Rollovers and Plan to Plan Transfers

• 15 Years of Service

• Age 50

Catch-Up Contributions

Preserves the Employer’s right to terminate

Termination of the Plan

IRS Safe Harbor Reasons

Can allow for any heavy and immediate financial need

Define Sources Available

Hardship Withdrawals

Define minimum/maximum loan Interest rate charged Number of years to repay Repayment method Number of loans outstanding When loan defaults

Participant Loans

Matching Formula

Non-elective Contribution

Employer Contributions

Most plans 100% immediately

3 year cliff

2-20 schedule

Vesting

Plan not adopted on or before 12/31/2009

Haste in adopting written plan resulted in errors

Operation not following the written plan document

Common Written Plan Errors

• Follow the terms of the plan• Timely transfer of contributions• Conduct periodic reviews• Update for recent law changes• Nondiscrimination Testing• Form 5500 Reporting

Operational Issues

√ Review plan document

√ Compliance testing each year

√ Monitor employee deferral and catch-up limits

Avoiding Plan Errors

Universal Availability Ineligible employers Plan Loans violate IRC 72(p) Hardship distribution failures Late deposit of employee elective deferrals

Plan transfers

IRS and DOL: Audit Focus

Fix-It GuidesCommon Problems Real Solutions

You have not updated your plan document effective 1/1/2009

Adopt plan now and update to prototype during remedial amendment period

Failed to follow plan terms

Apply reasonable correction methodSee Rev. Proc. 2013-12

Definition of compensation was not applied correctly

Corrective contribution or distribution

Missing Employer contributions

Corrective contribution

Fix-It GuidesCommon Problems Real Solutions

Plan failed nondiscrimination tests Make qualified non-elective contributions for the non-highly compensated employees or refund excess contributions to HCEs

A participant exceeded IRS Plan limits

Process an excess deferral distribution

Late deposited employee deferrals Deposit all late deferrals and earnings resulted from late deposit – see DOL lost earnings calculator at www.askebsa.dol.gov/VFCPcalculator/webcalculator.aspx

Fix-It GuidesCommon Problems Real Solutions

Participant loans do not conform to IRC 72p

Modify loan terms or send a corrective payment

Hardship distributions not made properly

Amend plan retroactively to allow hardships or have participant return hardship distribution with earnings

Did not file Form 5500 File all delinquent returns

IRS Fix-It Guide for 403(b) Plans coming soon:

http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Fix-It-Guides---Common-Problems,-Real-Solutions

How Can I Find Out More?

www.irs.gov/epNewsletters, Employee Plans News,

Retirement News for Employers, Governmental Plans Updates

Marcie Carroll 610-225-1210

mcarroll@cclbenefits.com

Tom Giedgowd 610-225-1206

tgiedgowd@cclbenefits.com

Pat Gallagher 610-225-1217

pgallagher@cclbenefits.com

Buzz Hartsig 610-225-1204

bhartsig@cclbenefits.com

Regulatory Guidance, Fiduciary Education, Investment Provider Analysis and Management, Investment Platform Plan Transition, Year-end Compliance Testing and Form 5500 Reporting, Plan Design Consulting & Employee Communication and Education

www.cclbenefits.com