IRS Regulations on Same-Sex Spouses

images (11)According to an article in Employee Benefit News, the IRS recently issued rules on retirement plan recognition of same-sex spouses.  IRS Notice 2014-19 requires plans to recognize the same-sex spouse as a participant when providing various administrative functions, survivor benefits, spousal consent, RMDs, qualified domestic relations orders, and hardship withdrawals as of June 26, 2013.  The ruling doesn’t require retroactive application of same-sex spouse rules prior to June 26, 2013 but retroactive application is an option for Plan sponsors.  Plan sponsors with Plan terms that contradict the new rules regarding same-sex spouse recognition have until December 31, 2014 to amend the Plan.

Have you evaluated your Plan for compliance with the new regulations regarding same-sex spouses?

Participant’s False Impressions

images (3)An article in the Wall Street Journal “When a Nest Egg Looks Ready, But Isn’t” addressed the recent Retirement Confidence Survey released by the Employee Benefit Research Institute- a survey of American workers and their preparations for retirement.  This survey revealed that although many workers believe they are prepared or will be prepared for retirement (75%), many aren’t seeing their true financial picture.

  • 43% of workers surveyed aren’t currently saving for retirement
  • 56% haven’t calculated how much they will really need for retirement
  • 68% aren’t sure that Social Security will continue to provide benefits of greater or equal value to those provided today
  • Only 22% have saved more than $100,000 for retirement
  • Only 19% sought investment advice from a professional

Have your Plan’s participants have made use of the Plan’s available advisement tools or financial calculators?

IRS Audits and Internal Controls

irs_signAccording to a recent article in The Kiplinger Tax Letter, IRS audits of retirement plans of large employers ($10 Million and 2,500 participants) should place more focus on their internal controls.  According to Kiplinger, in the event of an IRS audit, the audit team will start with the Plan’s internal controls, focusing on the employer’s HR and benefits staff and the electronic records system.  When fewer flaws are found in the Plan’s internal controls, it will be less likely the IRs auditors will need to expand their audit.

Have you recently reviewed your Plan’s internal controls?

AXA Equitable $20 Million Fine- Annuity Disclosure

NYAXA Equitable was recently fined $20 Million by New York State Department of Financial Services, the largest fine against an insurance company according to the Wall Street Journal, for failing to adequately explain the changes it made to its variable annuity products after the financial crisis.  Variable annuities offer guarantees of steady income for the lifetime of the annuity owner.  After the financial crisis, many insurance companies redesigned their annuities by reducing the benefits participants would be entitled to and increasing the cost of the annuity in an attempt to “smooth fund returns” and reduce the risk to participants and the insurance company.  These changes have the potential to limit participant gains. The $20 Million fine is the result of AXA Equitable’s failure to disclose the extent of the changes they made to their annuities, limiting New York’s ability to protect its consumers.

Did your Plan offer annuities before the Financial Crisis?  Were changes to those annuities offered adequately disclosed?

Participant Retirement Security and the Company Bottom Line

A recent article from HR Magazine, “Paving the Road to Retirement” featured some of the business reasons why employee retirement security should be a priority for Plan sponsors.

  • Employees with secure retirement futures allow Plan sponsors to plan for and develop the skills of younger employees, anticipating there will be room for advancement
  • Employees putting off retirement because of financial insecurity may not be contributing their best work to the company, reducing productivity and potentially affecting the company’s competitive advantage
  • Older workers may develop health problems that reduce their productivity and may increase the costs of company healthcare

If Plan sponsors focus on participants’ retirement health, companies may be better able to anticipate their future staffing needs and allow loyal employees to retire with dignity and financial security.Secure2

Does your Plan promote a secure retirement future?

A Focus on Women in Retirement

A recent article from Plansponsor focused on a survey conducted by the images (10)Transamerica Center for Retirement Studies which suggests that women are less likely to achieve a secure retirement than men.

A few of the findings from the survey are:

  • 7% of women are “very confident” they will be able to retire comfortably
  • 65% of Baby Boomer women don’t have a back-up plan if they have to retire earlier than planned
  • 43% of women expect they will work until they are 70 or don’t plan to retire at all
  • 45% of women work part-time, which may make them ineligible to participate in an employer sponsored retirement plan
  • The median contribution percentage for women offered an employee sponsored retirement plan is 6%
  • Women want information that is easier to understand

The article suggests expanding Plan eligibility to include part-time workers and starting with a good education program to increase participant awareness of the tax advantages of retirement savings may help to improve the outlook for women in retirement.

Does your Plan take into consideration women’s education needs when constructing their education program?

Proposed Changes to Retirement Savings

Ways&MeansA recent article from Plansponsor outlined a new proposal from U.S. House Ways and Means Committee Chairman Dave Camp that would have an interesting impact on current U.S. retirement system.  In his proposal,

  • Contribution limits would be frozen for the next 10 years, halting the current practice of adjustments for inflation
  • Require all elective deferrals greater than 50% of contribution limits be made as Roth deferrals
  • All Plans with more than 100 employees would be required to offer a Roth savings option
  • 25% cap on the rate deductions and exclusions reduce taxpayer income tax liability, including exclusions relating to retirement savings

How would these proposed changes affect your Plan?

Investment Advisor Services

Services2A recent article from Employee Benefit News described some of the services that Plan sponsors should expect to receive from their 401(k) investment advisor as their annual review approaches.


Those services include:

  • Review investment option performance
  • Provide new investment options-  Your advisor should provide information to aid management’s decisions on selecting replacement investments for poorly performing options
  • Review the Investment Policy Statement – The advisor should help to keep a Plan’s IPS compliant with 404(c) requirements
  • Help with employee education
  • Help evaluate plan fees

Does your Plan’s investment advisor provide these services?

Investment Policy Statement

An Investment Policy Statement (IPS) is a written policy to aid Plan fiduciaries in their decisions regarding the Plan.  The IPS should define the responsibilities of all fiduciaries, whatever their role within the Plan, and set the criteria for selecting, reviewing, and eliminating the investment options offered within the Plan.  An IPS is not required of Plan sponsors however, should the IRS choose to audit a Plan, an IPS is likely to be one of the first documents they ask for.

An IPS can also aid in limiting fiduciary liability by outlining the necessary investment requirements and fiduciary responsibilities needed to comply with ERISA section 404(c).  If a Plan meets the requirements of Section 404(c) it may eliminate or limit fiduciary liability for participant losses.

Does your Plan have a current Investment Policy Statement?

Good News and New Trends from 2013

2013 was a good year for most 401(k) participants.  Participants saw significant returns on stock investments and more employers reinstated or increased their match contributions.  According to the Investment Company Institute, tax-deferred accounts now make up 54% of the U.S. retirement market and the majority of that is within employer-sponsored 401(k) plans.  With more Americans now dependent on their employer sponsored plans to carry them in retirement, the focus has turned to fine-tuning employer plans to create the greatest advantage for participants.

Some of the latest trends and tools to consider for 2014

  • Some investment companies offer participant statements that compare their savings to other employees based on age, salary or gender
  • Employers are focusing on educating participants to increase participation, participant deferral percentages and participant returns
  • Employer sponsored plans are increasingly offering self-brokerage accounts as an investment option within their 401(k) plans

Does your Plan already offer some of these tools to Plan participants or are they considering offering them?


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