Category: Blog

SRP’s Own Jim Robison Highlighted in 401(k) Specialist Magazine

Jim Robison, Managing Director Great Lakes, was recently interviewed by Ross Marino with 401k Specialist Magazine. Take a look into what has shaped him into an elite 401k advisor with over 25 years of experience. “What worked best was taking the time to learn from others in the retirement plan consulting arena and to gather observations and learn wisdom form them that is usually easily transferable to my own situation”, he explains. Get to know some of Jim’s professional and personal routines, from skills that are essential for advisors, to how he refreshes himself by working on the family farm.
Click here to read the full interview with Jim Robison.

Department of Labor Issues Relief Guidance for Victims of California Wildfires

The U.S. Department of Labor (DOL) recently issued benefit plan guidance and relief for plans and participants affected by the 2018 California Wildfires. The DOL recognizes that plan sponsors and participants may be affected in their ability to achieve compliance with various regulatory requirements. The guidance generally applies to all parties involved in employee benefit plans located in areas identified by FEMA as disaster areas, listed here: www.fema.gov/disasters.

The guidance provides relief from procedures related to plan loans and loan repayment, distributions, contributions and blackout notices. In general, the DOL will not take enforcement actions if plans follow the guiding principle to act reasonably, prudently and in the best interests of workers and families who rely on the plans for their economic well-being.
Specific guidance is offered in certain areas:
• Loans and Distributions: Plan sponsors must make a good faith effort to follow procedural requirements under the plan, but the DOL will not assist with requirements and if unable, make a reasonable attempt to assemble any missing documentation as soon as practicable.
• Participant Contributions and Loan Repayments: The DOL recognizes that some employers in these disaster areas may not be able to forward amounts withheld from employee wages within prescribed timeframes. Employers are required to act reasonably, prudently and in the interest of employees and comply with the regulations as soon as practicable. The DOL will not take enforcement action if timelines were not met solely due to the 2018 California Wildfires, in the FEMA-identified areas.
• Blackout Notices: Generally, 30 days’ advance notice is required when a participant’s rights under a plan will be temporarily suspended, limited or restricted due to a blackout period. The DOL regulations provide an exception to this requirement when the inability to provide notice within the required timeframe is due to events beyond the plan sponsor’s or fiduciary’s control.

The full DOL fact sheet can be found here. Your advisor is available to answer any questions you may have or help you determine practical approaches to meeting fiduciary duties and requirements.

Nonqualified Plans: Understanding the Fundamentals

Since the passage of The Employee Retirement Income Security Act of 1974 (ERISA), companies have found it difficult to provide their top executives with a retirement accumulation program that matches the level of benefits the average employee will receive.

The Gap is Real

This information is from the Principal Financial Group® Replacement Ratio Calculator with source information from the Annual Statistical Supplements to the Social Security Bulletin (www.ssa.gov). It is intended to demonstrate the potential impact of Social Security and 401(k) plan benefits at various income levels. For more information on your individual circumstances, please speak with your financial or tax professional.

Nonqualified deferred compensation plans can serve an important function in helping to fill the significant gap between the combined amount of a worker’s social security retirement benefits plus his/her qualified retirement benefits and the amount of retirement savings he or she will need in order to replace current income.

Regulatory Limits on Qualified Plans Drive the Need for Nonqualified Plans
• 401(k) limits executive contributions to $19,000 (2019)
• The maximum compensation eligible for qualified 401(k) or pension plan benefits is $280,000 (2019)

As a result, many employers have established nonqualified plans to supplement their broad-based plans and, therefore, provide competitive retirement accumulation for executives.

Nonqualified Plans Function as an Employer/Employee Agreement
• A nonqualified plan is, fundamentally, a contractual agreement (plan document) between an employer and one or more key personnel
• The company makes an unsecured promise to pay benefits subject to all the terms of the “agreement”
• A participating employee can never be more than a general, unsecured creditor of the employer as to the benefits (if current taxation of that benefit is to be avoided)

The Need for Executive Benefits
Employees deserve retirement security—to be allowed to perform their jobs creatively and enthusiastically, without the burden of retirement security hanging over their heads.
Employers need to be able to attract and retain quality management talent; to create management incentives; and to restore retirement income shortfalls for key executives, balancing risk with reward for directors.

This article is shared with permission from Fulcrum Partners. Click here for more information.

Hardship Withdrawals – IRS Issues Proposed Regulation Reflecting Statutory Changes

This past November, the IRS issued proposed regulations to effectuate changes made for hardship withdrawals in the Bipartisan Budget Act of 2018. Comments were due by Jan. 14, 2019. Although the statutory changes are effective beginning in 2019, the proposed regulations do not require any changes in how hardships are administered until 2020. Plan documents must be amended to reflect changes to the safe harbor rules. Most recordkeepers updated their systems so participants are no longer suspended from making contributions following a hardship distribution, but they have not set a time frame for when plan sponsors can expect to receive the necessary amendments. The deadline for amendments will be the end of the second calendar year beginning after the hardship changes appear on the IRS’ Required Amendments List. The proposed regulations include some changes that go beyond what is required to conform to the statutory changes. While the changes generally make hardship distributions more accessible, the IRS makes it clear that plan sponsors are free to add their own restrictions, such as limiting the sources eligible for hardship distributions.

Current Law
Prior to age 59½, in-service distribution of elective deferrals is limited to certain events including hardship. A distribution qualifies as a hardship only if made on account of an “immediate and heavy financial need.” The amount distributed cannot exceed the amount necessary to satisfy this need. The determination of whether the participant has “an immediate and heavy financial need” must be based on “all relevant facts and circumstances.” A distribution is considered necessary to meet “an immediate and heavy financial need” only if other resources are not available to the participant. Plan sponsors may accept a participant’s representation that he/she has no alternative resources, unless the sponsor has actual knowledge to the contrary. Certain sources are not eligible for hardship distributions – post 1988 earnings, safe harbor contributions, QNECs and QMACs.

Existing Safe Harbor Rules

Although not a legal requirement, the majority of plan sponsors follow the safe harbors. If a plan sponsor follows the safe harbor rules, the IRS will not challenge hardships on audit. These rules are included in virtually all prototype and volume submitter documents. There are two aspects to the safe harbor rules:

  • First, six events are deemed to qualify as “an immediate and heavy financial need:” (1) deductible medical expenses; (2) costs associated with purchase of a principal residence: (3) tuition and other expenses associated with post-secondary education; (4) payments to prevent eviction; (5) funeral expenses and (6) deductible expenses associated with repairing damage to a participant’s principal residence if deductible as a casualty loss.
  • Second, a distribution is deemed necessary to satisfy the immediate and heavy financial need if the participant has taken all other available plan distributions, including loans, and the participant is suspended from contributing for six months.

What Has Changed

  • The six month suspension of contributions is eliminated (optional for 2019).
  • The requirement to take a loan first is now optional.
  • Except for 403(b) plans, all account sources are now eligible for hardships, but sponsors may elect to limit the sources eligible.
  • Earnings remain ineligible for all 403(b) plans, along with QNECs and QMACs in custodial accounts.
  • Casualty losses related to home repairs are now deductible only if the taxpayer resides in an area declared to be a federal disaster. The proposed regulation clarifies that a participant is eligible for a hardship distribution for such losses whether or not a federal disaster is declared.
  • All expenses related to an event declared by FEMA to be a federal disaster qualify for hardship if the participant resides in or works in the disaster area.
  • Expenses incurred by the primary beneficiary that are qualifying medical, education or funeral expenses are eligible for a hardship distribution. Under prior law, this was limited to the participant, spouses and dependents.
  • The “all relevant facts and circumstances” evidentiary standard no longer applies. The participant must first take any available distributions under all plans of the sponsor. This includes non-qualified plans. And, beginning in 2020, the participant must represent in writing (or by electronic medium) that he/she has no other available resources to satisfy the need. The sponsor may accept this representation unless it has actual knowledge to the contrary.

Strategic Retirement Partners Embraces Fiduciary Excellence

Our firm was founded on the principles of integrity, professionalism and exceptional client service. We are also deeply committed to continuous improvement. Our dedication to doing what is best for you, our clients, prompted us to engage CEFEX, the Centre for Fiduciary Excellence, LLC to audit our processes.

We contacted the CEFEX organization and requested an independent analyst provide us with a comprehensive independent review. The process was rigorous and their assessment took months to complete. Now, after going through the audit and carefully evaluating our procedures, we are proud to share with you that Strategic Retirement Partners is a CEFEX certified Investment Advisor.

This certification signifies our commitment to uphold the highest level of fiduciary care and that has a direct impact on you, your plan and your employees. As a plan sponsor, the Department of Labor (DOL) identifies the following as your fiduciary responsibilities:

  • Act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  • Act prudently in the faithful performance of all duties;
  • Follow the plan documents (unless inconsistent with ERISA);
  • Diversify plan investments; and
  • Pay only reasonable plan expenses.

By working with Strategic Retirement Partners, you can rest assured that our actions align with these responsibilities; our prudent process aims to help you limit liability and build a retirement plan that strives to improve retirement outcomes.

CEFEX is an independent global assessment and certification organization. They work closely with industry experts to provide comprehensive assessment programs designed to improve the fiduciary practices of investment advisors, stewards (retirement plans, foundations and endowments, etc.), investment managers, and other financial service providers. CEFEX confers a formal certification for those firms that are willing to undergo an independent audit and able to demonstrate that they fully conform to high standards which are substantiated in case law and fiduciary best practices.

At Strategic Retirement Partners, we follow well-defined processes, grounded in best practices, so that we can make sound, objective, and consistent decisions in service to our clients. CEFEX certification offers testament to the fact that we understand the importance of paying close attention to everything from high level strategies and policies all the way down to the details of our business practices. The CEFEX Mark seeks to make our clients confident that we are worthy of their trust.

We wanted to share news of the important recognition of our commitment to fiduciary excellence and continuous improvement. CEFEX certification is yet another way we tangibly demonstrate that serving our clients’ best interests is our highest priority.

 

 

1 Department of Labor. “Meeting Your Fiduciary Responsibilities.” DOL.gov. Sept. 2017

CEFEX and Strategic Retirement Partners are separate, unaffiliated entities.

Six Easy Steps to Keep Your Plan Assets Safe

Cyber fraud is a growing concern globally. Individuals are typically very careful to keep their bank account and email authentication information safe, but they aren’t always smart with the rest of their personal information.

Participants need to be vigilant with their retirement savings accounts as well. In the past year we’ve seen a slew of cases of attempted fraud – some successful – against retirement savings plan participants across a multitude of recordkeepers. The good news is that virtually all recordkeepers view security as a prominent priority and diligently update their technology. However, their security can only go so far if the participant isn’t being equally vigilant.

Educate your plan participants on the following tips to ensure the security of their retirement savings accounts.

1. Use all available levels of authentication. If your plan’s recordkeeper comes out with a new type of authentication, your participants should implement it immediately.

2. If participants frequent a website or have an account with a company whose website and information has been compromised, they should change all of their passwords for all online accounts.

3. Remind participants to use strong passwords. Utilize letters, capitalization, numbers and symbols. Don’t use recognizable words. Don’t use the same password for multiple purposes. Have the password be at least 14 characters in length. Consider changing passwords frequently. Using a password manager can make this task less unwieldy.

4. Don’t send authentication information to any third parties, and remind participants to limit authentication access to use on sites which are navigated to independently – not through a link or other prompt.

5. Check your participants’ accounts frequently, address any irregularities, and remind participants to keep an eye out, too.

6. Ask participants to immediately contact you if they receive any “updates” that look suspicious so you can notify your recordkeeper.

Keep your participants in the know. We recommend sending the participant memo that is included with this newsletter on the importance of remaining vigilant when it comes to cybersecurity – it’s one of the most important investments your participants can make.

Records and Their Expiration Dates

“What records should I keep? How long should I keep them? How should I organize my files?”

Advisors have been asked these questions time and time again by plan sponsors looking for a general guideline for record expiration dates.

Record retention doesn’t need to be a mystery, and the filing system doesn’t need to become a tomb. For audits, remember the following requirements.*

As for organizing your fiduciary file, we suggest a format that includes the following sections:

1. Documents with all plan documents, amendments, tax filings and so on.

2. Administrative for all audit results, contribution records, Fiduciary Plan Review meeting minutes, fee benchmarkings, participant complaints.

3. Participant Communication containing copies of enrollment materials, communications and memos, and meeting sign-in sheets.

4. Investments with a listing of fund menu with expenses, Fiduciary Investment Review meeting minutes.

If a participant, auditor, or DOL agent requested plan information, could you find it quickly? The key is twofold: keep the things you need and store them so you can find them easily.

Of course, these are only general guidelines. For questions about your specific case, contact your plan advisor to discuss best practices for keeping records.

*For litigation purposes, we recommend that documents be retained indefinitely.

January 2019 Plan Sponsor Webinar

Click here to register for 2019 – What’s in Store For the Year Ahead?
Thursday, January 31st
at 11:00 AM ET / 10:00 AM CT / 9:00 AM MT / 8:00 AM PT

We hope that you will join us for our first webinar of 2019. Robert Wagner (Chief Investment Officer for
SRP) and Jim Robison (Managing Director, Great Lakes) will share a review of 2018 and the major
financial trends expected for 2019.

If you are interested in the impact of Government Shut Down and Political Turmoil, Trade Conflict, Fed
Policy, and the overall Economy then this is a can’t miss webinar.