whats new out of washington dc bob kaplan, cfp, cpc, qpa, apa vp, national training consultant

What’s New Out of Washington DC

Bob Kaplan, CFP, CPC, QPA, APAVP, National Training Consultant

Retirement - Insurance - Investments 2

Important Information – The Legal Stuff

• This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

• Circular 230 disclosure: These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matters addressed in this document. The taxpayer should seek advice from an independent tax advisor.

The discussion highlights key issues of adopted and proposed Internal Revenue Code regulations. Any or all of the proposed regulations could change or be adopted as presented. The information is provided for your education only. Neither ING or its affiliated companies or representatives offer legal or tax advice. Consult your tax and legal advisors regarding your individual situation.


Agenda

• Automatic Enrollment

• Lifetime Annuity Payments

• Deficit Reduction

• Questions?


Automatic Enrollment

• Employer based savings program

• Intended for companies with more than 10 employees who do not sponsor a retirement plan

• Included in President’s February 14, 2011 budget

• Will House really want to mandate an employee benefit plan (remember Health care!!)


Lifetime Guaranteed Payments

• Bi-partisan proposal by Kohl, Bingaman and Isakson

• Bill reintroduced by Senate in February

• Report annuity amount annually based on current account balance

• Plans don’t have to offer lifetime payment option

• Plans report monthly annuitized amount of today’s value (no additional interest or contributions


What Will Congress Do??

• Deficit Reduction• Future of tax preferences for plans

• One recommendation – eliminate all tax deductions

• Another – cap DC accruals to lesser of $20,000 or 20% per year

• What could they do• Eliminate catch-up

• Lower Elective Deferral amount

• Eliminate cross-testing

• Lower considered compensation

• Freeze COLAs on contributions (salary, deferrals, annual additions)


What Will Congress Do??

• SEAL Act• Limit of no more than 3 loans

• Give 6 months after termination to pay back

• Allow deferrals after hardships

• Eliminate “credit card” loans

• SEAL = Savings Enhancement by Alleviating Leakage


Pending Regulations from DoL

• Participant Advice

• Target Date funds (SEC) and QDIA (DoL)

• Definition of Investment Manager Fiduciary

• Service Provider Fee Disclosure• 408(b)(2)


Questions

• I will be happy to answer any questions on Legislative, Regulatory or compliance issues

• Thank You

IRS Identifies Common 401(k) Plan Compliance Issues

Carla Ennis, QPA, QKA, APACompliance Consultant


Common 401(k) Compliance Issues

• IRS 401(k) Survey Results

• Most common compliance issues found so far:

• Plan document failures

• Terms of plan not followed

• Failure to use plan compensation definition

• Failure to follow plan loan provisions

• Employee Plans Compliance Resolution System (EPCRS)

• IRS Error Prevention Advice


Common 401(k) Plan Compliance Issues

• Plan Document Failures

• Document file incomplete

• Plans not timely amended for required changes



• Terms of the plan not followed or not applied correctly

• Employers not reading plan documents

• More favorable action still a compliance issue

• Changes require a plan amendment



• Definition of compensation is not followed

• Found in approximately 50% of plans

• Different definitions for different purposes

• Compensation errors affect many areas

• Can be costly and time consuming to correct



• Failure to follow loan provisions

• Loans have been permitted with no loan provision

• Repayments are not made

• Loans exceed permitted amount

• Loan forms missing or not used at all


Correcting Common 401(k) Compliance Issues

• Employee Plans Compliance Resolution System (EPCRS)

• Promotes voluntary compliance

• Self-Correction Program (SCP)

• Plan sponsor may correct operational errors without an IRS filing

• Voluntary Correction Program (VCP)

• Plan sponsor may correct operational, plan document, demographic and employer eligibility failures

• IRS filing and user fee based on number of participants

• Audit Cap

• Used when IRS finds the error

• Financial sanctions based on facts and circumstance


Correcting Common 401(k) Compliance Issues

• EPCRS correction principles

• Resemble existing correction

• Keep assets in plan to extent permitted

• Provide benefits for NHCEs if nondiscrimination failure

• Can’t violate any other requirements

• IRS may take into account a correction method authorized by another government agency

• Not to be used in place of corrections provided for under the Internal Revenue Code or Regulations


IRS Advice for Error Prevention

• Set up internal controls and procedures to ensure:

• Documents are executed & current

• Plan is operated in accordance with document

• Roles/responsibilities are identified

• Monitoring of Internal processes and service providers

• Do your own internal audit at least once each year


IRS Correction Information Online

• Link to IRS plan correction page below includes:

• EPCRS Program under Revenue Procedure 2008-50

• Fix-It Guide for 401(k) Plans

• Other correction information

• Finding and avoiding plan errors• http://www.irs.gov/retirement/article/0,,id=96907,

00.html

• Link to IRS EPCRS slide presentation• http://www.irs.gov/pub/irs-tege/epcrs_phoneforu

m_correction.pdf


QUESTIONS??

Fee Disclosure

Carla Ennis, QPA, QKA, APACompliance Consultant


Plan Sponsor Disclosure

• Plan Sponsor (ERISA 408(b)(2))

• Service Provider disclosure of fees and services to plan fiduciaries

• Burden is on service providers to deliver disclosure

• Fiduciary must receive disclosures for service contract to be deemed “reasonable” under ERISA

• Strong focus on fees and revenue sharing service provider is receiving



• Plan Sponsor – Interim Final Regulations under 408(b)(2)

• Covered service providers must disclose fees and services

• In advance of the date the contract or arrangement is entered into, extended or renewed

• New sales and existing clients

• Effective date extended from January 1, 2012 to April 1, 2012



• Applies to covered service providers and covered services (defined on next slide)

• Exception if anticipated fees are less than $1,000 for the year

• Good faith errors are not a problem if• Corrected within 30 days of discovering the

errors


Covered Service Providers

• Fiduciary Services• Performed directly to the plan as a fiduciary

• Investment adviser registered under 1940 Act

• Fiduciary to an investment product or contract that holds plan assets in which the plan has a direct investment

• Recordkeeping or brokerage services to a participant directed plan

• Other services for “indirect” compensation• Banking, consulting, custodial, investment advisory,

recordkeeping, third party administration or other (actuarial, accounting, legal), etc.


ING Readiness for Plan Sponsor Disclosure

• Two reports:• Direct Fee Report• Indirect Fee Report

• Notification of Fee Changes


Indirect and Direct Fee reports

• Investment expenses and Indirect Compensation, if applicable• Fund expenses: management fees, 12b-1, adjustments

• ING contract charges: DAC, ING Admin,

• Revenue paid to ING from funds

• Redemption fees

• Float

• Service Description and Direct compensation, if applicable• Recordkeeping services: annual charges, per participant charges, asset based

fees, discontinuance charges, optional services and fees.

• Trust or custodial services


Participant Fee Disclosure

• Participant Disclosure (DOL reg. §2550.404a-5)

• Plan disclosure of investments and fees to participants

• Burden is on plan sponsor to deliver disclosure

• Focus on the cost to participant to be in the plan

• ING will provide tools to assist with compliance


Participant Disclosure

• Plan Participant – Final Regulations under 404(a)(1)

• Generally effective for Plan Years that begin on or after November 1, 2011

• Two major categories: • Plan Related Disclosures

• General Info (instructions, restrictions/limitations on transfers, ID of investment managers, etc.)

• General admin fees that may be charged (recordkeeping, legal, etc.)

• Individual fees that may be charged (loan, QDRO, etc).

• Actual charges to participant accounts


Participant Disclosure

• Chart listing investment options, rates of return and fees

• Performance – 1,5, 10 year

• Benchmark

• Fee and Expense – both as a % of assets and dollars per $1,000

• Internet Web address for additional information

• Glossary of terms


ING Readiness for Participant Disclosure

• Initial and annual disclosure

• Two charts will be furnished

• Initial disclosure extended to later of:

• May 31, 2012 or

• 60 days after first day of the plan year the regulation is effective

• Furnished annually thereafter

• Enrollment Materials

• Initial disclosures before first opportunity to direct investment

• Actual fees charged to participant accounts reported quarterly • Notification of changes


www.ing401kinfocenter.com


QUESTIONS

whats new out of washington dc bob kaplan, cfp, cpc, qpa, apa vp, national training consultant

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