VIDEO: 20 QUESTIONS TO BENCHMARK YOUR PLAN

Posted on by Jerome.Pfeffer

When was the last time you reviewed your retirement plan – 5 years ago, 3 years ago?

If it has been over a year, it may be time to benchmark your retirement plan, but it doesn’t have to be a chore this time around. After your review, you should feel more confident with your plan’s design, employee engagement, service providers, funds and fees. Come prepared to do your review with 20 questions that will help you evaluate your plan.

This clip outlines 5 main areas of your retirement plan and the questions you should be asking.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC.  All rights reserved. Proprietary and confidential.  Do not copy or distribute outside original intent.

TRADITIONAL 401(K) VS ROTH: DO YOU WANT TO BE TAXED NOW OR LATER

Posted on by Jerome.Pfeffer

Your employees may have questions about one of the first decisions they will need to make – do they want to contribute to a Roth 401(k) or Traditional 401(k)? No matter how you slice it, taxes, income brackets and contribution availability can be confusing, and it is natural for them to need guidance.

Our helpful infographic illustrates the key differences and each plan type’s impact on take home pay and retirement income projections. Share this with your employees and let them discover which best fits their needs!

2022 DEADLINE NEARS: NOW IS THE PERFECT TIME TO REVIEW YOUR RETIREMENT PLAN DESIGN

Posted on by Jerome.Pfeffer

For the millions of business owners that offer a workplace retirement plan, the COVID-19 pandemic created many financial difficulties.

However, as the economic climate improves, there is an opportunity for employers to refresh their company’s retirement plan. With an important plan document restatement deadline happening in 2022, there’s never been a better time for employers to reevaluate their current plan design and, if necessary, add or update features that align with their business objectives and retirement plan goals.

Cycle 3 Deadline is Next Year

Every six years, the IRS requires business owners to restate their pre-approved qualified retirement plan documents to ensure they are up-to-date and compliant with current regulatory and/or legislative changes. A restatement means the plan document must be completely rewritten to reflect mandatory regulatory changes, as well as any voluntary changes made to the plan since the last update. But don’t worry, this is very normal and nothing to fear.

The latest restatement cycle for these plans began on August 1, 2020 and will close on July 31, 2022. It’s known as “Cycle 3,” since it’s the third restatement period required under the pre-approved retirement plan program.

Since the last restatement period that ended in April 2016, there have been several legislative and regulatory changes that impact retirement plans. However, this restatement period doesn’t include regulations introduced in the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. They must be addressed in separate, good faith amendments.

Restatement is mandatory. Plans that haven’t complied by the deadline could face penalties from the IRS. Even newly established or terminating plans need to restate their plan documents.

The restatement period provides employers with an opportunity to enhance their existing retirement plans — especially in light of the pandemic. Updating the plan’s design now could better position business owners, employees and companies for the future.


Plan Design Updates to Consider

Like many employers, you may be looking for ways to prepare your employees more effectively for retirement by increasing focus on plan design, investment performance and financial wellness. With these motivations top of mind, here are some plan design features worthy of consideration:

  1. Automatic savings features: Adding auto-features like auto-enrollment and auto-escalation may improve plan participation and increase savings rates.

Auto-enrollment enables employers to automatically enroll new hires into the retirement plan. To help maximize savings and improve outcomes, employers may want to consider enrolling new employees at a higher deferral rate, such as 6%, rather than the standard 3%. Under the SECURE Act, employers that implement auto-enrollment can also receive a tax credit. Additionally, employees can always opt out if they don’t want to participate.

With auto-escalation, employees’ contributions are automatically increased every year. For example, employers can increase deferral rates by 1% each year up to a maximum of 15% of pay.

The pandemic presented unprecedented challenges for employers that offer retirement plan benefits. With the future looking brighter and the Cycle 3 restatement deadline around the corner, now is the optimal time for business owners to review, and if necessary, update their plan design to confirm it aligns with your company’s goals and cash flow obligations.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

QUESTIONNAIRE: DO YOU KNOW THE DIFFERENT TYPES OF RETIREMENT PLANS?

Posted on by Jerome.Pfeffer

Help your employees save with a plan that fits your unique organization! Each type of retirement plan comes with its own set of features and tax advantage strategies for employees and employers.

Knowing the different types of workplace retirement plans available is important so you can choose the best one for your organization.  There are not only a number to choose from, but many of the plans offer different plan options to consider.

PEPs, MEPs and SEPs: DISCOVER THE DIFFERENCES

Posted on by Jerome.Pfeffer

Just ask anyone: Uncle Sam and the retirement industry love acronyms. Another was added in December 2020—PEP—which conveniently rhymes with MEP and SEP. The three plan types are 401(k) cousins[1] meaning they share many fundamental similarities, and their main differences relate to the administrative models they use.

If you don’t speak fluent tax code or understand complex legal jargon, you are in the right place! We’re going to break down a few of the 401(k) abbreviations you may have heard about lately because once you know what the acronyms stand for, they really start to make sense.

What is a SEP?

A Single Employer Plan (SEP)[2] is, as the name implies, sponsored by a single employer, including any controlled or affiliated group members. This is what most people think of when referencing a traditional 401(k) plan. A SEP is often the plan of choice for large, medium and small businesses as it can be easily customized to meet specific company needs. With a SEP, employers have total control over plan decisions and can work with a retirement plan specialist to help with fiduciary responsibilities.

What is a MEP?

A Multiple Employer Plan (MEP) is a retirement savings plan where multiple employers participate in a single plan. It is sponsored by one entity and adopted by one or more others, but here is the kicker: they need to share a common thread. Participating employers can’t be related tax-wise but they are often members of an association or professional employment organization. While there are various ways to set up a Multiple Employer Plan, to keep it simple, when we use the MEP acronym in this article, we are referring to a closed MEP. Member companies of a closed MEP are not required to file an individual 5500 report, undergo an annual plan audit and acquire individual ERISA bond protection.  

What is a PEP?

A Pooled Employer Plan (PEP) is a pooled retirement plan, a type of Multiple Employer Plan that allows two or more unrelated employers to participate in a single plan. It’s the new kid on the block, created by the SECURE Act of 2020 with an effective date of January 1, 2021. A PEP is offered by a group of employers who outsource all administration to yet another acronym—a PPP, or Pooled Plan Provider—a 3(16) fiduciary who establishes and administers the PEP.

The PPP is an important part of the PEP and has three fundamental models:[3]

How Do They Stack Up?

As with any solution, there are advantages and disadvantages; the same is true for selecting a type of 401(k) plan. There are so many variable options with each plan type, so here are a few key points to consider:

Customization: SEPs offer the highest level of customization as each employer can build a plan to meet their specific goals. By contrast, MEPs and PEPs are built with the best interests of many in mind so individual employers may be limited on the elements they can customize.

Time Commitment: One of the key benefits associated with MEPs and PEPs is the ability to outsource administrative duties. This same sentiment is true within a SEP when you select specialized service providers committed to taking on fiduciary duties.

Responsibility: No matter what, if you offer a retirement plan to your employees, you will carry some level of fiduciary responsibility. All 401(k)s plans allow you to offload plan operations and investment decisions to 3(16) Plan Administrator and a 3(38) Discretionary Advisor; the main difference with MEPs and PEPs is that both are determined by the plan; whereas, with a SEP, you have the ability to select all service providers.

Tenure: SEPs and MEPs have been around for a long time and are known entities. PEPs are still fresh out of the box and their effectiveness has yet to be determined.

Have questions? Call us today or schedule a virtual conversation to discuss which plan type could be best for your business.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.


[1] A MEP can also be a defined benefit plan.

[2] SEP can also refer to a Simplified Employer Plan, an IRA-based plan for self-employed individuals or small business owners with a few employees.

[3] Moore, Rebecca. “The PEP Opportunity.” Plansponsor.com. September 2, 2020.

CARES ACT AFTERMATH: WHAT PLAN SPONSORS NEED TO DO

Posted on by Jerome.Pfeffer

Pandemic Relief May Bring Administrative Pain to Plan Administrators

The CARES Act gave plan participants quick access to funds during the COVID crisis, although only about 6% of participants took advantage of the options offered.[1] However, as a plan sponsor you must understand your own obligations and how to keep your plan in good standing.

In most cases, the Coronavirus Aid, Relief, and Economic Security (CARES) Act did not change administrative procedures; however, it did raise a few compliance questions. With the subtle complexities involved, it is a best practice for plan sponsors to stay in close communication with their trusted administrator and, if necessary, ERISA counsel.

Coronavirus-Related Distributions

The CARES Act allowed qualified individuals to receive a “coronavirus-related distribution” (“CRD”) in the year 2020. Generally speaking, to qualify, a person or their spouse must have been economically affected by, or diagnosed with, COVID-19.

What the CARES Act changed:

A few questions raised:

  1. Is a plan required to accept a recontribution of a CRD?

No. While CRD repayments are considered rollovers, a plan is not required to accept them. If the plan does not accept rollovers, it does not have to be changed to accept rollovers or recontributions. A plan that does accept rollovers should review the recontribution of a CRD under the same procedures that apply to any other rollover contribution.

Yes. A plan administrator accepting a recontribution of a CRD must reasonably conclude that the recontribution is eligible for rollover treatment.

Even if a plan did not make CRDs available, qualified individuals who received distributions under existing plan provisions, either as in-service withdrawals or termination distributions, can designate those distributions as CRDs. This could, for example, make a hardship withdrawal eligible for recontribution.

Participants who received distributions may be informed of their ability to repay CRDs if they find they didn’t need the entire amount they withdrew.

Individuals may report one-third of the CRD amount as taxable income in each of three years, beginning with 2020. Alternatively, individuals may report the entire amount as taxable income on their 2020 tax returns and pay the associated taxes. However, the participant’s tax reporting is irrelevant from a plan perspective.

An individual may recontribute all or any portion of the CRD as a rollover to a plan or IRA within three years of receipt and avoid taxation on that amount. Any participant is responsible for obtaining his or her own tax advice.

Coronavirus-Related Loans

What the CARES Act changed:

A few questions raised:

  1. Must plan administrators provide notice to current employees who have outstanding loans that changed?

Qualified individuals who suspended loan repayments should have been notified that repayments resumed and that their loan was re-amortized for the remaining period of the loan to account for the accrued interest during the suspension period.

Nothing changes. If a plan accepts rollovers of loans from other plans, the plan’s existing procedural rules still apply.

Nothing changes. Most plans do not permit former employees to take plan loans and require repayment of loans upon employment termination. These plans are not required to change. If a plan permits terminated employees to continue to repay outstanding loans, normal procedures apply.

No special notice is required, and normal loan procedures will apply. If a CARES Act loan has been taken, it is still a plan loan and normal disclosures will suffice.

Minimum Required Distributions

What the CARES Act changed:

A few questions raised:

  1. Was this required?

Most administrators suspended these payments, but the plan sponsor had discretion as to whether to implement the suspension. Payments for 2021 are required to be paid by December 31, 2021 (or April 1, 2022 for initial required distributions for 2021).

What Else Should I Know?

One other thing to keep in mind is to speak with your plan administrator because plan amendments for the CARES Act provisions implemented are required by the end of the 2022 plan year (the 2024 plan year for governmental plans).

While we look towards recovery, a lot of has changed, but most has stayed the same. Hopefully, these detailed particulars were helpful as you oversee your company’s retirement plan. As you know, managing a retirement is no walk in the park, so when you have questions and would like to discuss in more detail, we are always here to help.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.


[1] Vanguard. “Revisiting the CARES Act and its impact on retirement savings.” January 2021.

Q3 2021 NEWS AND INFORMATION FOR EMPLOYERS: MEASUREMENT AND STRATEGIC PLANNING EDITION

Posted on by Jerome.Pfeffer

As the first half of the year phases out, it’s time to focus on measuring and begin strategic planning for your retirement plan. There’s a lot of new items on the agenda this year, from the CARES Act rules for repayment of loans to SEPs, MEPs and PEPs.  Plan sponsors may have a lot of their plates.

This quarter, we’re helping you make sense of all of the normal duties as well as the new plan sponsor obligations. Jump right in with our Q3 newsletter!

VIDEO: 12 TYPES OF FINANCIAL EDUCATION YOUR EMPLOYEES NEED

Posted on by Jerome.Pfeffer

Each of your employees is unique with their own individual lifestyle path. That said, your employees need guidance to make smarter decisions about their money so they can learn not only how to save today but how to build wealth for the future!

Here are the 12 types of financial education your employees need to begin and continue building towards their future.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

3 WAYS TO CONFRONT YOUR FINANCIAL FEARS

Posted on by Jerome.Pfeffer

30% of Americans don’t have a budget. In fact, 3 in 5 don’t know how much they spend last month, and the median household retirement account balance in America is $50,000.

One if not all of these statistics could exist in your workplace. Here are three ways your employees can take your control of their finances and give their savings a boost for a better future.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC.  All rights reserved. Proprietary and confidential.  Do not copy or distribute outside original intent.

STOP RETIREMENT SAVINGS SETBACKS

Posted on by Jerome.Pfeffer

The global pandemic has had a staggering effect on the economic lives of millions, driving them to actions that could have long-lasting effects on their retirement savings.

Facing unprecedented strain caused by the COVID-19 crisis, individuals who lack adequate emergency savings are turning to retirement plans to address their financial shortfalls.

Additionally, hardship withdrawals have been made easier by the passage of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Act expanded distribution options, offered favorable tax treatment for coronavirus-related distributions from eligible retirement plans and relaxed payback options for those who met specific criteria.[1]

A reported six percent of retirement plan holders took advantage of at least one CARES Act provision offered by the plan. Of these withdrawals, 21% took the maximum amount allowed under the Act ($100,000 or 100% of the vested balance).[2]

Plan leakage consequences

Overall, retirement plan leakage – which includes in-service withdrawals, cash-outs at job change and loans – can create savings repercussions and even a delay in retirement, even if the amounts are paid back.

In a single year, Employee Benefit Research Institute (EBRI) reported that $92.4 billion was lost due to leakages from cash-outs.[3] This is a serious problem as it can reduce aggregate 401(k)/IRA wealth at retirement. Essentially, money withdrawn early loses its potential for growth and interest accumulation, hindering its ability to produce adequate income replacement in retirement.

For those who still consider tapping into their retirement plan savings, they may be doing so as a result of a lack of emergency savings, something that is increasingly prevalent, according to a recent Bankrate study.[4]

These staggering facts point to the importance of having a robust financial wellness program in the workplace and by placing special emphasis on maintaining an emergency savings account, which employers can offer via payroll deduction.

Curbing savings damage

Separating emergency or “rainy day” savings and retirement savings accounts can have a practical impact, too. It can reduce the urge to give into short-term wants and separate long-run retirement savings needs.[5]

Participants should be aware of these financial factors when making retirement plan withdrawals:[6]

Benefits of financial education

Employers should work with retirement plan advisors to find ways to educate participants in today’s remote work environments; for example, an employer could host a virtual employee education meeting.

In these volatile economic times, it’s especially relevant to cover important topics that may help participants maintain a healthy retirement savings strategy including:

Despite the uncertainty brought on by the pandemic, employers can utilize key resources and get help from their plan advisors toward ensuring employees make sound retirement savings decisions today, and in the future.

Jerome Pfeffer, CRC, AIF

Managing Director

INVESTMENT SOLUTIONS GROUP

6020 Academy NE, Suite 206

Albuquerque, NM  87109

(505) 888-4015 Direct

(505) 515-0036 Fax

Jerome.Pfeffer@lpl.com

www.investmentsolutionsgroup.com

Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser. 

Member FINRA / SIPC.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC.  All rights reserved. Proprietary and confidential.  Do not copy or distribute outside original intent.


[1]Internal Revenue Service “Coronavirus-related relief for retirement plans and IRAs questions and answers.” irs.gov. March 2020.

[2]T. Rowe Price. “How the coronavirus is affecting retirement saving.” Sept. 2020.

[3] Employee Benefit Research Institute. “The Impact of Auto Portability on Preserving Retirement Savings Currently Lost to 401(k) Cashout Leakage.” Aug 2019.

[4] Bankrate. “Survey: Nearly 3 times as many Americans say they have less emergency savings versus more since pandemic.” Aug. 2020.

[5]Harvard Business School. “Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts.” Nov. 2019

[6] FINRA. “401(k) Loans, Hardship Withdrawals and Other Important Considerations.” 2020.

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