The 2015 Retirement Plan Limits are in

The Internal Revenue Service (IRS) announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost‑of‑living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

The limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

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Advisors should help grow Client’s assets

If you are a financial advisor, more assets under management equal more money. So that means a financial advisor working in their 401(k) plan space should do their best to making sure that their Plans get bigger n the asset department.

That’s why being concerned how much the fees that plan sponsors are paying for administration and investments are a concern. More money lost in high fees means less in the Plan.

Financial advisors should look at other avenues such as my friends at SaverNation who reward plan sponsors with 401(k) contributions for making purchases online. It is a no brainer for plans sponsors to join SaverNattion.

The other aspect if the new Internal Revenue Service guidance (Notice 2014-54) that will allow highly compensated employees who receive refunds because of a failed ADP deferral test to transfer those after tax refunds directly to a Roth IRA account within a 401(k) plan. There will be a few steps that a plan sponsor would have to take to make this work (such as having a Roth 401(k) feature to the Plan) in 2015, but it is a consideration.

Automatic enrollment is another option. Safe harbor plan design and cross-tested allocations can work as well.

An advisor who helps the plan sponsor grow assets can help them lower fees and end up getting more shekels for the advisor. That’s a good deal.

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Being a long term Plan Provider can be a bad thing too

Being a long time plan provider for a client can be a good thing and it can be a bad thing. While having a long time base of clients is great for business and indicative of client satisfaction, it can be a bad thing too.

Being a long-term provider for a plan sponsor client can be a bad thing. It’s like the folks on my local board of education. The members of the board of education have run unopposed for years and there has never been accountability. When you run unopposed, you end up thinking that you are so great that no one wants to run against you. You also end up with a sense of entitlement because you have been there so long.

The same can be said for long-term plan providers. There is that sense of complacency and the sense that this position as a plan provider is their divine right. Thanks to fee disclosures, the retirement plan market is more competitive and long-term plan providers may have more competition in keeping that business. The problem is that if you have been that plan provider before fee disclosure, you may still think you are in the good old days when their plan sponsor clients rarely reviewed plan providers.

So being a long-term provider is great for the pocketbook, but a bad think if the provider loses sight of the ball.

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How to Pick Your Retirement Plan Providers

My latest JDSupra.com article can be found here.

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Plan sponsors should replace the bad Bad Plan Decision Makers

If your company’s retirement plan got into some trouble because the powers that be who run the plan (whether it’s the C.E.O., human resources director, or retirement plan committee) took their eye off the plan, it may be a time to replace them especially if they haven’t learned from their mistakes.

They often say that people can’t change, but I believe that people can change if they learn from their mistakes. If their arrogance doesn’t let them learn from their mistakes, then they will never change and they will consistently make the wrong choices. Sounds like most of my family.

A retirement plan that had major compliance issues will have them again if the powers that be that didn’t learn from their ways will make consistent poor plan provider selections. It’s my opinion is that these powers that keep on making bad choices should step aside and let the people who can make the right choices take their spots. It’s hard for people with large egos to do such a thing because their egos won’t let them understand that what they have been doing all along is wrong. Sounds like my friends on the school board where I live. Bad decision makers will only start making good decisions only when they learn from their mistakes.

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Limiting Plan Sponsor Liability: The Board Game

After the downstairs play area was rebuilt after Hurricane Sandy, my wife went on a toy-buying spree to replace the board games we lost thanks to the five feet of water. My wife loves board games and the kids do too. Having discovered the Internet, I like them less so.

When it comes to being a retirement plan sponsor, sponsoring the plan isn’t just about the employees saving for retirement. It’s about playing what is essentially similar to a board game: “How to limit your liability as a retirement plan sponsor.” The concept is kind of the same as the board games Life or Monopoly. How the plan sponsor plays the limit liability game will dictate whether they will suffer pecuniary harm or not.

It may not be like Monopoly and buying up properties, but this liability board game is about making the correct moves of hiring competent plan providers such as a third party administrator and financial advisor with a process to review their work and the fees they charge. It’s not a difficult concept to understand because like a board game, life is a series of moves and the moves that a plan sponsor can take will go a long way in limiting their liability.

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Lies That Prospective Retirement Plan Providers May Tell You

My latest JDSupra.com article can be found here.

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Read the 5500 before E-Filing It.

Now is the time that plan sponsors who are on extension to file their Form 5500 should be receiving them via email from their third party administrator (TPA).

While plan sponsors just immediately file them to get it off their plate before the October 15th deadline, they would be wise to take a look before they do.

First off, anyone filing the Form 5500 is doing it under penalties of perjury and the last time I checked that was still a crime. A plan sponsor who didn’t review their Form 5500 maybe committing perjury because of something that was wrong on the Form 5500. One should never make any claim under penalties of perjury unless they reviewed such claims.

In addition, major omissions on the Form 5500 are just a recipe for a plan audit. Claiming an insufficient ERISA bond amount on the Form 5500 could get the red flag treatment from the Internal Revenue Service and/or Department of the Labor for a targeted plan audit.

I learned at an early age that you should read what you sign. The same should go for a plan sponsor who is e-filing their Form 5500.

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Advisors Advantage

My latest newsletter geared towards retirement plan professionals can be found here.

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Dumb Mistakes that 401(k) Financial Advisors Should Avoid

My latest JDSupra.com article can be found here.

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