Newsletters and Bulletins

It’s four o’clock on Friday afternoon and there’s a knock on the door of the Human Resource Manager’s office. It’s Zachary, a fairly new employee who entered the company’s 401(k) plan last month. He’s been deferring $40 a week into the plan, which means he has accumulated $160 by now. But last night his cable TV was shut off because he couldn’t afford to pay the bill and from his 23-year-old point of view, retirement seems like a long way off.

While they don’t have a book called Retirement Plan Sponsorship for Dummies, they should. So in the interim, here is a checklist that plan sponsors should review that can help them develop good practices and avoid unnecessary liability in their stewardship of retirement plans for their employees.

It’s time again to participate in that never ending ritual of qualified retirement plan restatements. As legislation affecting retirement plans is enacted, the Internal Revenue Service (IRS) requires all plan sponsors to restate or “rewrite” their plans to conform to current law.

The safe harbor 401(k) plan roared onto the scene in 1998 as a new design that allowed company owners and other highly compensated employees to maximize their salary deferrals even when other employees contributed at relatively low levels. Over the last 16 years, these plans have continued to evolve through a series of new laws and IRS pronouncements.

A boomerang employee (as we will use that name in this article) is, quite simply, one who leaves and then comes back to work?a rehire. As is so often the case, the retirement plan rules related to rehires are quite different than those that apply to other areas of employment and benefits. Whether rehiring a former employee is a rare occurrence or part of your regular course of business, it is important to understand how these rules work.

DOMA is small in the sense that it consists of only three sentences, making it shorter to include the full text of the law here rather than attempting to explain it.

Retirement plans are complicated beasts. The Pension Protection Act of 2006 was more than 1,000 pages long; one of the main reference books that retirement plan professionals use is more than 7,000 pages long; and there are countless other sets of rules and regulations that add tens of thousands more pages. All those pages mean a lot of moving parts, and all those moving parts mean that sooner or later, something is going to fall through the cracks no matter how much attention to detail is paid.

As the national economy continues its recovery, more and more businesses are beginning to see their financial situations improve to near pre-recession levels. Companies that have not thought about making profit sharing contributions for years are starting to consider their options.

In today’s business climate, it seems it is becoming increasingly common for businesses of all sizes to be structured using multiple companies. Maybe a business person is pursuing multiple ventures with different groups of co-owners. Perhaps a company decides to offer a new product or service and that is best accomplished via a separate entity. Sometimes it makes sense to create a separate company for each of a business’s locations. Still other times the owner of one company decides to buy another business.

The economic environment of the last few years created financial challenges for individuals and businesses alike. Even though the worst of the recession appears to be behind us now, some of those financial challenges have had a ripple effect that continues to show itself. One area where that is especially true relates to the loans participants took from their 401(k) plans. Economic pressures certainly brought about an increase in loans, but it also caused some participants with loans to have trouble repaying them.