Now is the Time to Take a Closer Look at Compensation

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The Department of Labor (DOL) dealt the human resource world another wild card in May when it released its final overtime rules. As most of you are already aware, the new rule nearly doubles the threshold for exempt employees from $455 per week or $23,660 a year to $913 a week or $47,476 annually. This means that employees paid less than the $47,476 salary level will be entitled to overtime pay on any hours worked over and above 40 hours per week. According to the DOL’s estimate, the new overtime rules will potentially change nearly 4.2 million employees’ exempt-worker status because they will now fall under the new exempt salary threshold.

While this law poses some very obvious challenges to companies in areas of compensation and hiring practices, it has a less recognizable, but just as impactful meaning to qualified retirement plans. This impact comes in the way the 401(k)’s plan document defines compensation. In many of the plans we have seen, overtime compensation is often included in the plan’s definition of compensation. This means that everything from deferral percentages to company match will be impacted for employees who become non-exempt on December 1 and begin to receive overtime. Additionally, for plans that exclude overtime from the definition of compensation, that practice of exclusion could be considered discriminatory if it causes the plan’s definition of compensation to favor the highly compensated employee (HCE) group. Speaking of HCEs, the new rule also built in a 34% increase to the total annual compensation requirement needed to be an exempt HCE, upping the level to $134,004. It remains to be seen what, if any, impact that change will have on the qualified plan world’s HCE definition.

What can you do to get ahead of the December 1st deadline? Read your plan’s document to make sure that you have a good understanding of your definition of compensation. Reach out to your payroll provider to make sure they are ready to accommodate the changes. Review your employee demographics to determine the potential impact to your company’s bottom line. Possibly and most importantly, partner with professionals in the benefit world to help you analyze this change and the other changes that are sure to come your way.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.

Please Don’t Call Me That

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I attended a conference recently and stumbled upon an idea during one of my break-out sessions that I guess I just never really thought a lot about.

Basically, it is that companies and their employees do not like employees being referred to as PARTICIPANTS by their retirement plan provider. The term seems disingenuous and generic. It does not imply the personal feeling that employers have for their hard-working, dedicated employees. Many employers regard their employees as almost family. When someone loyally works to better your company for 5, 10, 15, 25 years, you feel they are more than a participant. I get that.

What would be a better name for those employees who do participate in the company sponsored retirement plan;  one that would indicate they are more than a name and a number? Ideas? I really want to hear from you.

I think this notion hit me strongly because it really goes to the heart of the companies we want to work with at Grinkmeyer Leonard Financial. We have a wonderful client base of retirement plan clients and have always been particular those with whom we work. We want to collaborate with companies whose values align with ours. We believe the people who come in and work for your organization 40+ hours per week deserve more than just a paycheck. They deserve respect, quality benefits and the opportunity to retire comfortably.

At Grinkmeyer Leonard Financial, we also strive to make sure that all of the employees who are with our retirement plan clients have the best quality education regarding their retirement investing options. We go further though and try to educate employees as whole individuals, recognizing that they have lives and families outside of work. They need to know how to prepare for their children to attend college one day; they need to be aware of the financing options when buying a home; they should be acquainted with the benefits of healthcare savings accounts and the truth about debt consolidation. Grinkmeyer Leonard Financial has a comprehensive employee education program. While we know employers will enjoy the value this offers to employees, we also know first-hand that this type of financial readiness leads to employees being more productive at work. When someone has less stress at home, they can be more engaged while at work.

Our Retirement Plan Education Specialist, Caleb Bagwell, has a personal mission and in his own words, “I want to be a change in this world through my education platform.” Enthusiastic and engaging, Caleb extends a comprehensive educational platform to the employees with whom he works. Covering personal finance, retirement planning and leadership development, Grinkmeyer Leonard offers a wide array for education for the workforce – from blue collar employees to top-level executives.

For more information about our complete retirement plan advising platform, please contact me.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

Follow Jamie on LinkedIn

Follow Jamie’s Blog

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.

How to Ease the Audit Process with These Simple Steps

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When you can hear the frustrated moans of HR professionals over the sound of their fingers clicking through email after email looking for year old information or their sighs when shuffling through papers in the filing cabinet, you know that 401(k) audit season is in full swing. For qualified plans with over 100 participants in the 401(k) plan, audit season can be an aggravating time marked by constant calls and emails between the plan’s auditor, record-keeper, and third party administrator. However, I know a few simple tips that can help you ace your next 401(k) audit.

1.) Organize Your Fiduciary File

That old saying “an ounce of prevention is worth a pound of cure” is very true when it comes to organizing your plan documents.  Whether you utilize your record-keeper’s website, digitally image all pertinent documents, or print and file everything the old fashion way, it is important to make sure that you have a documented process for how you and your team store information. In addition, working with a retirement plan professional who understands the importance of having all of your plan documents in order can assist you in making sure that the right documents are saved.

2.) Hire a Proven Professional

In November 2015, the Department of Labor (DOL) sent out a somewhat unprecedented email to 401(k) plan sponsors stressing the importance of hiring a qualified CPA to audit company 401(k) plans. The DOL certainly did not mince words in the email; here is a direct excerpt, “Substandard audit work can be costly to plan administrators and sponsors. It both jeopardizes plan assets and can result in significant civil penalties being imposed on the plan administrator by the DOL.  A recent study conducted by the Department of Labor found serious problems with nearly 40% of employee benefit plan audits.  (You may read this study on our website at: www.dol.gov/ebsa).” Heeding the words of the DOL, I would recommend several best practices when selecting your plan auditor. Ask for referrals from other audit clients, review the CPA’s qualifications, and educate yourself about what to expect during an audit.

3.) Go Through a Test Run

It is important to understand that the Department of Labor and the Internal Revenue Service (IRS) look for different things when performing an audit. The DOL may focus more closely on the employee driven aspects of the plan.  Areas may include potential participant discrimination issues, prohibited transactions, management of service providers, up-to-date plan documents, accurate participant records (beneficiary designations, required notices sent, accurate deferral information, etc), and whether a prudent process was followed. On the other hand, the IRS is typically looking for plan qualification issues; ones that may result in penalties and interest. IRS points of interest may include a signed plan document with all amendments, IRS Letter of Determination, coverage tests, 402(g) limits followed, all participant distribution paperwork in order, and whether plan provisions were followed. Understanding what DOL and/or IRS auditors are looking for can help you save the appropriate information in your fiduciary file.

There are several key players when it comes to your 401(k) audit; the plan sponsor, the auditor, the record-keeper, the third-party administrator (TPA) and your financial advisor. If any one of these is weak, then the audit has the potential to take a frustrating turn for the worse. If you are worried that you don’t have all of the right people playing the parts for your audit, please let me know and we can work through additional ways to ease your audit experience.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

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SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.

Quantifying the Unknown

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It’s no secret that we are facing a potential retirement crisis in the United States.  A study by the National Institute on Retirement Security puts the national savings deficit at somewhere between $6.8 to $14.0 trillion (yes trillion with a “t”). Based on retirement account assets, 92% of working households do not meet retirement targets (The Retirement Savings Crisis, June 2013).  The chart below illustrates what we all already think we know: people are planning on working longer or forever because they are not positioned to retire.  Conduct a quick poll of your people and my guess is that most will say that they are unprepared for retirement, too.  You can read the studies, contemplate the charts, and brainstorm over what to do to close the gap, but at the end of day, as a President, CEO, CFO, or HR professional, is it really your problem if the average American isn’t prepared to retire?  I would argue 100% “Yes”. If you are responsible for paying, hiring, or managing your workforce, then you should be extremely concerned if your people aren’t able to leave your company for retirement.  The trouble with worrying about what to do with an aging workforce is one, how do you quantify the problem?  and two, what do you do about it?

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The first step is to understand what a delay in retirement by your company employees may cost your business.  We have the tools to determine, per individual employee, the cost of their putting off retirement based on salary and healthcare costs, including wage and health inflation. We can show you the potential savings to your company if you can help your workforce retire ahead of schedule and conversely, what the additional costs may be if your people stay on past normal retirement age.  In essence, there is finally a way to put a dollar figure to a cost that we all know exists, but didn’t know how to quantify!

Once you are armed with the knowledge of what the inability to retire for the average American means to you and your company, the next step is take action. It should be pointed out that simply offering a retirement plan makes a pretty significant difference in retirement confidence as shown in the chart below.

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However, offering a vanilla plan may not be enough.  We can assist you in reviewing current plan provisions to determine if plan design changes could have a positive impact on your employees’ retirement readiness.  Additionally, our education specialist, Caleb Bagwell, can meet with you to determine how a comprehensive education approach that includes one-on-one meetings, group sessions, and web-based communications will help move the needle.

We all know there’s a real retirement problem, so the question is what are you and your company going to do to solve it?

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

Follow Jamie on LinkedIn

Follow Jamie’s Blog

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.

Mid-Year Recap

Mid-Year-Recap---Jamie

It’s hard to believe that we are already more than halfway through 2016!  Here is a recap of some of my top posts from the year thus far.

2016 has been a year of ups and downs marked by overwhelming uncertainty with the upcoming presidential election, “Brexit”, and global unrest. The “On Shaky Ground” post highlights a few ways to stay the course during uncertain market conditions.

I can honestly say that I have yet to meet a business professional this year who is not interested in growing his or her business. “Calling All COIs” illustrates ways to leverage partners to help your business get to the next level.

25 Interesting Facts About Millennials created a lot of buzz because Millennials are quite possibly the trendiest business phenomenon of 2016.  With this demographic of current workers aged 19 – 35 rapidly entering the workforce, there is no doubt that they will continue to dominate discussions.

The heart of most companies is the Human Resource Department and the lifeblood is the people who work tirelessly in HR positions.  “You Cannot Spell HERO without HR” details ways that these invaluable professionals can ask for a little help.

Thank you for taking time to check out my blog and please share if you find the content to be useful.  I can’t wait to see what the rest of 2016 holds!

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

Follow Jamie on LinkedIn

Follow Jamie’s Blog

 

SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER WWW.FINRA.ORG/WWW.SIPC.ORG, A REGISTERED INVESTMENT ADVISER.  THIS COMMUNICATION STRICTLY INTENDED FOR INDIVIDUALS RESIDING IN THE STATES OF AL, FL, GA, KY, LA, MD, MS, OK, PA, SC, TN, TX. NO OFFERS MAY BE MADE OR ACCEPTED FROM ANY RESIDENT OUTSIDE THESE STATES DUE TO VARIOUS STATE REGULATIONS AND REGISTRATION REQUIREMENTS REGARDING INVESTMENT PRODUCTS AND SERVICES.