The Best Gift You Can Give to Your Employees

christmas-piggy-bankLast week we looked at how a well designed 401(k) plan can be a great gift to your company. This week I want to explore how this same 401(k) plan can be a great gift to give to your employees.

One of the most clichéd, yet true statements regarding employees is, “Our people are our greatest asset.” Does your company believe that? My guess is yes. Therefore, a better question might be, “How does your company show your people that they are your most valuable asset?” I believe a well designed 401(k) plan can go a long way in helping your people feel their worth.

Employees are telling their employers they want good benefits. It is no surprise to anyone reading this that financial stress consistently tops lists of people’s greatest concerns. Many of your employees are faced with the costs of raising children and caring for the needs of aging parents all while trying to balance saving for their own retirement. This stretching of the dollar is causing a retirement crisis. However, as an employer you can help by offering a retirement plan. A study conducted by Lockton Retirement Services and detailed in the report “Finding the Links Between Retirement, Stress, and Health” found that 52 percent of respondents reported that having a retirement savings plan helps ease financial concerns “a great deal” and an additional 43 percent said it helps “a little.” Furthermore, those employees with access to a retirement plan in which the employer contributed to the plan reported higher levels of job satisfaction and lower incidents of physical ailments.

Employees are also looking to their employers for guidance when it comes to savings. In May 2015, Northern Trust released a study that surveyed more than 1,000 defined contribution participants and asked about their desire for guidance on retirement savings and the role of the plan sponsor. The results were very telling – 88 percent of participants strongly or somewhat favor their employers providing tools to help determine if they are saving the correct amount for a financially secure retirement, 80 percent believe employers should encourage employees to contribute to their retirement plan, 84 percent support employers offering incentives to contribute, and 72 percent think employers should provide a viewpoint on contribution amounts. There is a careful distinction to make when it comes to who is actually providing the education that employees desire. I would suggest that your company would be best served to hire a financial professional to deliver the education about the plan.

Finally, employees need tools that can assist them when it comes to understanding how saving into a retirement plan can positively impact their retirement futures. The retirement industry has come a long way in developing interactive calculators that can assist your employees with modeling what their retirement could look like. A good version allows employees to enter outside accounts, social security information, spousal information, and other personal information to come up with the most accurate predictions. If your current retirement provider does not offer anything like this, it may be time to shop around.

Your employees look to your company to provide the gift of helping them to save for retirement. If you do not think your current plan is helping deliver that gift, please call me at 205.970.9088 or e-mail me at jamie@grinkmeyerleonard.com, and I will get to work for you today on developing a plan that works for your company and its employees.

The Best Gift You Can Give to Your Company

money-christmas-tree

It’s official…the holiday shopping spree is in full swing. Hopefully, you made it through Black Friday with all of your limbs and hair and through Cyber Monday with enough money left in your account to pay this month’s bills! All the holiday shopping made me stop and think, “What is the best gift that you can give someone?” Respect, time, money all came to mind. With those things in mind, over the next three weeks I want to look at ways to use your benefit plan, specifically the 401(k) or Profit Sharing Plan, to help give those gifts to your company, your employees, and yourself.

Whether you are a C-suite level executive assessing where to best spend your company’s resources or a Human Resource Professional thinking about how to make the most of your resources to benefit the company, one thing is certain – ultimately the company you own, manage, or work for needs to thrive. I would argue that one of the best ways to ensure the growing or continued success of the company is to hire the most talented workers and to retain them by showing that you respect them and want to contribute to the success of their retirement futures.

The gift of time that offering a 401(k) plan can offer to your company comes by adding valuable time worked to the workforce. To explain, I believe there is a significant difference between an employee that has to work and one that wants to work. If, through your retirement benefit plan, you can add hours to the employees that want to work by reducing the hours of have-to-works by allowing those employees to retire on time, then I believe that you are giving a great gift to the company as a whole.

Offering a 401(k) plan can also help reduce corporate taxes, thus helping the company to save money. The most common way to reduce your company’s tax liability is through offering a match or profit sharing arrangement. With either a match or profit sharing agreement, the amount the company contributes is tax deductible. Another lesser known way to reduce your business taxes is to pay for the expenses related to the plan such as the cost of the third-party administrator, recordkeeper, and/or financial advisor. Most commonly these fees are automatically deducted from participant accounts, but recordkeepers are becoming more flexible with the ways fees are collected.

These gifts of respect, time, and money can be given to your company with a well designed 401(k) plan. If you do not think these goals are being achieved by your current plan, please call me at 205.970.9088 or email me at jamie@grinkmeyerleonard.com and I will get to work for you today on developing a plan that works for you and your company.

Important Questions to Ask Yourself as You Prepare Your 401(k) Plan for the End of the Year

Important Questions to Ask Yourself as You Prepare Your 401(k) Plan for the End of the Year

Like it or not, the end of 2016 is fast approaching and that means a very busy time for 401(k) plan sponsors. Here are some timely questions to guide you as you close out another year:

Have you delivered the Summary of Material Modifications (SMM) or Summary Plan Description (SPD)?

If your plan was amended in 2015, then you have until September 30th to deliver the SMM or the SPD.
Note: If you filed an extension to your Form 5500, then you have until December 15th.

Have you delivered the 2015 Summary Annual Report (SAR)?

You have until September 30th to deliver the 2015 SAR to your participants.
Note: If you filed an extension to your Form 5500, then you have until December 15th.

Is the Form 5500 filed?

If you filed the appropriate extension (a Form 5558) then you have until October 15th.
Note: You have until October 17th this year since the 15th fails on a Saturday to file your form 5500.

Are you prepared to meet the annual notice requirements?

You have as early as 90 days (October 1st) and up to 30 days (December 1st) before the plan’s year end date to distribute required 2017 notices including Safe Harbor, Qualified Default Investment Alternative, and Automatic Enrollment.
Note: There are other notices including a 404(c) and the 404(a)(5) participant fee disclosure notices that should also be delivered throughout the year.

Are all employer safe harbor contributions in for 2015?

The plan has until the end of 2016 to make safe harbor or Qualified Nonelective Contributions (QNEC).

If you have any questions about these year end requirements or any of the other important functions that occur throughout the year, please reach out to me atjamie@grinkmeyerleonard.com.

 

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

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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.

Are You Unknowingly Setting a Trap for Your Plan?

Are You Unknowingly Setting a Trap for Your Plan?

Rarely, if ever, does a person who has been tasked with running a 401(k) plan go into the job with the willful ill intent of corrupting the plan. However, there are certain areas of 401(k) plan management that seem to, time and time again, trip up even the most well-meaning plan sponsors. Here are three areas that can cause trouble:

1. The Plan Document

The plan document serves as the instruction manual for how to operate the 401(k) plan and covers everything from eligibility and enrollment to match formulas and vesting schedules. The area that we have found causes the most problems is the definition of compensation. Most commonly, the plan’s definition will include all W-2 income including bonuses. It is important to note that we have come across plans that do not withhold elective deferrals from bonuses simply because that wasn’t past practice or because no participant had ever asked for that. Too bad neither of those are good enough reasons for the DOL or the IRS if the plan is audited. In order to avoid the potential traps of the plan document, seek the assistance of knowledgeable third party administrators and advisers who can help you identify the details.

2. Employee Contributions

It is common knowledge that if you withhold money from an employee’s paycheck, you need to deposit that money into the area from which it was withheld – whether it be taxes, insurance, or 401(k). The potential trap in remitting 401(k) deferrals lies in the timing of those contributions. Government regulations require that participant contributions to a 401k be deposited to the plan on the earliest date that they can be reasonably segregated from the employer’s general assets. In no event may they be deposited later than the 15th business day of the month, following the month in which the participant contributions were deducted from their pay. Seems pretty straightforward, right? Well, there is a catch. First, you must deposit the deferrals as soon as administratively possible; so, if that means in 2 business days, then they must be deposited in 2 business days. Additionally, you set the standard for your plan. By way of example, if the contributions are withheld every other Friday and are always deposited on the following Wednesday, then you have established your deadline as within 3 business days. However, if you go vacation and the contributions that were withheld on Friday don’t get deposited until the following week’s Monday, then you are outside of your 3-day business standard.

3. Forfeitures

Forfeitures occur when your plan has a vesting schedule in place for employer contributions. If a participant leaves before he or she is fully vested, then the unvested portion of their 401(k) account becomes a forfeiture. Those forfeitures can then be used to pay certain plan related expenses (excluding settlor functions), to reduce employer contributions, to provide additional participant contributions, or to restore previously forfeited participant accounts. The trap with forfeitures comes in the timeliness of use. The IRS requires that forfeitures be used or allocated for the plan year in which they occur or, in certain cases, the following plan year. The plan is not allowed to let the forfeitures grow year after year without using them. Therefore, it is very important that you monitor your forfeiture account and watch how the plan uses it.

If you think that your plan may be vulnerable to falling into one of these traps, please reach out to me at jamie@grinkmeyerleonard.com and we will work to unset 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

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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.

How Else Are You Supposed to Decide?

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As my husband and I were sitting with a couple of great friends watching our young girls playing together, we were lamenting about our retirement plans, or lack thereof. It seems we both have dance lessons, proms, college degrees and weddings to pay for in our futures. The conversation eventually turned to my friend’s 401(k) account and how he had come to make the investment decisions that he had. He said, “I just look at the performance and choose the best one.  How else are you supposed to decide?”

My friend had fallen into the trap that so many average investors out there fall into and that is selecting his investment allocation on performance alone. This can be a very risky way to plan your retirement future. As I explained to him, there is a very good reason why our industry’s favorite disclosure statement is “past performance does not indicate future results.” Take a look at the chart below. It illustrates the volatility of asset class returns from year to year by ranking certain key indices in order of performance. You will note that top-performing asset classes in a given year do not tend to repeat their top performance in following years and the lowest performing asset classes often outperform in subsequent years. Accepting that simply selecting your investments based on historical performance may not be the best way to go, you still have to answer the question, “How are you supposed to decide?” If you are a member of your company’s investment committee or if you simply have an investment account of your own, this can be a very important question to ask. The committees with whom we work decide the investments offered to the plan by examining risk tolerance, time horizon, and diversification.

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First and foremost, it is important to analyze and understand the risk tolerance of the group who will be utilizing the investments. Risk tolerance can be thought of as how willing a group is to subject the account to potential losses in order to get potential gains. In other words, are you or your group able to stomach the thought of losing in the short term in order to reap long term gains? Or at the first sight of loss, are you going to pull your money and run? Risk tolerance for an individual may be a little easier to determine than for a group; in determining what is appropriate for a group of employees, you have to use different methods. When we analyze appropriate investments for a 401(k) plan, we look at upside/downside capture ratios in order to help determine if the investment manager is taking an appropriate amount of risk and being appropriately rewarded for that risk. Upside/downside capture can also help determine how a manager will perform in down markets and manage the risk for the employee population as a whole.

Another factor to consider is the time horizon of the investor or group of investors. In application for a 401(k) plan, we analyze employee demographic information to determine the age range of the workforce, which can assist us and committee in deciding an appropriate investment menu. Additionally, we review with the plan sponsor whether the employees typically leave their money in the plan at retirement or if the funds are removed prior to or at retirement. This helps us to determine the time frame for the team of employees.

Finally, diversification in the investment menu can be important in shaping successful investment strategies. We’ve all heard “don’t put all your eggs in one basket” and that basic tenant best describes the idea of diversifying investments. As the chart above shows, if you have all of your investment dollars in one specific type of investment, there is a better chance that you will experience more volatility then if you spread your assets over a variety of asset classes.

Deciding how to allocate your personal investments or how to best design a 401(k) menu is challenging and it may seem that the easiest path is to make those decisions based on performance. However, if you or your 401(k) committee would like to take a more in depth look at the appropriateness of your investment strategy, please contact me today.

 

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.

Three Reasons It’s Time to Hire a Plan Professional Now

Three-Reasons-It's-Time-to-Hire-a-Plan-Professional-Now

My assumption is that most of you who are reading this blog post already have a financial advisor with whom you work on your company’s 401(k) plan. However, as with most things in life, not all advisors are created equal and finding the best fit for the needs of your plan and participants can be essential to the success of the plan.

1 – Your Plan Needs an Advocate

There are so many working parts that go into running a successful retirement plan. Some tasks are large in scale and may include designing a plan document that encompasses a strategy to increase participation and deferrals in order to drive retirement readiness. Others are smaller, day-to-day tasks like submitting employee contributions and processing loans.  Whatever the task that you are tackling, the job can be made easier by working with a financial advisor who understands the needs of your plan and how to accomplish them. Additionally, the goals of your plan need to be addressed. Do you want to benefit the owners of the company? Is your company invested in the retirement futures of your employees? Whatever the reason, it is important to match the goals of the plan with the financial advisor. Your advisor may have a knack for working with business owners and may be a good fit if your goal is to benefit the owners. On the other hand, if your focus is on the retirement readiness of your employees, then you will want your advisor to have a strong background in employee education. Again, whatever the reason, fit is essential.

2 – You Need a Partner

I’m sure I don’t have to tell you that it is becoming more and more difficult to stick to specific roles and responsibilities, no matter your job title. CFOs are faced with mounting responsibilities including forecasting and “guesstimating” tax rates. Human Resource professionals have become staffing firms, marriage counselors, and payroll processors. Not to mention, everyone at the company is tasked with moving towards the goal of growth. With all of the noise you deal with day in and day out, you need a financial advisor who can do some of the heavy lifting for your plan. In my role at Grinkmeyer Leonard Financial, I only serve the needs of our retirement plan clients; therefore, I can focus all of my time on the latest trends, rules, and regulations impacting qualified retirement plans. As an indication of my commitment to 401(k) plans, I have earned the following designations: Certified Fiduciary Plan Advisor (CFPA), Accredited Investment Fiduciary (AIF), and Qualified 401(k) Administrator (QKA). While I most certainly am not saying your financial professional must have these designations to be highly qualified to work with your plan, I am encouraging you to research the professional’s background and determine if it will take your plan to the next level.

3 – Your People Deserve the Best

We’ve all heard, said, or read that your people are your most valuable resource; the question is if you are treating them as such. When you hire someone, you expect them to come to work day in and day out and give you their best effort. By offering a well-designed 401(k) plan, you are also taking a step to give the best to them as well. As I have documented in previous posts (It’s Not All About the Money), offering a 401(k) plan can help reduce financial stress, bolster workplace productivity, and make employees more loyal. At Grinkmeyer Leonard, Caleb Bagwell takes the lead in coming up with new, innovative ways to reach your employees and engaging them in becoming active participants in the plan and in saving for their future.

Whatever your reason, working with a qualified retirement plan advisor can help alleviate some of the stress of running a plan, can elevate your plan, and can make your people engaged.


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.

It’s Not All About the Money

It's-Not-All-About-the-Money

The message concerning the advantages of a 401(k) including deferring more savings to the maximum limits, diversifying investments, and taking advantage of the company match has been beaten like a drum into employees’ and employers’ minds for the last several decades. Advisers talk about how adding the latest alternative investment can add 15 basis points of alpha to the plan or how increasing the company match can allow the highly compensated owner group to annually contribute 0.5% more to the plan. The focus is almost always solely on the financial aspects of what the 401(k) plan can provide and rarely, if ever, on the role that offering a quality plan can mean to your company’s ability to hire and retain top talent, foster employee loyalty, and contribute to your people’s mental well-being. At Grinkmeyer Leonard Financial we want to change the discussion surrounding the importance of a 401(k) plan from just numbers to people.

One of the first items to consider when addressing your company’s workforce is how to attract good people and then how to keep them. Increasingly, just offering more money is not cutting it when it comes to recruiting top talent. The Tower Watson’s Global Benefit Attitudes survey released in February 2016 highlighted that nearly 3-in-10 employee respondents prefer superior retirement or health benefits to pay and bonus, as well as almost 3-in-5 prefer some alternative to pay and bonuses. Employees want to feel as if they are valued by their employer and can see benefits as a clear expression of that value, more so than being offered an extra $0.50 per hour. Here is where plan design can have a meaningful impact on the company and its employees. If structured correctly, a match formula or profit sharing allocation in combination with a vesting schedule, can accomplish the goal of rewarding employees while, at the same time, giving them incentive to stay with the company.

Assuming you have hired the top people for the job, the focus should turn to keeping those people engaged and focused on doing their best work. Stress is a productivity and morale killer and more and more, saving for retirement is being cited as a top stressor. The good news is that you, as an employer, have the ability to help reduce that financial worry simple by offering a well-designed retirement plan. The Tower Watson’s Global Benefit Attitudes survey showed that in 2015, 79% of US respondents indicated that their company’s retirement plan is the primary way that they save for retirement. A 2016 study published by Lockton Retirement Services titled “Finding the Links Between Retirement, Stress, and Health” found that over half (52%) of their respondents reported that their employer’s retirement plan eased their financial concerns “a great deal”  and nearly all respondents (95%) reported that the retirement plan helped “a little” or “a great deal”.

Offering a retirement plan does not just reduce stress, but it also helps bolster confidence in a person’s ability to be financially secure in retirement. The 2016 Retirement Confidence Survey provided by the Employee Benefit Research Institute, in their March 2016 EBRI Issue Brief, reports that 74% of respondents with a retirement plan were “very confident” or “somewhat confident” that they will have enough money to live comfortably in their retirement years. This is in contrast to 39% of respondents with no retirement plan who responded they are either “very confident” or “somewhat confident”. (Such a retirement plan includes the respondent or their spouse having at least one of the following: IRA, DC, or DB plan.)

You may be thinking, “Sure, it’s great that my employees are less stressed and not as worried about retirement, but what does that mean for my company”? One well documented benefit is that employees who experience lower levels of financial stress are healthier and therefore, incur less cost to the employer in the form of absenteeism and lost productivity. The chart below from the Lockton Retirement Services illustrates the physical symptoms that manifest themselves at work.

Experienced Physical Symptoms Almost All the Time/ Frequently While at Work

Percentage of Respondents in These Categories

Ahead in Saving for Retirement

On Track in Saving for Retirement

Behind in Saving for Retirement

Fatigue

19%

19%

31%

Feeling Overwhelmed

9%

13%

31%

Anxiety or Nervousness

7%

10%

23%

Headaches

5%

10%

23%

Clenched Jaw or Teeth Grinding

4%

11%

16%

Insomnia

3%

7%

11%

Upset Stomach

5%

4%

14%

Depression

3%

6%

11%

Sense of Impending Doom

1%

4%

11%

I think that we can all agree that when a person is focused on dealing with physical ailments, they are less likely to be able to focus on getting their job done right.

As documented in this post, there is a significant amount of research to indicate the direct correlation between financial stress, physical ailments, and offering a retirement plan. When you look past all of the numbers and the statistics, what it really comes down to is the people in your organization and their quality of life now and in the future. Let us help you put the focus back on your people.

 

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.

Now is the Time to Take a Closer Look at Compensation

Now is the Time to Take a Closer Look at Compensation.jpg

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

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.

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

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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.

How to Ease the Audit Process with These Simple Steps

How to ease the audit process 1

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

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.