Sarah F. Rothenberg, ASA, MAAA

Have you outgrown your SIMPLE IRA? Here are the steps you need to take to replace your SIMPLE IRA with a 401(k):

Terminating Your SIMPLE IRA

1. Notify your employees at least 60 days prior to December 31st (i.e. before November 1st) that you will be terminating the SIMPLE IRA on January 1st of the following year.

• SIMPLE IRAs may not be terminated mid-year.

2. Notify your SIMPLE IRA plan administrator and your payroll provider that the plan will be discontinued on January 1st and no further contributions will be made to the plan.

3. Keep records of these actions.

• You do not need to notify the IRS.

Starting a 401(k) Plan

4. Determine what consultants you would like to engage (TPA, Broker, etc.) to assist you with the process.

5. Choose a record keeper (e.g. American Funds, Fidelity, Vanguard, VOYA, etc.).

• Considerations may include fees, platform ease of use, customer support, etc.

6. Choose a Trustee (may be self-trusteed or corporate).Decide on plan provisions (e.g. loans or no loans, vesting schedule, Safe Harbor, matching, etc.).

7. Decide on plan provisions (e.g. loans or no loans, vesting schedule, Safe Harbor, matching, etc.).

8. Complete an adoption agreement and summary of plan description.

9. Inform your employees of the plan’s existence and educate them on its benefits.

10. Set up individual accounts and set up payroll deductions.

Not Sure If A 401(k) Is Right For Your Company?

Review our Retirement Comparison Chart as well as our white paper on 5 Reasons to Switch from a SIMPLE IRA to a 401(k) to help you decide. And as always, if you ever have any questions we haven’t answered here, do not hesitate to reach out and ask. We are here to help!

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Samantha Schneider, Actuarial Consultant

Retirement planning for employers can often be tricky business; offering matching contributions, choosing investment options to offer employees, deciding whether to allow loans. Additionally, as a non-profit employer you have the option to offer your employees either a 401(k) or a 403(b) plan. Below, we’ve assembled some distinguishing features to help determine which of these plans could be right for you.

At the end of the day, the plan that’s best for you and your company depends on many factors. There’s no clear-cut winner in the competition between 401(k) and 403(b) plans because that depends on the needs of your company. But if you think one of these options may be a good fit for your company, contact your financial advisor or a team member at Odyssey Advisors.

The post Comparison of Key Features of 401(k) & 403(b) Plans appeared first on Odyssey Advisors, Inc.

Andrew D. Taggart, Actuarial Consultant

In 2015, the Treasury Department and the IRS released Notice 2015-49 establishing their intent to amend regulations to disallow Qualified Defined Benefit Pension Plans from replacing annuities with a lump sum payment or other accelerated forms of distribution.  In early 2019, the Treasury Department and the IRS released Notice 2019-18 which states that they no longer intend to amend the regulations.

Why should I care?

With this new guidance Qualified Defined Benefit Pension Plans now have the option to eliminate the mortality risks involved with retirees and beneficiaries who are currently receiving annuity payments (in pay status participants) via lump sum windows.  This can lower costs when compared to purchasing annuities for in pay status participants. Plans currently covered by the PBGC can also reduce the flat-rate PBGC premium they pay, currently $80 per participant in 2019.

What can I do?

You may amend the Plan to include a one-time window during which in pay status participants have the option to convert their annuity benefit into a one-time lump sum payment and forfeit their annuity.  If there are concerns over large amounts of lump sum money being paid out at the same time, the amendment to the Plan can include caps on the amount of money individual lump sums can be paid out (i.e., lump sums only allowed at or below $25,000).

What other considerations are there?

• This will require the consent of the retiree’s spouse if they are currently receiving a joint and survivor annuity.
• When offering a lump sum the normal forms of benefit must be offered as well.  This could result in some participants switching from joint and survivor annuities to larger single life annuities.
• Insurance companies can lower prices on possible future annuity purchases based on the assumption that healthier retirees will elect to keep their annuity as opposed to electing the lump sum benefit.

The post De-Risking Qualified Defined Benefit Plans – Lump Sum Windows for In Pay Retirees & Beneficiaries appeared first on Odyssey Advisors, Inc.

Parker Elmore, ASA, MAAA, EA, FCA | Sarah F. Rothenberg, ASA, MAAA

Simple IRAs are a great tool for small businesses to provide retirement benefits for themselves and their employees, with few complexities. However by opting for a simplified retirement plan, employers forgo flexibility and may end up leaving money on the table. There is often the misconception that a 401(k) plan is unaffordable for a small business. However, businesses will often find that a small increase in administrative fees is more than offset by the benefits, and consequential savings, that a 401(k) can provide.

Benefits of Switching to a 401(k)

1. Recruit and Maintain Talent
   a. Remain competitive with large employers
   b. Vary benefits to reward valued employees including yourself
   Vesting period may increase employee retention
   May offer additional benefits after a specified vesting period
2. More Investment Opportunities
   a. Many investment providers
   b. Investment providers educate employees on their options
   c. Lower cost options available
   d. Allows for Roth 401(k) deferrals
   e. May offer loans from accounts
3. Maintain Other Plans (if you wish)
   a. Allows greater flexibility in benefit allocation
   b. May be used to maximize tax deferred income
4. Save More for Retirement
   a. Higher contribution limits ($18,000 v. $12,500 asof 2016/2017)
   b. Allows for larger catch up contributions (additional $6,000 if over 50 compared to $3,000)
5. Maximize Tax Savings
    a. New 401(k) plans may be eligible for a federal tax credit up to $500 per year for the first three years
   b. Employer contributions (up to $54,000 per employee as of 2017) are tax deductible

401(k) plans may not be the right choice for every employer. So consider your goals and consult a professional. However, if you are looking to maximize your tax savings and save more for retirement, then a 401(k) may be for you.

The post 5 Reasons To Switch From A Simple IRA to a 401(k) Today appeared first on Odyssey Advisors, Inc.

Non-401(k) Related Limits

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