Category Archives: Investing and fiduciary requirements

Changes to Retirement Plan Audits

Recent rules changes have refocused the IRS on what they are calling a “focused examination.”  In a “focused examination” the IRS will look at the employers “internal processed and controls regarding pre-determined areas of compliance” such as investment policy statement, investment committee, eligibility, vesting and distributions.”  If they find no problems in those areas they will move on to another employer.

While this is good news for employers that maintain tight controls, it should not cause you to relax about the potential for an audit (either random, or based on employee complaint).  It is reported that a full audit and examination can involve between 75 and 150 requests for information, consumer 200-300 staff days, and yields significant dollars in corrections, fines and penalties.

Are Fiduciary Warranties worthless?

Ary Rosenbaum published an article recently titled “The Complete and Total Worthlessness of the 401k Fiduciary Warranty.”  He makes a great case that not only is your “fiduciary warranty” worthless, it is actually dangerous as it lulls Plan Sponsors into a false sense of security.

He reminds you that the fine print matters, and that you don’t always have the protection you were lead to believe.  A great example is my FEMA flood insurance.  When the river flooded into our yard last year (the 1000 year flood) our pool pump died.  Turns out FEMA only covers things inside your house, and regular insurance doesn’t cover things outside the house – so we had to pay.

If you have a 401k plan that you are responsible for I strongly advise you to read this.  Click here.

What does the decline in oil prices bode for the stocks?

Take a look at the history.

Stock Market After Oil Declines

What happens if I dont give health insurance but reimburse premiums?

This is a very common question.  “Well, why don’t I just cancel the health insurance and give them the money for premiums?”  Under IRS Notice 2013-54 this arrangement is an “employer payment plans” and the “plan” would have to meet all the ACA requirements.  Since that would be impossible, you could be subject to $100/day excise tax.  Thats $36,500 a year per employee.

 

“Referencing Notice 2013-54, the IRS emphasizes that these employer payment plans are considered group health plans under PPACA. As group health plans, these arrangements are subject to the market reforms, including the prohibition on annual limits and the requirement to cover preventive care without cost-sharing.  These arrangements cannot be integrated with individual health insurance plans in order to satisfy the market reform requirements.”

Any written arrangement that ties payments to employees specifically for health insurance premiums or expenses would be subject to this issue.  So, just give them a raise (if you want), cancel the health insurance, and send them to the exchange.

IRS answers Small Business Tax Credit questions

The Internal Revenue Service released answers to FAQ’s surrounding the Small Business Tax Credit.  The general gist of it is below, but click here for the full article.

1)  Owners and their families are not counted  as employees, nor are their hours taken into account.

2)   “The following individuals are not considered employees for purposes of the credit: owners of the small business, such as sole proprietors, partners, shareholders owning more than 2% of an S corporation or more than 5% of a C corporation; spouses of these owners; and family members of these owners, which include a child, grandchild, sibling or step-sibling, parent or ancestor of a parent, a step-parent, niece or nephew, aunt or uncle, son-in-law or daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law. A spouse of any of these family members should also not be counted as an employee.”

3)  Part time workers and leased employees count in the Full Time Equivalent calculations but seasonal workers and ministers in a church don’t.

4) There are three ways to calculate FTE’s:  Actual hours worked, Days worked equivalency, or Weeks-worked equivalency.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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