Retirement Plans Retirement Plans Workshop Workshop “Opportunities “Opportunities… … Th A Th A The Awareness The Awareness Test T t T t Test SMAR # 185-20130429-140984 1
Count the Squares Count the Squares - - It’s NOT about thinking outside the box. It’s NOT about thinking outside the box. 2
Keith Baumgarn, CLU, ChFC Keith Baumgarn, CLU, g g , , , , ChFC, , , QPA QPA Signature Resources is a servicemark of Signature Resources Insurance and Financial Services, Inc. Signature Resources Insurance and Financial Services, Inc. is independent of John Hancock. Offering John Hancock Insurance Products. 2601 Main Street, Suite 700, Irvine, CA 92614. Phone: (949) 794-0800. CA Insurance License # 0G01527 3
O1 Welcome ! Welcome ! W l W l ! ! Agenda Agenda ► Open forum to discuss benefit Open forum to discuss benefit packages/ tax law changes packages/ tax law changes ► Review common 401k compliance ► Review common 401k compliance Review common 401k compliance Review common 401k compliance “red flags” and remedies “red flags” and remedies ► Our Our Business Model / Players Business Model / Players 4
Niche Market Niche Market Niche Market Niche Market ► Businesses with one to Businesses with one to ???employees ???employees ► Available to ► Available to Available to a variety of tax entities Available to a variety of tax entities a variety of tax entities a variety of tax entities ► Focus on employer benefit designs a Focus on employer benefit designs a d employee benefit d employee benefit d employee benefit d employee benefit ► We help you with your benefit We help you with your benefit package package ► DA.D. / Attract, Reward and Retain DA.D. / Attract, Reward and Retain We specialize in providing the package that allows you We specialize in providing the package that allows you to work the small business pension market to work the small business pension market 5
SIMPLEs SIMPLEs and 401ks Aren’t and 401ks Aren’t Simple Simple SIMPLE SIMPLE SIMPLEs SIMPLEs IRS IRS SIMPLE/401k SIMPLE/401k Compliance Checklist Compliance Checklist p SIMPLE SIMPLE EGTRRA/401K cycle EGTRRA/401K cycle Document Compliance Document Compliance 6
Th Th The Pension Package: The Pension Package: P P i i P P k k ► Plan design Plan design g ► Plan administration services Plan administration services ► Plan funding options ► Plan funding options Plan funding options Plan funding options ► Plan compliance Plan compliance ► Players / Team ► Players / Team Players / Team Players / Team 7
Players In The Pension Market Players In The Pension Market Players In The Pension Market Players In The Pension Market ► IRS / DOL IRS / DOL ► Small Business Owner/HR/CFO ► Small Business Owner/HR/CFO Small Business Owner/HR/CFO Small Business Owner/HR/CFO ► CPA/Accountant CPA/Accountant ► Third Party Administrator ► Third Party Administrator Third Party Administrator Third Party Administrator ► Agent/Broker Agent/Broker ► Feasibility Study ► Feasibility Study Feasibility Study - Objective: Feasibility Study Objective: Objective: Objective: Qualified or Non Qualified or Non- -Qualified Qualified 8
Retirement Headlines Retirement Headlines Retirement Headlines Retirement Headlines ► Social Security in Jeopardy ► Social Security in Jeopardy Social Security in Jeopardy Social Security in Jeopardy ► Pensions Frozen Pensions Frozen ► Pension Benefit Guaranty Corp on ► Pension Benefit Guaranty Corp on Pension Benefit Guaranty Corp on Pension Benefit Guaranty Corp on Verge of Bankruptcy Verge of Bankruptcy ► U.S. Hits Historically Low Savings U.S. Hits Historically Low Savings Rate Rate ► Medicare Going Broke Medicare Going Broke ► Spiraling Health Care Costs S i S i Spiraling Health Care Costs li li H H lth C lth C C C t t ► Skyrocketing Drug Costs Skyrocketing Drug Costs 9
Business Owner Concerns ► I am getting killed with taxes I am getting killed with taxes ► I need more tax deductions in my business I need more tax deductions in my business I I d d t t d d d d ti ti i i b b i i ► I would like to save more money today I would like to save more money today ► Will I have enough money to retire? Will I have enough money to retire? ► Am I protected from creditors, judgments and sudden Am I protected from creditors, judgments and sudden d death or disability? death or disability? d th th di di bilit ? bilit ? ► What benefits do I need to provide to A, R and RE and can What benefits do I need to provide to A, R and RE and can I legally discriminate? I legally discriminate? g g y y 10
401k Terms ► Types ► Types Types Trad Types-Trad Trad Vs Roth Trad. Vs Roth . Vs Roth-combo and non Vs Roth combo and non combo and non qualifed combo and non-qualifed qualifed qualifed ► Automatic enrollment/communication Automatic enrollment/communication ► Protection from creditors and judgments Protection from creditors and judgments ► Fiduiciary Fiduiciary/administrator/resources /administrator/resources ► Integrated with other benefit package and Integrated with other benefit package and g g p p g g players/benchmarking tools players/benchmarking tools l l /b /b h h ki ki t t l l 11
Compliance “Red Flags??? ► Corrective Distributions Corrective Distributions- -ADP Tests/Safe ADP Tests/Safe Harbor rules? Harbor rules? Harbor rules? Harbor rules? ► Compensation/eligibility/liability/bonding? Compensation/eligibility/liability/bonding? p p g g y y y y g g ► Audits Audits- -IRS/DOL IRS/DOL ► Reporting/Integration/Benchmarking/turnk Reporting/Integration/Benchmarking/turnk ey packages? ey packages? ey packages? ey packages? 12
Available plan design options Available plan design options Available plan design options Available plan design options ► New comparability/Cross New comparability/Cross- -tested vs. SEP’s tested vs. SEP’s ► New comparability plans with 401(k) feature New comparability plans with 401(k) feature - - “the “the simpler plan” simpler plan” simpler plan simpler plan ► 401(k) safe harbor profit sharing plans 401(k) safe harbor profit sharing plans - - D.A.S.H. D.A.S.H. plans plans ► Traditional, Cash Balance and Floor Offset Traditional, Cash Balance and Floor Offset defined benefit plans defined benefit plans ► DB/401(k) or Roth 401(k) ► DB/401(k) or Roth 401(k) DB/401(k) or Roth 401(k) DB/401(k) or Roth 401(k) ► DB/DC carve outs DB/DC carve outs Are you confused?? Are you confused?? 13
Plan Contribution Comparison Plan Contribution Comparison Plan Contribution Comparison Plan Contribution Comparison Larger Contributions & Deductions - Example: Male, Age 50, Annual Compensation of At Least $265,000 Retiring At Age 62 TYPE OF PLAN CONTRIBUTION % OF SALARY 401(k) w/catch-up $24,000 9.0% Profit Sharing /401k $59,500 22.00% Money Purchase $53,000 20.0% Traditional Defined Benefit $199,610 49.0% Defined Benefit/401(k)/PS Defined Benefit/401(k)/PS $ 259 010 $ 259,010 64 0% 64.0% 14
Case I(a) Case I(a) Case I(a) Increased Case I(a) - Increased Increased Increased Individual Dollar Limit New Individual Dollar Limit New Census Age Comp. Contrib. % of Pay % of Comp PS Plan Comp PS Plan Comp. PS Plan Comp. PS Plan Total Owner 50 $150,000 $51,000 90% 34% EE 1 25 20,000 1,250 6.25% 2.3% EE 2 27 20,000 1,250 6.25% 2.3% EE 3 33 20,000 1,250 6.25% 2.3% EE 4 47 30,000 1,875 6.25% 3.1% Total $240,000 $56,625 ($60,000) 15
IRS Code Sec IRS Code Sec IRS Code Sec IRS Code Sec 401(a)(4) 401(a)(4) 401(a)(4) 401(a)(4) Nondiscrimination in a Defined Nondiscrimination in a Defined Contribution or Defined Benefit Plan Contribution or Defined Benefit Plan can be demonstrated by: can be demonstrated by: Comparing Contributions (Traditional) or Comparing Benefits (Age Weighted) 16
Plan Design Plan Design This example highlights reasons business owners adopt pension plans. Employer tax deductible $56,225 contribution Less estimated tax savings (40%) g ( ) -22,490 , Net cost after estimated tax 33,735 savings Contribution for business owner Contribution for business owner 51,000 51,000 Net cost after taxes for owner -17,265 (After tax savings and principal’s contribution) ) Not having a Qualified Plan is costing you $17,265 per year! 17
Case II(a) - Case II(a) - New New Comparability Profit C Comparability Profit C bilit bilit P P fit fit Sharing Plan Sharing Plan Sharing Plan Sharing Plan Compensation Profit Sharing (Corporation) (Corporation) Contribution Contribution Owner – age $ 250,000 $50,000 55 Spouse of $ 52,000 $24,750 owner – age 54 54 Total $302,000 $74,750 18
Case II(b) Case II(b) - - New New C Comparability Profit Comparability Profit C bilit bilit P P fit fit Sharing/401(k) Plan Sharing/401(k) Plan Sharing/401(k) Plan Sharing/401(k) Plan Contribution Contribution Compensation Profit Sharing 401(k) Catch up Total (Corporation) Contribution Contribution Profit Sharing + g 401(k) Owner- $250,000 $33,500 $17,500 $5,500 $56,500 Age 55 Spouse of $52,000 $33,500 $17,500 $5,500 $56,500 Owner Age 54 Total $302,000 $67,000 $35,000 $11,000 $113,000 19
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