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Whats New Out of Washington DC Bob Kaplan, CFP, CPC, QPA, APA VP, National Training Consultant.

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Presentation on theme: "Whats New Out of Washington DC Bob Kaplan, CFP, CPC, QPA, APA VP, National Training Consultant."— Presentation transcript:

1 Whats New Out of Washington DC Bob Kaplan, CFP, CPC, QPA, APA VP, National Training Consultant

2 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments2 Important Information – The Legal Stuff This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Circular 230 disclosure: These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matters addressed in this document. The taxpayer should seek advice from an independent tax advisor. The discussion highlights key issues of adopted and proposed Internal Revenue Code regulations. Any or all of the proposed regulations could change or be adopted as presented. The information is provided for your education only. Neither ING or its affiliated companies or representatives offer legal or tax advice. Consult your tax and legal advisors regarding your individual situation.

3 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments3 Agenda Automatic Enrollment Lifetime Annuity Payments Deficit Reduction Questions?

4 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments4 Automatic Enrollment Employer based savings program Intended for companies with more than 10 employees who do not sponsor a retirement plan Included in Presidents February 14, 2011 budget Will House really want to mandate an employee benefit plan (remember Health care!!)

5 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments5 Lifetime Guaranteed Payments Bi-partisan proposal by Kohl, Bingaman and Isakson Bill reintroduced by Senate in February Report annuity amount annually based on current account balance Plans dont have to offer lifetime payment option Plans report monthly annuitized amount of todays value (no additional interest or contributions

6 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments6 What Will Congress Do?? Deficit Reduction Future of tax preferences for plans One recommendation – eliminate all tax deductions Another – cap DC accruals to lesser of $20,000 or 20% per year What could they do Eliminate catch-up Lower Elective Deferral amount Eliminate cross-testing Lower considered compensation Freeze COLAs on contributions (salary, deferrals, annual additions)

7 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments7 What Will Congress Do?? SEAL Act Limit of no more than 3 loans Give 6 months after termination to pay back Allow deferrals after hardships Eliminate credit card loans SEAL = Savings Enhancement by Alleviating Leakage

8 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments8 Pending Regulations from DoL Participant Advice Target Date funds (SEC) and QDIA (DoL) Definition of Investment Manager Fiduciary Service Provider Fee Disclosure 408(b)(2)

9 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments9 Questions I will be happy to answer any questions on Legislative, Regulatory or compliance issues Thank You

10 IRS Identifies Common 401(k) Plan Compliance Issues Carla Ennis, QPA, QKA, APA Compliance Consultant

11 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments11 Common 401(k) Compliance Issues IRS 401(k) Survey Results Most common compliance issues found so far: Plan document failures Terms of plan not followed Failure to use plan compensation definition Failure to follow plan loan provisions Employee Plans Compliance Resolution System (EPCRS) IRS Error Prevention Advice

12 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments12 Common 401(k) Plan Compliance Issues Plan Document Failures Document file incomplete Plans not timely amended for required changes

13 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments13 Common 401(k) Plan Compliance Issues Terms of the plan not followed or not applied correctly Employers not reading plan documents More favorable action still a compliance issue Changes require a plan amendment

14 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments14 Common 401(k) Plan Compliance Issues Definition of compensation is not followed Found in approximately 50% of plans Different definitions for different purposes Compensation errors affect many areas Can be costly and time consuming to correct

15 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments15 Common 401(k) Plan Compliance Issues Failure to follow loan provisions Loans have been permitted with no loan provision Repayments are not made Loans exceed permitted amount Loan forms missing or not used at all

16 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments16 Correcting Common 401(k) Compliance Issues Employee Plans Compliance Resolution System (EPCRS) Promotes voluntary compliance Self-Correction Program (SCP) Plan sponsor may correct operational errors without an IRS filing Voluntary Correction Program (VCP) Plan sponsor may correct operational, plan document, demographic and employer eligibility failures IRS filing and user fee based on number of participants Audit Cap Used when IRS finds the error Financial sanctions based on facts and circumstance

17 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments17 Correcting Common 401(k) Compliance Issues EPCRS correction principles Resemble existing correction Keep assets in plan to extent permitted Provide benefits for NHCEs if nondiscrimination failure Cant violate any other requirements IRS may take into account a correction method authorized by another government agency Not to be used in place of corrections provided for under the Internal Revenue Code or Regulations

18 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments18 IRS Advice for Error Prevention Set up internal controls and procedures to ensure: Documents are executed & current Plan is operated in accordance with document Roles/responsibilities are identified Monitoring of Internal processes and service providers Do your own internal audit at least once each year

19 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments19 IRS Correction Information Online Link to IRS plan correction page below includes: EPCRS Program under Revenue Procedure Fix-It Guide for 401(k) Plans Other correction information Finding and avoiding plan errors 00.htmlhttp://www.irs.gov/retirement/article/0,,id=96907, 00.html Link to IRS EPCRS slide presentation tege/epcrs_phoneforum_correction.pdfhttp://www.irs.gov/pub/irs- tege/epcrs_phoneforum_correction.pdf

20 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments20 QUESTIONS??

21 Fee Disclosure Carla Ennis, QPA, QKA, APA Compliance Consultant

22 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments22 Plan Sponsor Disclosure Plan Sponsor (ERISA 408(b)(2)) Service Provider disclosure of fees and services to plan fiduciaries Burden is on service providers to deliver disclosure Fiduciary must receive disclosures for service contract to be deemed reasonable under ERISA Strong focus on fees and revenue sharing service provider is receiving

23 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments23 Plan Sponsor Disclosure Plan Sponsor – Interim Final Regulations under 408(b)(2) Covered service providers must disclose fees and services In advance of the date the contract or arrangement is entered into, extended or renewed New sales and existing clients Effective date extended from January 1, 2012 to April 1, 2012

24 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments24 Plan Sponsor Disclosure Applies to covered service providers and covered services (defined on next slide) Exception if anticipated fees are less than $1,000 for the year Good faith errors are not a problem if Corrected within 30 days of discovering the errors

25 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments25 Covered Service Providers Fiduciary Services Performed directly to the plan as a fiduciary Investment adviser registered under 1940 Act Fiduciary to an investment product or contract that holds plan assets in which the plan has a direct investment Recordkeeping or brokerage services to a participant directed plan Other services for indirect compensation Banking, consulting, custodial, investment advisory, recordkeeping, third party administration or other (actuarial, accounting, legal), etc.

26 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments26 ING Readiness for Plan Sponsor Disclosure Two reports: Direct Fee Report Indirect Fee Report Notification of Fee Changes

27 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments27 Indirect and Direct Fee reports Investment expenses and Indirect Compensation, if applicable Fund expenses: management fees, 12b-1, adjustments ING contract charges: DAC, ING Admin, Revenue paid to ING from funds Redemption fees Float Service Description and Direct compensation, if applicable Recordkeeping services: annual charges, per participant charges, asset based fees, discontinuance charges, optional services and fees. Trust or custodial services

28 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments28 Participant Fee Disclosure Participant Disclosure (DOL reg. § a-5) Plan disclosure of investments and fees to participants Burden is on plan sponsor to deliver disclosure Focus on the cost to participant to be in the plan ING will provide tools to assist with compliance

29 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments29 Participant Disclosure Plan Participant – Final Regulations under 404(a)(1) Generally effective for Plan Years that begin on or after November 1, 2011 Two major categories: Plan Related Disclosures General Info (instructions, restrictions/limitations on transfers, ID of investment managers, etc.) General admin fees that may be charged (recordkeeping, legal, etc.) Individual fees that may be charged (loan, QDRO, etc). Actual charges to participant accounts

30 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments30 Participant Disclosure Chart listing investment options, rates of return and fees Performance – 1,5, 10 year Benchmark Fee and Expense – both as a % of assets and dollars per $1,000 Internet Web address for additional information Glossary of terms

31 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments31 ING Readiness for Participant Disclosure Initial and annual disclosure Two charts will be furnished Initial disclosure extended to later of: May 31, 2012 or 60 days after first day of the plan year the regulation is effective Furnished annually thereafter Enrollment Materials Initial disclosures before first opportunity to direct investment Actual fees charged to participant accounts reported quarterly Notification of changes

32 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments32

33 Do not put content on the brand signature area Orange RGB= 255,102,000 Light blue RGB= 180,195,225 Dark blue RGB= 000,000,102 Grey RGB= 150,150,150 ING colour balance Guideline Retirement - Insurance - Investments33 QUESTIONS


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