Lifetime Income Disclosure Regulation
Your 401(k) plan statement will look different in the near future. Why? A new regulation included in the
SECURE Act, which was passed in December 2019, amended Section 105 of the Employee Retirement
Income Security Act.
Retirement Plan Limits for 2022
Jana Samek, Retirement Services – Relationship Manager
The Internal Revenue Service (IRS) has set inflation-adjusted limits for IRAs and company-sponsored retirement plans for 2022. While some of the contribution limits have remained the same, other limits have changed.
The basic salary contribution limit for a 401(k) and similar company sponsored retirement plans went up to $20,500 for 2022. This is a $1,000 increase from last year. The catch-up contribution limit for those who are 50 years of age or better remained the same at $6,500.
What is a SIMPLE IRA Plan?
Shara Fischer, Wealth Management Officer
Heartland Trust offers two of the most common types of employer-sponsored retirement plans: 401(k) and SIMPLEs. Both types of plans have many of the same features, but there are key differences that might make one a better fit for your business and employees. This article will cover the features of SIMPLE plans and next quarter we will take a closer look at 401(k) plans.
401(k) Loans: How Do They Work?
By Jana Samek, Relationship Manager – Qualified Plans
Having access to a 401(k) plan through your workplace is a wonderful thing. Over half (56%) of US employers offer this employee benefit. If you have a 401(k) plan and face a financial emergency, there may be an option you are unaware of. You may be able to take a loan from your vested balance, depending on the provisions of your plan.
Keep in mind, the purpose of a 401(k) is to save for retirement. If you take money out of it now, you’ll risk not having enough money saved in retirement, especially if you don’t have any other savings put towards your retirement years. You may also incur stiff tax consequences and penalties for withdrawing before age 59½. Before taking a loan, the question you should ask yourself is will taking money from my 401(k) today jeopardize my financial security in the future?
Planning for Physicians: Managing Contributions Between a 401(k), 457(b)
As many of our readers likely know, the Federal government provides strong incentives for saving for retirement and other financial goals. You can break these down into three broad categories: tax deductibility (on contributions), tax-free distributions (i.e. withdrawals), and tax deferral (on growth). Many physicians can increase their tax deductions and benefit from tax deferral by contributing to both a 401(k) plan and a 457(b) plan.
401(k) and 457(b) plans are both employer-sponsored retirement plans. The main difference is 457(b) plans can only be sponsored by certain entities, namely state and local governments, along with nonprofits such as hospitals, charities, and unions.
Retirement Plan Restatement
Every six years the Internal Revenue Service (IRS) requires certain qualified retirement plans to be fully amended and restated to comply with law changes. The Cycle 3 Defined Contribution (DC) Plan Restatement period began on August 1, 2020, and plan sponsors of defined contributions plans (401(k), profit-sharing, and money purchase pension plans) will have until July 31, 2022, to comply. Plans that do not restate their plan document by this date will be subject to IRS-imposed penalties, which, in extreme cases, could jeopardize the plan’s tax-qualified status.
So why is this important? Plan documents are the framework that an individual retirement plan must follow. They are drafted based on laws and regulations set forth by three federal regulators: Congress, the Treasury Department (IRS), and the Department of Labor (DOL). The IRS is the main overseer, and it has the ability to “pre-approve” plan documents.
Retirement Plan Limits for 2021
The Internal Revenue Service (IRS) has set inflation-adjusted limits for IRAs and company-sponsored retirement plans for 2021. While some of the contribution limits have remained the same, other limits important to determining the amount you can save have changed.
The basic salary contribution limit for a 401(k) and similar company-sponsored retirement plans remains the same at $19,500; and the catch-up contribution for those who are 50 years of age or better, also remained the same at $6,500. However, the overall annual additions limit for these types of plans goes up from $57,000 to $58,000 in 2021.
The table below provides additional information regarding the 2021 contribution limits for retirement accounts as well as prior limits for the past five years. It is for informational purposes only.
What Can Heartland Trust Company Do for You?
Here at Heartland Trust Company, we are proud of the great reputation we have built in the community over the last 30 years. We know that if we do business the right way, we will be here for a long time. Our mission statement says it all: “We provide a lifelong commitment to the well-being of those we serve.”
Our reputation is everything, and that is why we choose to adopt the fiduciary standard. This means we apply the industry’s highest financial, ethical, and legal standards to the services we provide for our clients. We always act in our client’s best interest, and we would not do it any other way. We do things our own way, and we do it to benefit our clients. And even though trust is our middle name, we do much more than that.
We started out as a trust company and we continue to provide these high levels of financial and ethical care that these special accounts require. We can serve as trustee, co-trustee, or agent for the trustee (usually for an individual named as trustee who would like assistance with responsibilities such as recordkeeping, asset management, and tax preparation). Types of trusts we administer include:
Revocable Living Trusts
Special Needs Trusts
The Importance of Annual 401(k) Census Information
Businesses that sponsor 401(k) plans are required to run annual compliance tests to ensure that their plan meets the regulatory requirements to maintain their qualified status. In order to run these tests, your Third Party Administrator (TPA) will request certain information from you such as a complete census file. This file includes important information on each employee who received a paycheck from you during the year, regardless of whether or not they are eligible to participate in the plan. Your census information should be compiled and forwarded to your TPA within a month following your plan year-end to ensure that the proper tests are run and any necessary corrections to testing failures are completed timely.
Why You May Need a 401(k) Investment Policy Statement
No matter how business savvy you are, choosing how to invest your money can be tricky.
If you are a business owner who sponsors a retirement plan, this becomes even more
worrisome because you are expected to choose investments to offer your employees.
While it is possible to divest yourself from some of the risk involved in this process
(a larger topic for a future article), as a retirement plan sponsor you can never completely
remove yourself from this fiduciary duty. This is why an investment policy statement may be
right for you.
An investment policy statement (IPS) is simply a roadmap that a retirement plan sponsor
uses to select and regularly evaluate the investments that they offer to their employees in
the retirement plan. While there are no government regulations that require you to have
one, adopting an IPS can make it easier for you to operate efficiently, and give you some
much-needed peace of mind on the topic of investments.