retirement

IRS Announces 2019 Retirement Plan Contribution Limits | North Carolina Employee Benefits

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On November 1, 2018, the Internal Revenue Service (IRS) released Notice 2018-83announcing cost-of-living adjustments affecting dollar limits for pension plans and other retirement-related items for tax year 2019. Many pension plan limits will change next year because the increase in the cost-of-living index has met the statutory thresholds that trigger their adjustment. Other items, however, will remain the same. The following is a summary of the limits for 2019.

For 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plans:

  • The elective deferral (contribution) limit increases from $18,500 to $19,000 for 2019.

  • The catch-up contribution limit for employees aged 50 and over who participate in these plans remains at $6,000.

For individual retirement arrangements (IRAs):

  • The limit on annual contributions has not changed for many years. For 2019, however, it increases from $5,500 to $6,000.

  • The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment so it remains $1,000 for 2019.

For simplified employee pension (SEP) IRAs and individual/solo 401(k) plans:

  • Elective deferrals increase to $56,000 for 2019, based on an annual compensation limit of $280,000 (up from the 2018 amounts of $55,000 and $275,000).

  • The minimum compensation that may be required for participation in a SEP remains unchanged at $600 for 2019.

For savings incentive match plan for employees (SIMPLE) IRAs:

  • The contribution limit on SIMPLE IRA retirement accounts increases to $13,000 for 2019 (from $12,500 for 2018).

  • The SIMPLE catch-up limit remains unchanged at $3,000 for 2019.

For defined benefit plans:

  • The basic limitation on the annual benefits under a defined benefit plan is increased to $225,000 for 2019 (from $220,000 for 2018).

Other changes:

  • Highly-compensated and key employee thresholds:

    • The threshold for determining “highly compensated employees” increases to $125,000 for 2019 (from $120,000 for 2018).

    • The threshold for officers who are “key employees” in a top-heavy plan increases to $180,000 for 2019 (from $175,000 for 2018).

  • Social Security cost of living adjustment: In a separate announcement, the Social Security Administration stated that the taxable wage base will increase to $132,900 for 2019, an increase of $4,500 from the 2018 taxable wage base of $128,400. Thus, the maximum Social Security tax liability will increase for both employees and employers.

This article originally appeared on ThinkHR.com.

The Rap on Wraps | North Carolina Benefit Advisors

There’s a good chance you use a wrap document to help satisfy your Employee Retirement Income Security Act (ERISA) summary plan description (SPD) obligations. Yet if you look for a definition of wrap document in ERISA statutes or regulations, you will not find one. The wrap is not a defined term or required document; it is simply a format. So why do you need a wrap document? Here are three (of many) reasons why a wrap document is a solid choice.

Reason 1

Your insurance carrier materials are not enough in most cases.

A common misconception is that carrier materials or benefit description booklets meet all ERISA SPD requirements. They rarely do; in fact, they usually fall short.

For example, the SPD must define or explain eligibility for benefits. A carrier’s materials may indicate that a benefit is available for all full-time employees, but not define what constitutes “full-time.” An SPD that does not completely communicate eligibility is deficient, may confuse employees, and could result in costly litigation for your company.

Therefore, to address gaps like these, it’s advisable to use a wrap document to “wrap around’ the existing carrier documents and fill in any required ERISA provisions the carrier documents are missing.

Reason 2

You are an applicable large employer (ALE) and use the lookback measurement method.

ALEs who use the lookback measurement method to determine eligibility for medical benefits must meet a complex set of rules for determining whether and how certain employees are eligible for healthcare coverage under the Affordable Care Act (ACA). The rules are complex and daunting for employers. Even more daunting, however, is explaining these eligibility rules to employees.

Carriers are not required to communicate this information, and very likely will not. Therefore, it is up to you to ensure the information is communicated. While your specific lookback measurement method is not required to be explained in an SPD – and some employers choose to put it in an employment policy or handbook — the SPD is a logical place to include this information because it also communicates your other benefits eligibility requirements.

Reason 3

A wrap reduces your reporting obligations.

You may use a wrap document to combine multiple insurance policies into a single document, which results in one ERISA plan for all combined benefits. This simplifies and reduces reporting requirements for employers who are subject to Form 5500 filing requirements.

Most employers with 100 or more health and welfare benefit plan participants as of the first day of the plan year, as well as certain employers with fewer than 100 participants, are required to file a Form 5500 annually. (Participants include covered employees and former employees who elect COBRA, but spouses and dependents are not counted.) Some plans, such as governmental plans or certain church plans, are exempt from filing a Form 5500.

The wrap document may be a time saver if you have multiple health and welfare benefit plans subject to Form 5500 filing requirements. For example, if you have a vision, dental, and medical plan that each meet the “100 or more participant” threshold, then you would be required to file a Form 5500 for each plan. However, if the plans are all wrapped together into a single document, then they are considered one ERISA plan and you would only have to file one Form 5500.

Do it Right

While there are many other reasons an employer should consider investing in a wrap document, not all wrap documents are made equal. Work with a reputable vendor and/or competent counsel to ensure your wrap document meets all compliance requirements.

Originally published by www.thinkhr.com

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A DOL Audit Can Happen to You | North Carolina Benefit Advisors

Summary plan descriptions (SPDs) are required for all retirement, health, and welfare plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). However, misconceptions about this requirement are widespread. ERISA attorney Stacy H. Barrow, partner with Marathas Barrow Weatherhead Lent LLP, had a chat with ThinkHR about the importance of having proper ERISA documentation and the consequences of failing to do so.

THR: What types of employers need to have an SPD?

SHB: We tell all employers — of any size — who offer plans subject to ERISA that they need to have an SPD. This is the first item in every Department of Labor (DOL) audit. If you don’t have one and you get audited or a participant asks for plan documents, you will be scrambling to put documents together and you can’t do them fast enough to avoid an issue. In addition, cafeteria plans can only be adopted prospectively, so if you don’t have a written cafeteria plan in place, you may be jeopardizing the tax qualified status of your plan.

THR: Won’t my broker or carrier take care of these documents?

SHB: Employers may think that brokers or carriers take care of all required benefits documentation, but at the end of the day, it’s the employer who is responsible for complying with ERISA’s SPD requirement. Your broker may help you, but they might not be aware of every benefit you offer or your eligibility guidelines. The carrier’s documentation often is missing some of the required language, which is why you use a wrap. You don’t specifically have to use a wrap to develop your SPD, but the carrier document won’t get you there and an wrap is often the best way to comply. If the plan documents aren’t compliant, that’s not the carrier’s or broker’s responsibility, it’s the employer’s.

THR: Do I really need to be concerned about a DOL audit?

SHB: Employers can get complacent about documentation, thinking that only large employers get audited, or it won’t happen to them. It’s not only the large corporations that get audited. It can happen to employers of any size or type. It’s important to make sure you have good benefits documentation, because if you don’t, and you do get audited, it might cause the DOL to dig deeper and look for other problems, such as looking into your 401(k) plan.

Plan documentation is a huge part of every DOL audit. I can’t stress strongly enough that they will want to see the summary plan description and plan documents. If you can get good, compliant documents to the DOL, it increases the chances of a speedy resolution. If you can provide them quickly, it sends a message that you are ready and in compliance.

THR: What are the consequences of being out of compliance?

SHB: Not having the proper documents may be an issue if you get audited or there is litigation over a denied claim. You need to be prepared for this possibility. If the DOL audits and imposes penalties, it may not be because the employer didn’t have a wrap document, but rather because the document wasn’t updated, wasn’t compliant, or wasn’t distributed to employees. And the DOL may impose penalties of up to $152 per day for failure to provide an SPD upon request. Also, failure to inform participants of plan changes may invalidate those changes.

Originally published by www.thinkhr.com

 

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