December 2018 Newsletter & Important Information
(For a PDF Version of the newsletter, please click here!)
A Message to our Valued Clients:
As 2018 comes to a close, we think about our clients, professional colleagues, friends, and family. We truly appreciate your business and we’re grateful for the trust you have placed in us for over twenty years. We are privileged to have the opportunity to serve you and we look forward to continuing our relationship for years to come. Should you have any suggestions on how we can serve you better, please do not hesitate to drop us a note or give us a call. Our commitment to providing you the best service is our primary goal.
Meet our New Staff
Please join us in welcoming our new Team Members!
April Schaefer – April joined our team in June as a Participant Services Administrator with nearly 5 years of administrative experience.
Mikia Gray – Mikia joined our team in June as an Administrative Specialist with nearly 20 years of administrative and support experience.
Brad Stanley – Brad joined our team in September as a Plan Consultant with more than 10 years of experience in client relationships and account management.
Heather Lantagne – Heather joined our team in October as a Plan Consultant with more than 15 years of experience in the retirement plan administration industry.
Please join us in recognizing our long-term Team Members!
Pat Nelson – Pat joined our team in 1998 with over 10 years of distribution experience. She celebrated her 20th Anniversary as a Distribution Specialist with PASI this year!
Jack Hurley – Jack joined our team in 2008 with over 20 years of experience in the pension field. He celebrated his 10th Anniversary as a Plan Consultant with PASI this year!
Effie Moutogiannis – Effie joined our team in 2008 with over 17 years of experience in the retirement plan industry. She celebrated her 10th Anniversary as a Plan Consultant with PASI this year!
News and other Fun Stuff
Follow us on Social Media!
You’ll see some great ‘Moving Day’ photos and find some informational posts and articles!
PASI is a proud member of the community we serve. We support a number of organizations throughout Connecticut each year, including
PASI will be observing the following upcoming holidays:
Christmas Day – Tuesday, 12/25/18
New Year’s Day – Tuesday, 1/1/19
Check out our New Location!
We recently moved to a new location; right across the street!
Our new address is:
10 Talcott Notch Road, Suite 200
Farmington, CT 06032
Important Year-End Compliance Checklist
The 2018 Year-End Compliance Checklist has been designed to help ensure that various time-sensitive matters related to your Plan are executed and/or addressed before December 31, 2018 (or shortly thereafter, as applicable). Please review this checklist carefully (even if your Plan Year-End does not correspond with the calendar year) and contact your PASI Plan Consultant with any questions you may have. You only need to return this checklist if necessary, as indicated on the checklist.
Qualified Plan Limits for 2019
Looking for the 2019 Plan Limits that most affect tax-qualified retirement plans? We have provided them for you here. If you have any questions regarding how these new limits will affect your plan, please do not hesitate to contact us.
2019 Hardship Distribution Regulation Changes
As many of you have already heard, there are new changes to the rules governing hardship distributions that become effective throughout 2019. Overall, these changes increase the availability of hardship distributions and simplify their administration. In general, these rules become effective on the first day of the Plan year beginning on or after January 1, 2019.
A Note on Transition Periods
If your Plan’s investments are held by a recordkeeper*, then the process of implementing these new rules will vary depending upon decisions made by your recordkeeper. These changes will necessarily require re-programming of computer systems, which can be an enormous undertaking. How quickly that process will be completed will vary from provider to provider. Thus, the effective date of the new rules might be January 1, 2019 for your Plan, but because of delays in re-programming systems, the actual availability date might be April 1, 2019. Some providers have already sent communications regarding this transition period. PASI is available to assist with any hardship needs and/or questions that might arise.
* The term “recordkeeper” refers to a mutual fund company or insurance company that provides online access to participant accounts and provides a source level accounting that is updated on a daily basis. It does not include investments held in a brokerage account.
Summary of Rule Changes
It should be noted that in general, these liberalizations/simplifications are not mandatory changes. We do however generally recommend adopting all of these simplifications. If you would like to discuss in further detail, please do not hesitate to call your Plan Consultant.
Elimination of Six-Month Suspension Period
It is no longer a requirement that a participant’s payroll deduction 401(k)/403(b) contributions be suspended for six months following a hardship distribution. Participants who are currently under suspension may resume their 401(k) contributions on January 1, 2019 (or the first day of the next Plan Year if later).
Hardship Distribution May Include Cumulative Investment Gains on 401(k)
The cumulative investment earnings allocable to payroll deduction 401(k) contributions were previously ineligible for hardship distributions. Under the new law, this cumbersome restriction (which in some cases required decades of payroll records) has been eliminated.
- Attention 403(b) Plan Sponsors: In what was likely an oversight on the part of Congress, the cumulative investment gains allocable to payroll deduction 403(b) contributions are NOT available for hardships. This distinction needlessly disadvantages 403(b) participants as compared to 401(k) participants. It is likely that this will be corrected in subsequent legislation.
Previously Restricted Sources Now Available for Hardship
Current law precludes hardship distributions from various restricted contribution types. Those contribution types included the following: Safe Harbor Non-elective, Safe Harbor Matching, and Qualified Nonelective (QNEC). The new law eliminates these restrictions. Having said that, it should be noted that whether or not this change will affect your Plan depends on your current plan design. Please contact PASI if you would like more information regarding how this change will impact your Plan.
Addition of New Hardship Reason
As of today (December 21, 2018), the IRS’s pre-defined list of hardship reasons includes the following:
- Medical expenses not paid for by insurance on behalf of the participant, a close relative, dependents, or a primary beneficiary
- Costs related to the purchase of a principal residence
- Tuition to a post-secondary institution for a participant, a close relative, a dependent, or a primary beneficiary
- To prevent foreclosure/eviction from the participant’s principal residence
- Funeral expenses for a close relative, dependent, or a deceased primary beneficiary
- Repair of principal residence due to “casualty losses” (e.g., flood, fire, storms)
- During 2018, this hardship reason was limited exclusively to losses within federally declared disaster areas due to a drafting error in a previous law. That restriction has been eliminated.
The new hardship event that has been added relates to federally declared disaster areas. Any losses incurred by a participant as a result of a federally declared disaster are eligible for hardship distributions. These losses appear to be broadly defined and include a specific reference to lost income as an eligible “expense.” As an example, the following expenses should be allowable under this new provision:
- Weekly wages times the number of weeks during which you are unable to work due to the disaster
- The cost of replacing or repairing your car or boat (provided the damage was the result of the disaster)
Plan Amendments and Participant Notices
If you have adopted a pre-approved Plan sponsored by PASI, LLC (which is the vast majority of our clients), then we will be providing you with the necessary amendment to reflect these rule changes during 2019. As a default, all of the simplifications will be adopted as described above; nevertheless, we are available to discuss customizing the amendment if you are interested in a more in-depth discussion. In addition, we will be providing our document clients with a “Summary of Material Modifications” for distribution to Plan participants; this document will describe these changes to participants. Regardless of the timing of these amendments and disclosures, the PASI team is prepared for these new rules and we are ready to assist you and your participants in the event of a financial hardship should the need arise.
Please call us for assistance!
Special 401(k) / 403(b) Payroll Deduction Form for Bonuses
If your company is giving holiday or other bonuses this year, your 401(k)/403(b) plan may allow Participants to make a special 401(k)/403(b) payroll deduction election that would apply exclusively to that bonus. This means Plan Participants could contribute up to 100% of their bonus without impacting their regular payroll deduction contribution elections. If you would like to discuss this option with us, please contact your Plan Consultant. PASI can customize a form for use with your Plan.
Timely 401(k)/403(b) Deposits
The issue of timely 401(k)/403(b) deposits continues to be of the highest priority to the U.S. Department of Labor. In accordance with final regulations regarding deposit deadlines, Plans with less than 100 Participants are required to deposit contributions within seven (7) business days from the paycheck date.
Plans with more than 100 Participants have generally been held to a higher standard – therefore, we recommend that these larger plans deposit contributions as soon as possible after the paycheck date.
If you have any questions regarding your deposit requirements, please contact your Plan Consultant.
Employee Census Data
If your Plan Year ends on December 31st, your Plan Consultant will be reaching out to you for important census data in the coming weeks. Feel free to contact your Plan Consultant at any time if you are prepared to supply us with this data, but have not yet received our formal request.
Fidelity Bonding Requirements
Federal law (i.e. ERISA) generally requires that qualified retirement plans must be protected by a fidelity bond. A fidelity bond protects the Plan’s assets from losses due to fraud or dishonesty by any individual handling funds or other property of the Plan (e.g. Trustees). PASI requests a copy of your fidelity bond to review it for compliance each year.
PASI recommends obtaining a policy that provides “blanket” coverage for anyone required to be bonded. Otherwise, you should ensure that any of the following individuals are covered by the policy:
• Anyone who has physical contact with cash, checks or similar Plan property.
• Anyone with the power to transfer or negotiate Plan property for a price.
• Anyone with the power to disburse funds, sign checks, or produce negotiable instruments from the Plan assets.
• Anyone that has decision-making authority over any individual described above.
PASI also recommends obtaining a policy that automatically increases the bond amount to the level necessary to comply with ERISA (“inflation guard”). Otherwise, you should ensure that the fidelity bond provides coverage of no less than 10% of the Plan’s assets. Regardless, the bond amount can never be less than $1,000. A bond is not required to be more than $500,000 (except in the case of a Plan holding stock of the plan sponsor). Many plan sponsors choose to obtain coverage well in excess of $500,000 based on consultations with their insurance agents.
For more information on the fidelity bonding requirements, or to check your fidelity bond status, please call your Plan Consultant.