3 Things to Consider to Make the Most of Your 401(k) Plan

Many of you know that your employer’s 401(k) plan is one of the best places to save for retirement. Because of this you enrolled, and you’ve been contributing, but for some reason you aren't seeing the results you had expected. What could help?

Maximizing your 401(k) plan does take some work. However, you don’t have to take on all of the work yourself. Taking full advantage of your retirement plan features and working with your plan advisor will help you to get the most out of your retirement savings. Here are 3 things you should also consider looking into:

• No investment allocation – Many 401(k) investors end up in the plan’s default investment option (target date fund, money market fund, conservative portfolio) because they have not made an investment election. If this sounds familiar, look at your plan’s investment menu and/or meet with your plan’s investment advisor to determine a selection of investments that best match your risk tolerance.

• Automatic rebalancing - Participants who choose to build their own fund lineup, will realize over time some funds will out perform others. This will result in a portfolio that can be more or less aggressive than you intended. Rebalancing corrects this very thing. Having your account set-up to auto rebalance on a regular basis keeps you from having to do this on your own.

• Maximizing your employer match - Many 401(k) plans offer an employer match to encourage employee participation. This is comparable to getting a raise without having to do anything. Unfortunately, many participants who participate in their employer sponsored 401(k) plan do not contribute enough to receive the full employer match. If you have not done so already, check if your plan offers an employer match. If they do I would encourage you to contribute enough to receive the full match.

It's always best to gain advice from your advisor. As a plan administrator, our role is to educate you on the options out there. The role of the advisor is just that, to give you advice. To learn more about Alliance Benefit Group North Central States, Inc. and the services we provide please visit abgncs.com or email info@abg-mn.com. 

The Author: Seth Holstad

Account Executive

abgncs.com/RetirementAdministration

sholstad@abg-mn.com

Disclaimer: This blog is of an informative and educational nature, and should not be considered legal, financial or operational advice. Please contact the appropriate parties for those services. Thank you.

A Cautionary Tale on Fiduciary Responsibilities

Before you name a specific member of an organization as the fiduciary on a health plan subject to COBRA, consider this. You may want to avoid that if you don’t want that individual to become the responsible party to pay any COBRA fees should an audit occur. Here’s an example that helps illustrate why this should be a concern:

Fiduciary Acme, Inc maintains a health plan subject to COBRA. Susan, Acme, Inc’s CEO, is the named Plan Administrator and fiduciary of the plan. As required by COBRA, Acme, Inc has been extremely careful to send General COBRA Notices to employees and spouses within 90 days after they first become covered under the health plan. However, from December 1, 2012 until she learned the actual General COBRA Notice rule on March 30, 2013, Acme Inc’s new, in-house COBRA administrator failed to send General COBRA Notices to spouses within 90 days of becoming covered by the plan. One spouse became covered on December 1^st and did not receive his notice until April 1^st. Another spouse became covered on December 15^th, and again did not receive her General COBRA Notice until April 1^st. In this instance Acme Inc could be subject to a maximum of $3,000 in excise tax penalties with respect to the first spouse and a possible $1,500 in excise tax penalties with respect to the second spouse.

Under ERISA’s general fiduciary responsibility rules, Susan, in her capacity as the named fiduciary responsible for the plans’ compliance with COBRA, is personally liable for any excise tax that is actually imposed for the failure. To avoid the personal liability the HR person could have named Acme, Inc. as the fiduciary.

If you have any questions about your COBRA administration, please contact our COBRA department at (800) 761-1934.

The Author: Roger Jorgensen, RHU, REBC

Marketing - HSA/HRA/FSA & COBRA

abgncs.com/HSAFSAHRA

rjorgensen@abg-mn.com

Disclaimer: This blog is of an informative and educational nature, and should not be considered legal, financial or operational advice. Please contact the appropriate parties for those services. 

Nondiscrimination Testing for Section 125 Plans

Most employers know Section 125 “Flex” plans and their various component benefits (FSAs, Dependent Care, group insurance premiums, etc.) are subject to nondiscrimination rules.  But did you know not complying with the nondiscrimination rules could result in taxation of employees’ benefits?  Or worse, the revocation of an employer’s ability to offer this type of pre-tax plan at all?  

The 2007 Proposed Regulations clarified that, upon review, employers must be able to prove these tests were run and passed each plan year.  But running these tests is not a simple process.  It requires work, time and cost.  In order for Alliance Benefit Group North Central States, Inc. to perform Section 125 nondiscrimination testing, an employer must provide very specific and detailed information, twice.  First in the middle of the plan year and then again after the plan year has ended.  We might even ask the employer to provide that information more than twice, depending on the results of the tests.  ABGNCS also charges employers a fee to perform these tests.  

So the question is, is it worth it?  Do employers really need to have this done year after year?  Even if the results are always passing?  The answer is yes!

Remember Section 125 plans offer employees a very significant savings.  

Contributions to Section 125 plan benefits are not subject to federal, state, Social Security or Medicare taxes.  Depending on their income tax bracket, an employee could save 25% - 40%, or more!  These plans also save employers Social Security and Medicare tax, which equals 7.65% savings on all funds run through the plan. 

The ability to provide these savings is threatened if an employer doesn’t ensure their plan is following the rules, which makes nondiscrimination testing an invaluable service!     

The Author: Sadie Wuerflein, CFC

Account Executive - FSA/HRA/HSA

abgncs.com/HSAFSAHRA

swuerflein@abg-mn.com

IRS Released 2015 HSA Limits

As you may have experienced over the last year, everything seems to be a little more expensive than the year before. Our friends at the IRS have taken notice and released the 2015 Health Savings Accounts (HSAs) amounts, adjusted for inflation. The annual contribution limits, deductible limits, and out-of-pocket maximums have all been increased for 2015.

2015 Annual Contribution  Limit: 
Single coverage: $3,350 (up from $3,300 in 2014)
Family coverage: $6,650 (up from $6,550 in 2014)

2015 Minimum Deductible for HDHP:

Single coverage: $1,300 (up from $1,250 in 2014)

Family coverage: $2,600 (up from $2,500 in 2014)

2015 Maximum Out-of-pocket:

Single coverage: $6,450 (up from $6,350 in 2014)

Family coverage: $12,900 (up from $12,700 in 2014)

For more detailed information, you can review the updated Revenue Procedure communication directly from the IRS website. Contact us if you have any questions about HSAs.  

The Author: Roger Jorgensen, RHU, REBC

Marketing - HSA/HRA/FSA & COBRA

abgncs.com/HSAFSAHRA

rjorgensen@abg-mn.com