Top Twelve Strategies for Year-End Planning

The end of the year is approaching—it’s a great time to review your employee benefit plans to ensure they’re compliant and up to date. Below are our top twelve strategies:

  1. Is your plan on track to require an audit? Generally, most existing benefit plans require an audit once the number of eligible employees exceeds 120 on the last day of the plan year. Review the “80-120” rules in the Internal Revenue Service (IRS) Form 5500 instructions.
  1. Verify that your plan is properly making automatic cash-outs for participants that are no longer active and are within the thresholds set by the plan document. This could reduce your number of eligible employees below the audit threshold.
  1. Does your plan have a balance in the forfeiture account? The IRS requires that such funds be used on an annual basis and not be permitted to accumulate. Refer to your plan document regarding how the forfeitures should be used. For instance, should they be used to reduce employer contributions or pay plan expenses? Be sure the process is followed.
  1. Review your plan’s participant deferral remittance procedures and verify that the funds are being transferred into the plan as soon as administratively possible. You may need to accelerate the process.
  1. Is it time for the plan to adopt auto-enrollment and/or auto-escalation? These are great ways to encourage your employees to start saving for retirement.
  1. Will your company be paying a year-end bonus to its employees? Refer to your plan document to determine if bonuses are considered eligible compensation.
  1. Part of a plan administrator’s fiduciary duty is the continual monitoring of investments offered by the plan. Schedule a review of the plan’s investments with your independent investment advisor and confirm that the plan is in compliance with the investment policy statement.
  1. If your plan document is other than a prototype plan document, verify that the document has been amended to conform with current IRS regulations.
  1. Mortality tables have been updated for defined benefit plans. Review the impact of these changes with the plan actuary.
  1. Next year will bring some changes to the contribution ($19,500 plus catch-up of $6,500 where applicable) and compensation limits ($285,000) for benefit plans. Verify that the limits are taken into consideration with an effective date of January 1, 2020. For 2019, consider whether the maximum contributions have been made by the sponsor, or if there are additional contributions that could be made for 2019.
  1. Prepare for the IRS requirement for 403(b) plans to be restated onto an IRS approved plan document in order to retain the plan’s tax-qualified status. The deadline for this restatement is March 31, 2020.
  1. Certain changes to hardship distributions go into effect in 2019 as a result of the Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act. Discuss these changes with your document provider to determine which changes have been adopted and how they affect your plan. These include:
    • Participant loans are no longer required to be taken prior to a hardship distribution.
    • There is no longer a requirement to suspend participant deferrals for six months following a hardship distribution.
    • Earnings are now allowable distributable assets for hardship distributions.

If you have questions about any of the above items or need assistance, contact your CSH Employee Benefit Plan adviser. We’re happy to help!

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