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Roth assets are becoming more and more essential to a successful retirement savings strategy. Concerns about rising tax rates and legislative changes (ex. SECURE Act eliminating the stretch IRA) are two important drivers. Let’s start with the basics of “Why Roth?”  Contributions are after-tax Tax free growth of principal and earnings Tax free withdrawals*  *after satisfying 5 year rule, age 59 1/2 Unfortunately Roth IRA contributions are limited to $6,000 ($7,000 for age 50+) and many individuals are not eligible based on income limitations. If an individual is looking to buil ..read more

The American Rescue Plan Act of 2021 (‘ARPA’) contains a couple of provisions to help cash-strapped sponsors of defined benefit/cash balance (‘DB/CB’) plans. This relief probably won’t help a large number of your clients. However, if you have a client who is having difficulty making their required 2020 DB/CB contribution or missed a required contribution for 2019 and owes an excise tax, this relief could be a god-send. Without getting too technical, ARPA offers two types of relief and the relief can be “retroactive”. The first type is a rest of shortfall amortization bases and allowing the bas ..read more

Introduction One of the most common issues that arise when CPAs are counseling clients regarding retirement plans is how the controlled group rules apply in qualified plan world. The controlled group rules ensure that a qualified retirement plan (or plans) maintained by an employer (or group of related employers) does not discriminate in favor of highly compensated employees (HCEs). Why is it important? A controlled group of companies is considered a single employer for qualified plan purposes, and, generally single employers are prohibited from maintaining more than one qualified pl ..read more

What is the auto-enrollment tax credit? $500 per year, for a maximum of $1,500 over 3 years This auto-enrollment tax credit is in addition to any startup plan tax credits, as well as any available deductions for employer contributions The employer does not need to have to expenses associated with adding the auto-enrollment feature to claim the tax credit. These tax benefits add up quickly to make 401(k) plans extremely affordable for small employers. What are the requirements to receive this credit? Adopt a new eligible automatic contribution arrangement (“EACA”) or add one to an existing r ..read more

If an individual received a 2020 1099-R, how does the CPA or individual know if the distribution reported on the 1099-R qualifies for special tax treatment under the CARES Act. The burden is on the taxpayer and his CPA to make the determination and to document their compliance with the CARES Act requirements. 1099-R Reporting There is no special 1099-R code for CARES Act distribution. So, a distribution that potentially qualifies for CARES Act special treatment may look just like a regular distribution from a retirement plan. Usually, it will be reported as a Code 1 “Early Distribution, n ..read more

For self-employed individuals and business owners Effective for the 2020 tax year, The SECURE Act ended the deadline to adopt profit sharing plans, defined benefit plans and cash balance plans to the business’ tax filing deadline including extensions. This is huge! Typically, business owners don’t realize they need an additional tax deduction until completing their taxes after the end of the year. But, at that point, the deadline to adopt a qualified plan had come and gone. To encourage employers to adopt qualified plans, The SECURE Act extended the deadline to adopt qualified plans to ..read more

What did the SECURE Act change about the start-up tax credit? Since 2002 a federal income tax credit has been available for starting a retirement plan. All the SECURE Act changed was the amount of the start-up credit for tax years after 2019.  So everything else stays the same. Discussed separately, the SECURE Act also added a tax credit for adding auto-enrollment to a plan. How much is the tax credit? The amount of the tax credit is 50% of the costs to set up and administer the plan or educate employees about the plan.  The minimum tax credit is $500.  The maximum tax credit is ..read more

Comments on SECURE Act Guidance in IRS Notice 2020-68 Mr. Eric Slack Director, Employee Plans Internal Revenue Service 999 North Capitol Street NE Washington, DC 20002 Re: IRS Notice 2020-68 Dear Mr. Slack, Nova 401(k) Associates and our affiliate, Administrative Fiduciary Services Inc. (collectively “NOVA”), are writing to provide comments with respect to IRS Notice 2020-68 (the “Notice”). Nova is a third-party administrator serving over 6,500 employers. Our current practice also includes multiple employer plans (‘MEPs’). Nova’s primary focus is on employers with fewer than 2,000 employees. O ..read more

Mr. Joe Canary, Director Office of Regulations and Interpretations Employee Benefits Security Administration U.S. Department of Labor 200 Constitution Avenue NW Washington, DC 20210 Re: Registration Requirements for Pooled Plan Providers RIN 1210-AB94 Dear Mr. Canary: Nova 401(k) Associates and our affiliate, Administrative Fiduciary Services Inc. (collectively “NOVA”), are writing to provide comments with respect to the Notice of Proposed Rulemaking (“Proposal”) to provide a registration process for pooled plan providers (“PPP”) who wish to sponsor a pooled employer plan (“PEP”). Nova expect ..read more