April 2015

Inside this issue:

Are You Ready for an Audit?

Several events can trigger a DOL or IRS audit, such as employee complaints or self-reporting under the annual submission of the Form 5500. Often times an audit is a random event, which is why you should always be prepared. Listed below are several key items typically requested in an initial letter sent by the IRS or the DOL in connection with a retirement plan audit. These items should be readily accessible by the plan administrator at all times the plan is in operation.

  • Plan document and all amendments
  • Summary plan description
  • Investment policy statement
  • Copy of the most recent determination letter
  • Copies of Forms 5500 and all schedules
  • Plan’s correspondence files (including meeting minutes)
  • Plan’s investment analyses
  • ADP and ACP testing results
  • Most recent account statements for participants and beneficiaries
  • Contribution summary reports (i.e., evidence of receipt of these monies by the plan's trust)
  • Loan application, amortization/repayment schedule (for all loans)

If you have questions about preparing for an audit, or need plan design review assistance, please contact your Montgomery Retirement Plan Advisors consultant.

Many Plan Participants Leave Unclaimed Match

More than 75% of those contributing to an employer-sponsored retirement savings plan receive matching contributions, and more than three-fourths of those participants contribute enough to receive the full match, according to TIAA-CREF’s Perfect Match Survey. But, only 72% of women and 64% of workers earning less than $35,000 annually receive the entire match.

Many people don’t appreciate what they’re giving up by not getting the full match. As an experiment, researchers developed a specific set of facts regarding how much could be earned from the employer match (earn $50,000 annually from age 35 to age 65, a 3% match, contribute enough to get the full match). They calculated that the employer contribution would be worth almost $73,000 by the time the participant reached age 65.

Almost one-third of respondents said it would be worth less than $50,000. Generation Y respondents and those earning less than $35,000 annually were even more likely to underestimate the value of how much the full match could be worth in retirement. TIAA-CREF concluded that data-driven examples would help participants realize how much they’re giving up by not contributing enough to earn the full employer match. Learn more at http://tinyurl.com/TIAACREFMatch

Loan Proceeds Mostly Used to Pay Off Other Debt

Half of participants who take 401(k) loans use them to pay off debt. Nearly one-quarter of borrowers say they had other options, yet tapped their 401(k) anyway.
Loans were used for:

Paying off debt Purchasing primary home Health care expenses Vacation Non-primary-home real estate

This article is an excerpt from MFS’ white paper, The Retirement Equation. Results of MFS’ 2014 DC Pulse Survey.

News From MRPA

  • Michael Montgomery spoke March 20th at the fi360 Insights 2015 Conference in Orlando, Florida on Fiduciary Best Practices for Non-ERISA Defined Contribution Plans.
  • Mike Montgomery also participated in two panel sessions at the National Association of Plan Advisors (NAPA) conference in San Diego, March 22nd and March 24th, 2015. One presentation addressed trending fiduciary outsourcing solutions, and a second panel session discussed current regulatory trends and potential congressional action regarding Multiple Employer Plans (MEPs).

No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. 

Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

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