|
|
Newsletter
December
2004 Volume
21 - Number 4
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
This newsletter is addressed to
our clients their attorneys, accountants and other professional advisors.
Citations may be included for those who want to refer directly to the source
material. IN THIS ISSUE:
RETIREMENT
PLAN LIMITS FOR 2005 - Compare the increased limits for 2005 side by side
with the 2004 limits. NOTICES
TO ELIGIBLE EMPLOYEES - These notices are required to notify participants of
plan provisions and events. YEAR END REMINDERS - Calendar year requirements that must be satisfied by all retirement plans. |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
RETIREMENT PLAN LIMITS FOR 2005
Many qualified plan limits will increase for 2005. Some of these changes are due to both
increases in the cost-of-living index (COLA) and meeting the statutory
thresholds that trigger adjustment. Several of the limits are scheduled to
increase due to the statutory requirements of the Economic Growth and Tax
Relief Reconciliation Act of 2001 (EGTRRA).
The FICA rates remain unchanged since 1990. For both employers and employees the FICA Tax is 7.65% (6.2% for Social Security Tax plus 1.45% for Medicare Tax). For self-employed individuals the FICA Tax is 15.3% (12.4% for Social Security Tax plus 2.9% for Medicare Tax). FICA Tax applies to earnings up to the Taxable Wage Base. |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
NOTICES TO
ELIGIBLE EMPLOYEES
A participant is entitled to obtain, without charge and without request, a summary plan description (SPD), a summary of material modification (SMM) to the plan and a summary annual report (SAR). Summary
Plan Description – A “plain language” explanation of the terms of
the qualified retirement plan. This must be provided to each participant (or
beneficiary in the event of the participant’s death) no later than 90 days
after becoming a participant in an existing Plan. The employer must continue to provide the participants with
updated SPD’s when the plan is amended or restated and even if no changes
have occurred to the plan document a new SPD must be issued at least every 5
years. Penalties have been assessed
against a plan administrator for failure to provide plan participants and
beneficiaries with an SPD. Summary
of Material Modification – When a plan amendment is
prepared for a plan document that makes the information on the SPD
inaccurate, an SMM may be prepared and distributed to the plan participants
rather than an updated Summary Plan Description. The SMM must be distributed within 210 days after the close of
the plan year in which the material modification is adopted. Summary
Annual Report – This is provided to the plan sponsor at the same
time as the IRS Form 5500. The SAR
must be distributed to participants and beneficiaries receiving benefits no
later than the later of nine months after the close of the plan year or two
months after the due date (with extensions) of the Form 5500. The summary annual report is a synopsis of
the information reported on the annual Form 5500 return. Designation
of Beneficiary – This should be provided to each newly eligible
participant, with subsequent forms provided upon request. A copy of the
executed Beneficiary Form should be retained by both the plan sponsor and the
participant. Notice to
Eligible Employees – The 401(k) Safe Harbor Notice must be provided to
each participant, within 30 to 90-days prior to the beginning of the plan
year or within the 90-day period prior to becoming a new participant. Blackout Notice –
Required when the plan relies on the 404(c) Regulations for fiduciary
protection concerning individually directed accounts. This notice is required if participants
will be unable to direct or diversify investments, or obtain a loan or
distribution for a period of time and must be provided at least 30-days prior
to this “blackout period.” The following participant election forms should be available upon request for all qualified plans: ·
Rollover & transfer contributions ·
Loan application ·
Hardship Withdrawal Additional
participant election forms in 401(k) plans include, but are not
limited to, the following: ·
Election to enter or waive participation in the plan ·
Salary reduction agreement to make elective deferrals ·
Investment selections by participant The employer must
provide the above listed forms for all employees when they become
participants or as they are needed. |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
YEAR END REMINDERS Preparation of IRS Form 1099-R. This office sent each plan sponsor information regarding the filing of a Form 1099-R to report distributions made during the calendar year. Please note that a direct rollover or a direct transfer to an IRA or another qualified plan is considered a distribution from the plan. The cost of current life
insurance protection must also be reported on form 1099-R. A
retirement plan participant receiving current life insurance protection under
a policy held by the plan must include the value of that benefit in his or
her gross income for any year in which employer contributions or trust earnings
are used to pay life insurance premiums. The amount which must be included as
income is generally provided by the insurance company. This income must be reported on
a Form 1099-R for each participant. If the insurance company does not prepare
the 1099-Rs, the plan sponsor must make other arrangements to have it done.
If you wish this office to prepare the forms, information pertaining to the
cost of current life insurance protection should be entered on the schedule
requesting the 1099-R data. Required Minimum
Distributions. Participants who have attained age 70 ½ may be
required to receive a plan distribution as early as December 31, 2004. If the
appropriate distributions have not yet been made, please contact this office
immediately. The penalty for noncompliance with this requirement is a
non-deductible excise tax equal to 50% of the amount required to be
distributed. Withholding from distributions must be reported on
form 945. Withholding
from 2004 distributions from qualified plans must be reported on Form 945.
The filing date for this Form is January 31, 2005. If there is no
withholding, no Form 945 need be filed.
California filers may be required to file Form DE-7. We suggest you
check with your tax advisor regarding State-filing requirements.. |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
NEW CREDENTIALS AWARDED TO PRP STAFFProfessional
growth and continuing education are important parts of our philosophy; so we
are proud to announce that the American Society of Pension Professionals and Actuaries
(ASPPA) has awarded the following to members of our staff: Helen Zan has earned the new designation of Qualified 401(k) Administrator (QKA) to add to her. Certified Pension Consultant (CPC) and Qualified Plan Administrator (QPA) credentials. Carol
Youshock and Jing Ye have successfully completed ASPPA’s Pension
Administrator’s Course. |
||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
