2009 Required Minimum Distributions (RMD's)

In December 2008 legislation was passed and signed into law suspending the minimum distribution requirements for 2009 for individuals who are 70 ½.  Therefore, no minimum distributions are required for 2009.  This waiver does not apply to a defined benefit plans.  The following are some key points regarding the suspension:

It is important to note that TSC will not be initiating 2009 RMD’s unless specifically instructed to do so.  Please contact your TSC Retirement Plan Administrator for more information.

For more information regarding the specifics of the 2009 RMD update reference the Translator March/April 2009 issue.

It’s almost here…Beginning in 2010, submission of Form 5500 and related schedules will be done electronically.  Rest assured that TSC is prepared to make the changes as easy as possible for you.  While all the specific details will not be available until the DOL “opens” the system on January 1, 2010, we have been preparing and gearing up for electronic submission that is required under the EFAST2 system.

For most employers, paper forms will not be sent in to the Employee Benefits Security Administration (EBSA) as has been past practice.  While a signed paper copy will still be required, it won’t be mailed into the EBSA.  In addition to the manner in which the required filings are submitted, changes to the questions asked on the forms and schedules have also occurred.

We want you to know that all of the changes and how they affect you is of great importance to us and we will make sure that transition to this new submission system is as uncomplicated as we can make it for you.  There will be a learning curve and likely a little more work as we familiarize ourselves and our clients with all the changes, but please know that our commitment to providing excellent service remains unwavering.

Many employers are seeking clarity on how to treat compensation paid to terminated participants after their employment ends.  The final 415 regulations indicate that post-severance compensation paid within “the later of 2 ½ months after the severance of employment or the end of the limitation [plan] year that includes the date of severance of employment” should be counted as compensation for Plan purposes if they include payment for regular wages for services rendered, commissions, or bonuses, all of which would be paid as compensation if the individual continued employment. 

TSC’s documents are generally drafted to include compensation such as accrued bona fide sick, vacation, other leave, or a taxable payment from a nonqualified deferred compensation plan that is paid within the timeframe described above.

It is important to note that pure severance pay, which is “triggered” by severance of employment, is always excluded as compensation, even if paid within the timeframe described above. 
           
Contact your TSC Retirement Plan Administrator for more information should you have questions about post-severance compensation.

Quality Counts...

It is interesting times … now more than ever in the history of corporate retirement plans, quality counts! As plan sponsors you must COUNT ON QUALITY…to protect and serve you and your employees.   Given the increasing demands placed on your business, it is vital that as your third party plan administrator, we help you manage and maintain your plans according to current regulations allowing you to focus on generating revenue for your business.

How do we help protect you and your employees?  Compliance regulations mandate that you maintain up-to-date plan documentation, perform annual plan accounting and compliance testing and submit governmental reporting forms – to name just a few.   In addition, regulations require delivery of account balance statements, employee notices for certain plan types, summary plan rules and important tax information on plan withdrawals – among many other requirements.  We take care of all this and more for you, our client.  We don’t expect you to know what to do, just who to call when you have a question.

Serving you and your employees to make informed decisions requires regular review of the plan with you and your participants.  The annual TSC 401(k) Health Check ™ provides a benchmark and check-up of your plan and participation within the plan as well as individual statements for participants.  An annual check-up is key to prevention of future ailments and fatal mistakes.

According to the Center for Due Diligence, “while the fiduciary standard is not something to take lightly, it is NEVER a good time to accept fiduciary responsibility without the necessary expertise, resources, adequate insurance, risk compensation and the ability to control outcomes.”  Watson Wyatt Worldwide reports that “plans with less than $100 million have a 12% chance of a fiduciary claim.”   Now, more than ever, is the time to protect your company and your participants.

Mark and Mike, our on-staff ERISA attorneys along with our team of experts live and breathe the intricacies of the corporate retirement plans.  We look at not only what is required to be done, but what opportunities you might have and not know about and what pending or proposed legislation may affect you.  As an industry, there’s been a recent surge of others sacrificing quality and selling plan administration as a low-cost commodity.   A word of caution for those companies choosing a retirement plan team without consideration of quality of the service or experience in the business.   The wrong decision can be a costly mistake for the future.

As we wrap up this year – one that will long be recognized for its economic downturn –we look forward to the upcoming year.  It is widely believed that the new-year will bring more change to corporate retirement plans.  Stay tuned….we’ll keep you informed to any changes in the weeks and months ahead.

I wish you a very Merry Christmas, Happy Holidays, and a Happy New Year. Thank you for your business.

Cheers,
Gary Zurek

The employer has a fiduciary responsibility to conduct a diligent search for all terminated participants that retain an account balance in the plan.  In circumstances where you have forwarded a distribution package to a terminated participant through first class mail and it is returned to you as undeliverable, there are specific steps that you should take to ensure that you are compliant with the terms of your plan document.

Since the Internal Revenue Service requires proof that you attempted to locate a missing participant, the TSC document provides guidance on acceptable proof.   This proof should include a post office returned mailing that was sent through either registered or certified mail.  Consequently, a returned mailing to a participant sent through first class mail should be re-sent through either registered or certified mail to satisfy this requirement.  Alternately, you can utilize registered or certified mail as the method to forward all distribution packages.

If you are unable to contact a person through the mail, subsequent steps should be taken to exhaust other locating methods available to you.  This should include, but is not limited to:

1. Checking related plan records from a group health plan or retirement plan
   
2. Checking with the designated plan beneficiary or known acquaintances
   
3. Internet search tools

If these methods prove to be unsuccessful, a letter-forwarding service through either the Internal Revenue Service (IRS) or the Social Security Administration should be utilized.  The IRS procedures, along with sample letters, can be found on our website at www.tsc401k.com under the “distribution” option under the Plan Administration button.

There will be instances when despite your best efforts, you will be unsuccessful in locating a missing participant under any of the methods described above.  Documents sponsored by TSC allow for distributions after three years from the date the returned registered or certified mail was sent to the participant.  The ultimate disposition of the participant’s vested account balance will be determined based on the applicable federal laws in force.  Currently, the recommended method is for the distribution to be in the form of a rollover into an individual retirement account or annuity on behalf of the participant.

If you have any questions concerning missing participants, please contact your TSC Retirement Plan Administrator for further information.