As a result of the Pension Protection Act of 2006, the Form 5500 is required to be filed electronically for plan years beginning in 2009 or later.  All applicable TSC client plan sponsors were recently mailed information regarding the electronic submission requirements of Form 5500.  For a copy of the mailing, click here EFAST 2 Credentials.  If you haven’t already acquired your credentials, we recommend you to do so as soon as possible.   It is also important to note that all individuals who will be signing the form need their own individual credentials.

Signers of Form 5500 will first need to obtain signing credentials from the DOL’s system titled EFAST2 and notify TSC of who will be signing along with their email address.  TSC will then upload the Form 5500 to plan sponsors for signature.  This will generate an email to the plan sponsor(s) with a link for them to electronically sign the Form 5500.  Note that plan sponsors are required print and sign the hard copy for their records.  Additionally, if your plan is a large plan filer, an electronic copy of the audit report will also need to be attached.  Rest assured that TSC will provide instructions and assistance every step of the way.  If you have any questions, please don’t hesitate to contact your TSC Retirement Plan Administrator.

Once an employee has completed the plan’s eligibility requirements and officially entered the plan on a date of entry, they are considered a plan participant whether or not they have elected to contribute 401(k) deferrals to the plan and whether or not they ever established an account balance in the plan. 

When a participant terminates employment, they continue to be considered a plan participant until they have received a distribution of their entire vested benefit from the plan.   However, in the event that the employee is rehired by the company, their eligibility for 401(k) deferrals is immediately re-instated as of the date of their rehire.

There may be a situation where an employee completed the plan’s eligibility requirements but terminated employment before their plan entry date.  Under this scenario, if their rehire date is before they would have otherwise entered the plan they would enter on their original entry date. If their rehire is after their original entry date they would enter immediately on the day in which they were rehired.
           
Failure to allow a participant the opportunity to contribute 401(k) deferrals in a timely manner could result in an obligation by the employer to make-up contributions on behalf of the participant. Steps also need to be taken to provide rehired employees with a copy of the latest version of the Summary Plan Description as well as new enrollment materials and the employer needs to retain the participant’s election to defer or not to defer in their personnel files. 

Contact TSC when you have a rehired employee and TSC can help maneuver through vesting, eligibility for employer contributions, and forfeiture re-instatement.

Specific instructions on how to report rehired employees are included in the year end census request package.

You know you’ve met a good reporter when he or she takes time to gather facts and do the research necessary to tell a story.  Many of you may know that I’ve been frustrated with some in the media who have reported that the 401(k) is broken.  It’s not.   Recently StarTribune reporter Todd Nelson wrote Checking vital signs on employees’ 401(k)s article (June 14, 2010) that featured the TSC 401(k) Health Check™.  For those of you who, like me, are somewhat skeptical about the accuracy of reporters at times, I’d encourage you to read and follow Todd Nelson’s stories.  We were pleased he interviewed us and we found him to be well informed, and on a quest to gather facts from reliable sources for a complete story.

Nelson spoke with Todd Swanson, a financial adviser with the John Hancock Financial Network and according to him “…one client company credited the high percentage of employees participating in its plan and the high percentage of those meeting their retirement savings goals to TSC’s 401(k) Health Check™…The Health Check has been an important part of their success with the plan.  It’s a critical element because most companies aren’t doing anything like that.” According to the article, Barbara Burke, administrator at Thomsen and Nybeck law firm remarked that they "find (the 401(k) Health Check) to be a valuable tool to give employees, to evaluate how they’re doing."

If you’ve followed this column over the past months and years, you also know that we’ve been on a mission to help retirement plan sponsors and participants really understand the health (good and bad) of their plans.  While we can’t control the market, we can control other factors that result in a healthy retirement.  Others are following suit, including the federal government with the proposed Lifetime Income Disclosure Act bill in Congress.  While I’m not generally a fan of government mandates, I do support others in the industry providing complete information to participants and sponsors to better their retirement plans.

We at TSC are proud to have an influence on helping people succeed with their retirement plans.  Do you have a comment about the TSC 401(k) Health Check™ or have suggestions on how we can better help you understand your REAL retirement benefits?  If so, get in touch with TSC Client Relations Manager, Jennifer Arntson at 952-806-4385.

And, by the way, read Todd Nelson’s upcoming articles – it seems he values doing his homework, like we do, and believes that paying attention to details is important!   Click here to read Todd Nelson’s full article Checking vital signs on employees’ 401(k)s.

Employees can roll money into the plan as long as the plan document allows; though, there may be restrictions.  Generally, plan documents are drafted to permit rollovers.  If rollovers are allowed, the plan document will indicate whether they are accepted ‘only after Participant enters Plan’ or ‘from Employees in an eligible class before Plan entry.'

It is important to note that qualified plans restrict rollovers of after-tax non-deductible employee contributions into the plan.  If the plan document allows, an individual can roll their pre-tax funds from an IRA into the plan, but the after-tax portion must remain in the IRA.   If your plan has Roth features, employees may be able to roll their Roth accounts into the plan; however, no other after-tax or non-deductible contributions are allowed.  In-kind rollovers are typically not permitted.

Please contact your TSC Retirement Plan Administrator for further details or if you have any questions.

We are happy to announce that we have developed mutual relationships with several payroll companies.  This provides a solution to the biggest challenges for our plan sponsor clients, integrating their payroll provider with their 401(k) recordkeeper or investment platform. These relationships will provide assistance in completing the year end census and the submission of contribution files to the investment company on a per payroll basis.  Typically these areas have been the hardest to provide a solution for due to some payroll company’s unwillingness or associated high cost to work with 401(k) recordkeepers/investment platforms and third party administrators like TSC.

To provide a better solution for our clients, we have negotiated integrated service features along with favorable payroll service pricing for our clients with several payroll companies.  We believe that in addition to saving you time associated with submitting 401(k) contributions to your investment platform and year end census data to TSC, you will receive superior payroll service.

The two primary (although not exclusive) payroll service firms with whom TSC has established a partnership are HK Payroll and Paylocity. We would welcome the opportunity to discuss this further with you should you have any interest in finding out more.  Please contact Jennifer Arntson at 952-806-4385 if you have any questions.

Bob was hired by ABC Company and their retirement plan requires that an employee complete a year of service (1,000 hours of service in a 12 month eligibility computation period) before entering the plan on the first day of the next calendar quarter.  Bob was originally hired on 3/5/09 and completed 1361 hours of service before he was terminated on 12/9/09.  Bob was rehired by ABC Company on 5/10/10.  What is Bob’s date of entry into the retirement plan?

1st correct response to this issue of the Translator Brain Teaser will receive a $25 American Express gift card. Simply click "reply" to this email and send us your answer.

“The answer is found on page 12” was the correct answer to the Spring 2010 Translator Trivia Question. Roger Olson from IPTCI Bearings (Paul E. Robey & Associates) had the first correct response. Congratulations!