Newsletter Articles

Maximum compensation limit, Defined contribution plan maximum contribution, Defined benefit plan maximum benefit, etc.

When Congress passed the Pension Protection Act of 2006 (PPA), it enacted several provisions that affect your Form 5500 filing. The first provision requires that you file Form 5500 electronically, thereby eliminating the expensive paper processing system currently in use by the government.

One of the primary objectives of the qualified plan rules is to make the tax advantages contingent upon covering a significant number of the nonhighly compensated employees. As this goal could be thwarted by creating separate legal entities for the highly compensated and nonhighly compensated employees, a complex set of rules has evolved concerning the aggregation of related employers for purposes of the minimum coverage rules and other qualified plan requirements.

The Pension Protection Act of 2006 (PPA), which fundamentally changed the funding of defined benefit plans, was signed into law about three years ago. Guidance needed to interpret this new law has trickled in over these three years.

The primary goal of a retirement plan is to accumulate savings to provide income after retirement. Most plans also allow distributions before retirement age for a number of circumstances, including termination of employment and financial hardship. Non-taxable participant loans may also be an option.

Given the complex nature of administering qualified retirement plans in accordance with ever-changing pension law, mistakes are inevitable. When the IRS discovers plan mistakes through audit, the plan risks being disqualified which results in severe consequences to the plan sponsor and participants.

Are you a fiduciary of your company’s retirement plan? If you’re not sure, it’s time to find out because if you are a fiduciary, it is important to know exactly what your responsibilities are.

With the current economic conditions, many companies have been forced to downsize either by laying off a portion of the workforce or closing a plant or line of business. These layoffs can have an impact on a qualified plan. If enough employees are terminated, a partial plan termination can occur which requires that the affected workers become fully vested in their benefits.

Qualified retirement plans provide tax deductible benefits for employers and employees, as well as an opportunity for significant savings for the post-retirement years. But these plans require adherence to numerous governmental regulations, and there are costs involved in the establishment and ongoing maintenance of the plan.

Each year the U.S. government adjusts the limits for qualified plans and social security to reflect cost of living adjustments and changes in the law. Many of these limits are based on the “plan year.” The elective deferral and catch-up limits are always based on the calendar year. Here are the 2009 limits as well as the three prior years for comparative purposes.