We will be utilizing this online newsletter to notify you of government actions that may affect your retirement plan administration. This newsletter contains five important issues for you to consider.

HOW TO INCREASE YOUR 401(k) SAVINGS BY 2% WITHOUT REDUCING YOUR TAKE-HOME PAY

Have you noticed a difference in the amount of Social Security (SS) tax coming out of yours or your employees pay?  Recent Congressional activity, intended to serve as a “stimulus” for the economy, has reduced the amount of SS tax withheld from individuals from 6.2% to 4.2% for the 2011 calendar year only (employer liability remains 6.2% of pay).  While we here at CCI are in favor of the economy picking up steam, we are even bigger believers in paying yourself first and saving for retirement.  Why not take that 2% savings from SS taxes and slide it over to your 401(k) plan instead?  Chances are your take-home pay will be slightly increased from before the tax break because your federal withholding tax will be reduced accordingly.

Be sure to check you plan’s deferral modification dates before pitching this idea to your plan participants.  Some plans only allow participants to change the amount withheld from their pay twice per year.  If you are unsure of your plan provisions, please contact us.

SERVICE AGREEMENTS COMING SOON

CCI has been providing quality retirement plan services since 1977 without having our clients sign excessive paperwork to begin or maintain our relationship.  We have always believed in the power of a handshake and quality communication.  Those qualities are certainly still important, but recent compliance rules relating to fee disclosure (more on this below) require us to create service agreements for all our clients.

Agreements must be in place by January 2012.  We will be in contact with you later this year to present the agreement for your review and signature.

FEE DISCLOSURE

The Department of Labor (DOL) published final regulations on fee disclosures to plan participants in late 2010.  The new regulations are intended to provide more clarity on the fees assessed to retirement plan participant accounts.  As plan administrator you must provide an explanation of any fees or expenses that may be charged to a participant’s account on an individual basis.

This is creating much “buzz” in the retirement plan service community.  We will continue to keep you posted of how service providers (including CCI) intend to provide information to you for distribution to your plan participants.  The rules are fully effective January 1, 2012.

HOW SOON DO YOU DEPOSIT 401(k) SALARY DEFERRALS?

This topic has been shared several times via our Retirement Planner.  However, the importance of timely deposits cannot be emphasized enough. There has been much discussion over the years on how soon you should deposit 401(k) salary deferrals for your plan participants once withheld from their pay.  On January 14, 2010, the Department of Labor (DOL) finalized a proposed rule, giving guidance to plans with fewer than 100 participants, for meeting the deposit deadline.  Under the new rule, small plans will meet the rules if they submit employee contributions to the plan’s trust account within seven business days of being withheld from participant paychecks. The rule also applies to participant loan repayments.

Plans with 100 or more participants are not eligible to rely on the new rule.  It is our recommendation that large plans remit deferrals as soon as possible.

PLAN BONDING

Did you know your plan is required to have a bond covering 10% of the plan assets?  IRS Code Section 412 specifies that a plan sponsor hold a bond no less than $1,000 in value with a cap of $500,000.  In a recent survey the IRS determined that bonding was a frequent error in plan sponsorship.  Please contact us if you have questions about bonding your plan.  If your insurance agent does not have an ERISA Bond product, we recommend Colonial Surety.

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“Retirement . . . It’s worth planning for!”

Thank you for reading this electronic issue of Retirement Planner.  Please feel free to contact us at cci@ccinc.net or via phone at 360-871-7727 or 206-441-4411.