Retirement Plans

Plan sponsors and fiduciaries rely on Employee Benefits Law Group for all aspects of their retirement plans. Whether it’s designing and setting one up from the start, improving an existing plan, or assessing a plan for compliance, we help clients build the retirement plans that meet their objectives. We strive to act as true partners for our clients and we work with everyone involved in a plan, including CPAs, third party adminstrators, and investment advisors. We’ll take the time to understand your goals, holistically assess your options, and then work with your benefits team to create or redesign a plan.

Building on decades of experience, we can also hone in on common problem areas, uncover unrecognized flaws, and resolve potential issues before they become tax problems with the IRS or fiduciary liabilities with the Department of Labor. Our team helps plan sponsors understand their fiduciary duties, create the best administrative and fiduciary structure for their organization, and establish best administrative and investment practices to keep them out of trouble.

We cover a wide array of retirement plans – whether sponsored by for-profit employers, tax-exempt employers, governmental agencies, or religious organizations.

403(b)

We design or amend your 403(b) plan to ensure that it works best for your situation while limiting its exposure. Additionally, we help organizations that function both as a governmental entity and 501(c)(3) not-for-profit charitable organization – with the unique challenge of determining whether they satisfy the eligibility requirements – implement a 403(b) plan. We provide a comprehensive review and assessment of your plan, including evaluating service provider contracts and investment agreements to determine that the plan is paying reasonable fees. We also establish an appropriate fiduciary structure to limit exposure of the plan investment fiduciaries.

457(b) and 457(f)

Our team understands 457 plan rules and regulations to help you determine which of these plans may work for you and if they could be used in conjunction with other plans. We design and draft the plan document and work with your financial advisor to determine the best investments for the plan. Governmental and select tax-exempt employers may want to consider a 457(b) plan, which works similarly to a 401(k) or 403(b) plan or a 457(f) plan. Unlike 401(k) or 403(b) plans, 457 plans may allow independent contractors to participate.

We regularly review and analyze statutory and regulatory changes. Upon your request, we can also review your plan’s design, costs, fiduciary structure, and operational compliance. We’ve helped many clients dramatically lower their costs and limit the potential fiduciary exposure of employers and their employees. This is done by analyzing the best administrative structures and, in the case of public plans, the best fiduciary structures for their organizations – ultimately establishing the best administrative and investment practices.

We provide a full suite of services to help you get the most out of individually sponsored retirement plans in addition to 457 plans. These include 401(k) plans, defined benefit pension plans, cash balance plans and 403(b) tax-sheltered annuities (TSAs). We can work with you to design a plan to suit your needs, help you address issues with a current plan, or evaluate your plan to find potential cost-savings or uncover potential problems.

Charter School Plans

As charter schools expanded, their retirement and benefit plans attracted increasing scrutiny from the IRS. Employee Benefits Law Group has the specialized knowledge to help your charter school understand its unique tax and regulatory issues while designing and maintaining your plans accordingly. Our targeted employee benefits expertise is a vital component for your legal team and provides senior leadership with a recipe to create a plan that meets your strategic goals and objectives. We work alongside your senior leadership and charter school general counsel to determine:

• Whether or not your charter school is subject to ERISA rules
• Whether your charter school can or should participate in State public employee or teacher retirement systems
• Whether your charter school must design and manage its retirement and health benefits on a “group” basis
• The best ways to set up your 403(b) plan, if applicable
• How to structure and design your organization’s overall employee benefits program

Church Plans

We work with churches and religious organizations on their defined contribution and defined benefit plans, including plan design, administration, and compliance. Because church plans are not subject to the same federal and state laws and regulations, it is important to have a knowledgeable advisor.

Corrective Compliance

There’s a cloud to the silver lining of a qualified plan’s tax advantages – the responsibility for compliance in both form and operation with the requirements of the Internal Revenue Code. Failure to meet that responsibility can lead to plan disqualification, potentially resulting in:

• Income taxation of the plan’s trust for all open years
• The employer’s loss or postponement of deductions for contributions made to the plan during open tax years
• For plan participants, immediate income taxation of vested contributions made on their behalf, or vested accrued benefits, as well as loss of their right to roll over distributions tax free to IRAs or other plans
• The IRS, realizing that the great majority of plan failures are likely unintentional, created the Employee Plans Compliance Resolution System (EPCRS) as a way to help plan sponsors avoid those consequences

Here are some of the most common types of errors submitted to EPCRS for correction. How common are they? The IRS has its own “greatest hits list.”

The IRS Employee Plans Compliance Resolution System

In a perfect world, all benefits plans would operate according to the plan terms and the law. EPCRS is the IRS’s way of acknowledging an imperfect world where a road to resolution is necessary. EPCRS has three programs to treat operational, document, demographic, or eligibility failures. The program used depends on the failure and the circumstances. The Self-correction Program allows correction of certain failures without involving the IRS or paying a fee. The Voluntary Correction Program allows plan sponsors to correct a failure, pay a fee, and apply for IRS approval if an audit wasn’t conducted. The Audit Closing Agreement Program allows plan sponsors to pay a sanction and correct the failure while the plan is under audit. This 401(k) plan checklist is a good tool to help keep your plan in compliance with important rules.

Compensation Errors

In our corrective compliance work, compensation errors are the most frequent failure we see. Incorrectly calculated contributions lead to incorrect plan deferrals and contributions – to much or too little. In any plan, there are different types of compensation beyond wages and salary, such as tips, fringe benefits, bonuses, merit pay, and overtime. Your plan may specifically define some of those as compensation and some as specifically not, and will likely use different definitions of compensation for different purposes. Plan sponsors who are unaware of their plan’s evolving language are the most common cause of the error.

Eligibility Mistakes

Eligibility errors are third on the IRS list of the top 10 most common retirement plan errors submitted for correction. This error occurs when eligible employees are excluded from participation in a plan or ineligible employees are included. In our experience, it’s overwhelmingly an honest mistake. The plan sponsor wasn’t fully aware of the plan document’s language on eligibility or there was a merger that resulted in a “controlled group” violation. We’ve even seen it caused by an error in the original plan design. The longer the error goes uncorrected, the more at risk the plan’s qualified tax status becomes.

Plan Amendment Failures

Plan amendment failures are first on the IRS’s most common plan errors filed in its Voluntary Compliance Program. What causes a plan amendment failure? The amendment was improperly adopted or executed or adopted too late or too late to be retroactive to the first day of a plan year. The amendment may have also resulted in a cut-back in benefits already accrued to participants. The root of the problem is often a lack of understanding how complex the amendment process can be and the pitfalls of the DIY approach without someone reviewing the amendment.

Contribution Errors

Plan asset regulations generally state the outside limit for making plan contributions as the 15th business day of the month following the date the employer receives the contribution. Plans with less than 100 participants can have a safe harbor of seven business days to deposit the funds once the employer receives them. Contributions that are even a few days late and calculation errors in matching contributions can add up. These missed amounts must be deposited to the plan along with any lost earnings. IRS penalties may apply. Correcting this failure is an action when haste doesn’t make waste. Correction costs, catch-up amounts, penalties, and fees can snowball over time.

Plan Loan Failures

Unpaid, uncorrected plan loans can have consequences for both the plan participant and the plan sponsor. According to the IRS, there are usually one or more of three reasons behind most plan loan failures for the plan participant. The loan exceeded the Internal Revenue Code’s maximum permissible loan amount. It exceeded the Internal Revenue Code’s repayment time limits. Or repayment was never satisfied and the loan has gone into default. In a default, the IRS will consider the failure to be a “deemed” distribution for tax purposes. That means the participant is taxed and possibly penalized as if a distribution was taken. But, even with treatment of the loan as a deemed distribution, the participant is still obligated to repay the loan. A loan can also be an operational error for the plan sponsor if it wasn’t made in accordance with plan document language. Learn more about opportunities from the IRS to self-correct plan participant loan errors in this podcast.

DB/DC Combo

A combined defined benefit/defined contribution (DB/DC) plan can solve a challenging problem for employers hitting defined contribution plan limits. We can help you build a DB/DC plan that maximizes benefits to key personnel and owner-employees and maximizes their share of the company’s total retirement plan contributions. We’ll ensure your plan is designed to meet all nondiscrimination criteria and contribution requirements for non-highly compensated employees (NHCEs) as defined by the Internal Revenue Code. In some cases, we can develop a plan that requires only minimal contributions for the NHCEs, which can have a significant impact on smaller employers.

Defined Benefit Plans

Traditional defined benefit plans grant plan participants benefits upon retirement – usually based upon years of service and average salary. This benefit is paid as an annuity or income throughout retirement. These types of plans, which often have legal funding obligations, are becoming less popular. We have helped many employers, not only with their defined benefit plans, but also with other alternatives to these traditional plans.

Either as an alternative to a defined benefit plan or in conjunction with it, employers can provide an attractive benefit called a cash balance pension plan. Cash balance plans combine elements of a defined benefit plan with those of a defined contribution plan, potentially providing more portable and understandable benefits for participants than they would receive under traditional defined benefit plans. We’ll partner with you to analyze your company and understand your employees and your goals to help you determine if a defined benefit plan would support meeting those objectives and then build a custom defined benefit or cash balance plan to meet complex needs.

Defined Contribution Plans

Employers face many choices when developing or altering their defined contribution plans. Most people are familiar with the most common defined contribution plan, the 401(k), which allows participants to make pre-tax salary deferral contributions that may or may not be matched by the employer. There are actually six additional types of defined contribution plans and we can help implement any combination of them.

• Profit Sharing Plans: Accumulate money through employer contributions to an account for each eligible employee.
• Money Purchase Pension Plans: Fixed annual rate of contribution.
• Target Benefit Plans: Specify a given benefit, such as 50 percent of salary at retirement and base each participant’s contribution on the amount of money needed to satisfy that obligation.
• Stock Bonus Plans and Employee Stock Ownership Plans (ESOPs): Use company stock to build equity that will become a retirement resource
• Simplified Employee Pensions (SEPs): Operate similarly to a profit sharing plan in that the employer decides how much to contribute to each participant’s account every year. Instead of making a contribution to a retirement trust for all of the participants, however, the contribution for each employee is made into an IRA for that employee.
• Tax Sheltered Annuities or 403(b) Arrangements: Similar to 401(k)s and allow the eligible employees of certain tax-exempt organizations to specify the amount of pre-tax income that should be deducted from their paychecks and contributed to either an annuity contract or a custodial account.

Fiduciary Compliance

Employee benefit plans, particularly defined contribution plans, must be properly invested and managed to be successful and compliant. As part of their fiduciary obligations, plan sponsors too often overlook these critically important aspects of plan design and administration when they delegate or over-delegate aspects to outside advisors and consultants. A comprehensive review of your plan’s administrative procedures and investment menu or investment policy will help ensure that you are adhering to your fiduciary responsibilities regarding the oversight of your plan administration and investments. This review also provides plan sponsors with a better understanding of their responsibilities regarding the day-to-day operations of administering their plans.

By working with Employee Benefits Law Group, you’ll have access to a broad suite of fiduciary compliance services. We can help sponsors and fiduciaries:

• Understand the fiduciary duties and obligations under tax-qualified ERISA and non-ERISA plans. Our clear and simple guidance helps you fully understand these challenging responsibilities.
• Install ERISA best practices that limit exposure to participant claims or regulatory action.
• Analyze how your investment lineups and fees are structured. Because plan administrative expenses are frequently paid out of participant accounts, and not by the employer, many plan sponsors don’t pay enough attention to whether these fees are competitive or even reasonable. We help plan sponsors understand the importance of monitoring plan investment and fees along with the costs and consequences of inadequate investment and fees oversight.
• Simplify and improve plan investments. We can help you structure investment lineups to help participants be more successful in their retirement investing.
• Develop best practices to comply with ERISA 404(c) and similar rules for California governmental plans. Many government plan sponsors and their participant-directed 457(b) and 401(a) plans are subject to fiduciary rules and mandates similar to those found in ERISA section 404(c). We’ll keep you compliant.
• Work with retirement plan investment consultants and advisors to understand the differences between the ERISA 3(21) and 3(38) business models. Additionally, we can help structure your businesses to service both ERISA and non-ERISA retirement plans. We have decades of ERISA 3(38) experience.
• Draft a client-friendly advisory agreement. For investment advisors who want to make sound business proposals when dealing with ERISA and non-ERISA clients, we can work with them to develop easy-to-read and user-friendly client advisory agreements. A simple and straightforward advisory agreement can go a long way toward earning the trust and confidence of a new client.

Government Examinations

It can feel overwhelming to have the IRS, Department of Labor, or Pension Benefit Guaranty Corporation (PBGC) review, audit, or investigate your retirement plan. If you have a pending examination, trust that our expert advice will put you at ease. We’ll represent you in your plan’s review, audit or investigation to minimize your tax and fiduciary liabilities. With more than 20 years of experience defending and protecting plan sponsors and fiduciaries, we can reduce your correction and sanction amounts in the event of an IRS audit. We become your first line of defense against a Department of Labor investigation. We’ll expertly represent you to get the most favorable result possible. Plus, we’ll review and assess all of the information requested by the government to determine if there are qualification or fiduciary issues. If we find problems, we’ll work to proactively resolve them before the government requires it, resulting in more cost-effective and timely conclusions to examinations.

IRAs

We’ll help you get the most out of your IRA. Our expertise can help protect IRA accounts from violations of rules, taxes, and even creditors. We’ll help you:

• Determine what investments your IRA can make without violating the prohibited transaction rules.
• Avoid the tax on unrelated business taxable income (UBTI).
• Work with your bankruptcy counsel to determine the extent that your IRA assets can be protected from creditors.
• Upon death of the IRA holder, determine the timing of required minimum distributions and identify the proper beneficiaries.

Multiemployer Plans

We guide employers in multiemployer plans to protect them from withdrawal liability and ensure they are complying with ERISA. Our team helps you understand and minimize your withdrawal liability exposure.

Team & Fiduciary Responsibilities

Many employers do not understand benefits team members’ responsibilities and potential liabilities. We help employers understand the roles of the benefits team including the in-house plan administrator, plan trustee, third party administrator, benefits consultant, actuary, benefits attorney, and CPA.