- Our Role in Managing Your Plan
- LRS Team
- How We Communicate with You
- Online Account Portal
- Plan Sponsor Responsibilities
- Services Performed by LRS
- Service Providers to You & Your Business
- Employees, Owners as Employees
- Owners as Employees: What Owners (Stock Investors) Need to Know About Their Status as an Employee
- Establishing an Owner as an Employee
- Compensation as an Owner
- You Hired Employees, Now What?
- Making Additional Investment Options Available
- Consolidate Old Retirement Accounts
- Retirement Plan Requirements
- ERISA Bond Requirement
- Employee Census and/or Summary
- Retirement Plan Testing, Financial Reporting and IRS Form 5500
- Business Changes
- Sponsoring Other Retirement Plans
- Helpful Information Curated for QES Plans.
- 401(k) Plan Sponsor Responsibilities – A Quick Overview of Best Practices and Commonly Asked Questions
- Plan Sponsor is Ultimately Responsible for The Plan
- Utilization of Investment Funds
- Setting Up Other Retirement Plans and Implications of Doing So
- Using Funds from One Corporation to Invest in Another Corporation
- Owner’s Opportunity to Invest into Plan Before Employees
- Know Your Enrollment and Payroll Dates, Especially if You Have Employees
- Distributing Necessary Forms to Employees
- Required Year End Forms and Actions
- Employee Census and Summary
- Internal Revenue Service Form 5500
- Internal Revenue Service Form 1120
- ERISA Bond Requirement
- Employees, Owners as Employees Information for QES Plans
- Need Additional Business Financing / Investing More Money into the Corporation
- Let’s Talk Investing: You Have Additional Monies in the 401(k) Plan
- Reducing Your Taxes with Your Retirement Plan
Welcome to Your New Retirement Plan
Welcome! You now sponsor and manage a Retirement Plan. This guide will highlight some of the primary responsibilities you will have in managing your Retirement Plan. There are many responsibilities that come with sponsoring and managing a Retirement Plan and the Leading Retirement Solutions Team is here to help you. We would like to familiarize you with these responsibilities and requirements to help you manage your new Retirement Plan, and to make sure your Plan remains in compliance with Internal Revenue Service (IRS) and Department of Labor (DOL) regulations.
- Our Role - We help you manage and administer your Retirement Plan in several ways:
- Assist with any questions you may have about your Retirement Plan. Our experts are here to help answer any question you may have about your plan.
- By helping you and your employees save for retirement.
- Recommending strategies to take advantage of tax credits and tax deductions available with your Retirement Plan.
- Help ensure that your Retirement Plan is kept in compliance with the Internal Revenue Service and Department of Labor regulations.
- Consolidate old retirement accounts.
- Assist you with providing the necessary notices that need to be distributed to your employees. Internal Revenue Service regulations require that you present employees with certain participant notices and information related to the Retirement Plan’s available investment options.
- Answer questions about additional corporate entities, mergers, acquisitions and how they may affect your Retirement Plan.
- If you engaged in the ROBS (Rollovers as Business Startup) business financing strategy and have a 401(k) Plan with Qualified Employer Securities, LRS will assist you with private stock/Qualified Employer Securities held by your 401(k). We help with the initial rollover, subsequent transactions, wire transfer, and assisting with redemptions.
- If you have a 401(k) Plan with Qualified Employer Securities, we can answer any questions about investing more money into your corporation. We can also help you with your exit strategy when exiting out of ROBS and getting Qualified Employer Securities out of The Plan. For more information please visit: How to Exit the ROBS Business Financing Strategy
- Your Leading Retirement Solutions Team and How We Communicate with You: Our client services professionals are always happy to help answer questions you may have about your Retirement Plan. Call, Email, Live Chat, or meet via Video, with an LRS team member – whichever method you prefer we can make happen. We strive to be accessible to our clients when you need us.
- For questions about your Retirement Plan contact our Client Services Team:
- For billing questions please contact our Accounting Team:
- There are a number of methods we use to communicate with our clients:
- Much of our proactive communication is initiated via email; we utilize an email ticketing system which allows for robust task management around any email inquiry we may initiate with you and/or receive from you. This ensures your matter will be taken care of.
- LRS will also send you important notices via our automated voice broadcast system to remind you about upcoming regulatory requirements, deadlines, meeting reminders, and updates. These calls will also give you the option to immediately transfer through to a team member so you can speak with someone one on one.
- Text messages are utilized to send you important alerts and notices.
- For more information about how we may initiate contact with you please refer to: Communicating with Our Clients
- Online Account Portal: We highly recommend becoming acquainted with your Online Account Portal (Plan Administration Portal), as this is what you will use to view important notices and submit required information back to Leading Retirement Solutions.
- Log in to your Online Account Portal located at https://www.leadingretirement.com/portal/. Please choose the “Manage My Plan” option under Plan Sponsors / HR Managers category. You can also log in from: https://portal.leadingretirement.com
- Review account activity and balances.
- Obtain copies of your Retirement Plan account statement and important documents.
- Review Internal Revenue Service and Department of Labor deadlines specific to your Retirement Plan.
- Find helpful information about your plan and LRS offerings related to your plan.
- Complete other regulatory compliance requirements such as:
- Year End Employee Census and/or Summary.
- Reviewing your Annual Notice.
- Live Chat with a team member about any questions you may have.
- This portal is specifically reserved for sponsor/company level access. If you have employees that participate in the retirement plan, they will be provided alternative access, also located at https://www.portal.leadingretirement.com
- Plan Sponsor Responsibilities: The company/organization sponsoring the Retirement Plan is considered the Plan Sponsor. The Plan Sponsor is ultimately responsible for all aspects of the Plan. Plan Sponsors generally secure a team like Leading Retirement Solutions, to assist with the various requirements related to your Plan.
- The Plan Sponsor must ensure the Plan remains in compliance with federal regulations. Compliance responsibilities include:
- Your plan document must be written to comply with all requirements in the Internal Revenue Code.
- Your plan must be administered to follow its terms in operation.
- Review your plan annually to make sure it’s operating according to its terms and the law.
- The Plan Sponsor is also responsible for:
- Making sure that all government reporting deadlines are met.
- Notices are distributed to employees and participants.
- Know your enrollment dates and payroll dates, these dates are especially important if you have employees.
- Filing year-end forms. The Plan sponsor is responsible for filing all Plan Year End information such as employee census and/or summary, and Internal Revenue Service form 5500. Please see the ‘Plan Requirements’ section of guide for more information about these requirements.
- Implementing your Retirement Plan. Understand how your Retirement Plan operates. Refer to the Adoption Agreement that we have provided to you. Know what your adoption agreement says about:
- When your employees are eligible to participate in the plan;
- Types and amounts of allowable plan contributions;
- How employer contributions are divided among participants;
- When participants are vested; and
- When and how benefits are paid.
- Maintaining your Retirement Plan. Once you’ve established a retirement plan, you assume certain responsibilities in operating the plan. Your duties will vary depending on the type of plan you choose, but in general will include:
- Enroll participants in the plan when they’re eligible.
- Make contributions required by the plan terms.
- Withhold the appropriate amount of salary deferrals, if your plan allows them, and timely deposit the deferrals in employees’ individual accounts.
- Notify participants when certain events occur.
- Perform annual testing to determine if your plan benefits discriminate in favor of highly compensated employees, if required.
- File annual reports with the IRS, DOL and PBGC, if required.
- Make distributions and loans in accordance with the plan terms.
- Amend your plan document as necessary to reflect current laws.
- If errors occur in operating your plan, correct them as soon as possible to keep your plan tax-qualified.
- Develop internal controls to maintain your plan. Formal review procedures can help you find and prevent mistakes in administering your plan. Internal controls should include procedures for:
- Compare salary deferral election forms with the amounts deducted from employees’ wages.
- Verify the types of compensation used for allocations, deferrals and testing.
- Check that plan service providers received accurate compensation and ownership records.
- Monitor annual contribution and compensation limits.
- Verify the validity of rollover contributions to the plan.
- Verify that years of service were accurately determined for eligibility and vesting.
- Verify marital status and spousal consent for plan distributions.
- Ensure participants received required minimum distributions.
- Services Performed by Leading Retirement Solutions:
- Determine employee eligibility.
- Provide enrollment kits and help enroll employees in your organization’s 401(k) Plan.
- Help document your records when employees decline to enroll in the 401(k) Plan.
- Validate ineligible employees.
- Consolidate old retirement accounts such as IRA, 401(k), 403(b), 457, Pension Plan, or Defined Benefit Plan.
- When you take compensation from your company, LRS will help you start making contributions to the plan.
- Set up more traditional investment options such as mutual funds when employees become eligible. LRS can help with adding investment options to your plan to ensure regulations are being met with the Department of Labor, which requires diversification of options for employee participation in your organization’s Retirement Plan.
- Provide automated billing of Administration costs making it easy to pay for the services we provide for you. For more information about billing please reference: LRS Billing Policy
- Prepare Form 5500 and 5558 if necessary.
- Help you file Form 5500 with the Department of Labor.
- LRS will work with your bookkeeper/CPA or any other service provers you may have.
- Answer any questions about investing more money into your corporation.
- LRS will help you secure the required ERISA Bond. More information can be found here: ERISA Bond: Obtaining Your Plan's Required Fidelity Bond
- Asist you with finding strategies to reduce taxes with your Retirement Plan. Inquire with an LRS team member for more information.
- ROBS clients can find more information about this topic at: Tax Strategy for the ROBS
- Service Providers to You and Your Business - Certain Things to Be Aware of:
- There are several unique regulations that affect your company when you offer a retirement plan.
- You may hire a CPA, Bookkeeper, Attorney, Investment Advisor, Human Resources, or a Payroll company. However, we do not expect bookkeepers, CPAs, or attorneys to know about the unique and varied regulations related to your Retirement Plan.
- We encourage you to organize a brief meeting between us and any service provider you secure to ensure you remain in compliance with all regulations.
- If you hire a payroll company, do not allow them to set up a second retirement plan for you or your company, this will likely result in a prohibited transaction. Please consult LRS before setting up any other retirement plans.
- Employees, Owners as Employees
- Owners As Employees: What Owners (Stock Investors) Need to Know About Their Status as an Employee:
- The owner must still meet eligibility requirements to participate in the Retirement Plan.
- In order to qualify to participate in a company retirement plan, roll retirement monies into that plan, and invest those monies into your Corporation, an owner must be a bona fide employee of the company sponsoring the Retirement Plan.
- Your contributions to the Plan must be through a payroll deduction after you begin taking compensation (a paycheck).
- For Leading Retirement Solutions to establish you were/are a bona fide employee of the Corporation you should track the hours that you work. This can be done by:
- Time tracking software.
- Excel spreadsheet
- You can track by the day; you don’t have to track by the hour.
- Compensation as an Owner:
- Business owners don’t always take compensation initially, or they may take compensation from the Corporation at irregular intervals. This is okay. Your Corporation should generate revenues sufficient to support any compensation you take.
- You Hired Employees, Now What?
- Offering the plan to employees can be easy; we can assist you with that process.
- We determine if an employee is eligible for The Plan. However, you must provide employees with your Plan’s Deferral Agreement and Summary Plan Description.
- LRS will help with enrolling employees by creating a comprehensive enrollment kit for distribution to employees.
- You must offer enrollment to employees and require submission of an enrollment form, which is provided by LRS.
- You must distribute the Summary Plan Description and Rollover Form to each new hire, on their day of hire. This information can be obtained through your Plan Administration Portal located at: https://www.leadingretirement.com/portal/.
- As a reminder, failure to offer the plan to eligible employees will result in a plan violation requiring that your company pay significant penalties, taxes, and costly and time consuming filings with the Internal Revenue Service and Department of Labor.
- Each employee, including yourself, has the right to roll outside/old retirement accounts into the Retirement Plan on their hire date, Leading Retirement Solutions will help you with this.
- You cannot exclude “Part Time” employees from the plan. There are employees you may exclude from the plan, as defined in The Plan’s legal documents. Ask an LRS team member if you need assistance in making this determination.
- If you hire 1099/independent contractors, union workers, and/or leased employees, please contact us to discuss additional requirements.
- Required Documents and Forms for Eligible Employees
- For additional information about who qualifies as an employee please visit this link: Plan Design: Non-Traditional Assets
- Webinar: You Hired Employees, Now What?
- Making Other Investment Options Available:
- If your organization employs individuals who are eligible or will soon become eligible to participate in the plan and the only investment currently available via the plan is privately held stock (qualified employer securities), pursuant to DOL regulations you are not offering a sufficiently diverse range of investment options.
- “Under Labor Department regulations, there must be at least three different investment options so that employees can diversify investments within an investment category, such as through a mutual fund, and diversify among the investment alternatives offered. In addition, participants must be given sufficient information to make informed decisions about the options offered under the plan.” Read more at: DOL Fiduciary Responsibility
- Leading Retirement Solutions can help you complete this important DOL requirement by assisting you with adding investment options to your plan including mutual funds, Stable Value, Target Date Funds and Money Market accounts and preparing and providing the required employee notices. Please contact a Leading Retirement Solutions Client Services team member for assistance with fulfilling this requirement.
- As an owner of the company, your contributions to The Plan may be restricted when employees do not participate. Contact your LRS Administrator for solutions.
- IRS regulations require that you present employees with certain participant notices and information related to the Plan’s available investment options, provided by LRS.
- Additional information at: Contribution Maximums
- Consolidate Old Retirement Accounts:
- We will help you and your employees consolidate all of your retirement accounts into the new Retirement Plan.
- You must provide a copy of the Summary Plan Description and Rollover form on each employee’s date of hire. LRS will provide you with the necessary documents to do so through your Plan Sponsor Portal located at: https://www.leadingretirement.com/portal/.
- If you or any of your employees have an IRA, a 401(k), 403(b), 457, pension plan, Defined Benefit Plan please contact LRS for assistance in transferring these accounts into the new Plan. LRS can help you consolidate all your retirement accounts into the new Plan.
- Retirement Plan Requirements
- ERISA Bond Requirement:
- You are required to obtain a bond (government required insurance policy) once you have an employee eligible to participate in the plan, beyond company owners.
- Leading Retirement Solutions will help you secure the required bond. If you would like assistance with acquiring this bond, please contact us and a team member will be happy to help.
- For more information about this bond requirement please view: ERISA Bond: Obtaining Your Plan's Required Fidelity Bond
- Employee Census and/or Plan Year Summary:
- At least annually (and more frequently depending on the services LRS is providing to you), we request that you review and submit an employee census and plan year summary questionnaire to us, so that we can prepare your annual IRS and DOL reporting requirements.
- We will provide these documents to you at the time they are needed and also send you reminders as you approach the deadline(s) for submission.
- It is very important that you fill out an employee census and summary for LRS. We use this information to complete IRS Form 5500 for your Plan. All employees should be listed on the census whether they are participating in the Plan or not.
- Retirement Plan Testing, Financial Reporting and IRS Form 5500:
- Form 5500: Internal Revenue Service Form 5500 Is Required For Your Retirement Plan
- One of your most important responsibilities when you own a company that sponsors a Retirement Plan is to file IRS Form 5500, annually. This DOL & IRS filing is based on your plan year end. If you are unsure of Plan’s Year End please reference your Plan’s Adoption Agreement.
- Form 5500 is like the Retirement Plan’s tax return; just like you or your CPA would prepare your personal tax return or your Corporation’s tax return. However, CPAs generally do not work with the Department of Labor and don’t prepare Form 5500.
- Form 5500 is not filed directly with the Internal Revenue Service, it is filed with the Department of Labor. Leading Retirement Solutions will help guide you through this filing process.
- We will prepare Form 5500, present it to you for review, and assist you with filing Form 5500 with the Department of Labor.
- Business Changes: It is important to let us know if you intend to make changes to the ownership of your business, prior to such changes, so that we can evaluate and identify Internal Revenue Service or Department of Labor requirements that may be associated with your business change(s):
- Starting a new business, even if not related to your original business, the business sponsoring your Retirement Plan.
- If the owners of the company sponsoring the Retirement Plan have ownership in or common control over other business ventures or entities, you may be required to offer the Plan to employees of those other entities.
- If you wish to change the type of entity (e.g., C-Corporation to S-Corporation), your entity’s tax classification, or you want to establish other entities, regardless of whether they are associated with your business, Internal Revenue Service regulations may require additional action as it relates to your retirement plan.
- If ownership of your business/entity and another commonly owned or controlled entities changes.
- If you plan on buying another business, buying part of a business, or buying a larger stake in any other businesses; you may be required to offer the Plan to employees of those other entities.
- Sponsoring Other Retirement Plans:
- If you wish to sponsor another retirement plan (SEP, SIMPLE, IRA, another 401k, etc.) it is important you contact us prior to doing so to ensure you remain in compliance with Department of Labor and Internal Revenue Service regulations.
- Government regulations place restrictions and additional requirements on other retirement plans adopted by your company and/or other businesses in which you have common ownership or control.
- Sponsoring a 401(k) Plan along with a Defined Benefit or Cash Balance Plan is very common.
- Sponsoring a SEP/SIMPLE IRA, generally precludes your company from also sponsoring a 401(k) and/or Defined Benefit, Cash Balance Plan.
- Helpful Information Curated for QES Plans.
- Employees, Owners as Employees Information for QES Plans
- Owners as Employees: What Owners (Stock Investors) Need to Know About Their Status as an Employee:
- The owner must still meet eligibility requirements to participate in the Retirement Plan.
- In order to qualify to participate in a company retirement plan, roll retirement monies into that plan, and invest those monies into your Corporation, an owner must be a bona fide employee of the company sponsoring the Retirement Plan you are utilizing for your business financing strategy.
- Your contributions to the Plan must be through a payroll deduction after you begin taking compensation (a paycheck).
- Tracking Your Work: For Leading Retirement Solutions to establish you were/are a bona fide employee of the Corporation you should track the hours that you work. This can be done by:
- Time tracking software.
- Excel spreadsheet
- You can track by the day; you don’t have to track by the hour.
- Compensation as an Owner:
- Business owners don’t always take compensation initially, or they may take compensation from the Corporation at irregular intervals. This is okay. Your Corporation should generate revenues sufficient to support any compensation you take.
- You must understand how you are being paid:
- If your accountant tells you to take a “draw” that suggests your accountant plans on reporting your Corporation as an “S-Corporation” which is not allowed by Internal Revenue Service regulations for the strategy you engaged in. Only apply to QES?
- If you take a “dividend” from the Corporation, all owners of the Corporation must also receive their rightful share of the dividend. Remember, the 401(k) Plan is an owner of the Corporation and must receive a share of the dividend.
- You need to take compensation as a W-2 employee to participate in the 401(k).
- Need Additional Business Financing or Plan on Investing More Money into the Corporation?
- There are a number of traditional and non-traditional business financing options that may be available to you if your business needs additional capital.
- If you need additional 401(k) monies invested in the company or if you intend to bring additional investors into the company and/or intend to invest more monies into the Company, additional requirements are necessary that are specific to the Qualified Employer Securities (QES) strategy you engaged in.
- One of the key legal requirements related to engaging in a QES transaction is that the stock purchased by the 401(k) Plan, in both the initial and any and all subsequent stock purchases must be purchased for “adequate consideration” as defined, in part by ERISA § 408(e)(1).
- You can invest additional funds into the company; however, it is important that you contact Leading Retirement Solutions prior to investing any additional funds into the company so that we can provide you with information about additional requirements.
- Let’s Talk Investing: You Have Additional Monies in the 401(k) Plan:
- If your money is currently sitting in a cash state, earning no interest, asking us to invest your money in a money market fund would generate even a little bit of return, mutual funds, even more.
- It can be helpful, in the event of an audit by the Department of Labor or IRS, for them to see that you are accessing not only non-traditional investments (private stock) but also more traditional investment offerings, like mutual funds.
- Once investment options are made available, the plan is ready to receive further rollovers of your own outside investment accounts as well as employee’s rollovers when hired and contributions when eligible to participate. This is an excellent hiring tool.
- Your qualified 401k plan offers a higher level of legal protection for your retirement accounts than do IRA’s. Bankruptcy and other litigation cannot attach Pension benefits and 401(k) accounts.
- You have access to investment professionals who will advise on investing and retirement planning.
- Reducing Your Taxes with Your Retirement Plan: There are a few possible ways to utilize tax breaks for businesses and business owners with a Retirement Plan. Some of these include:
- Tax Credits: Tax credits are available to a company for retirement plan startup costs.
- You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a 401(k), 403(b) or other qualified retirement plan.
- You will find that tax credits reduce the amount your company owes to the IRS, dollar for dollar. A tax credit for retirement plan startup costs (the first 3 years your company sponsors a plan) is available to most companies.
- Talk to your accountant to determine what tax credits are available to your company. Tax credits have the reputation for yielding the better results because of how they directly impact how much you owe.
- Tax Deductions through employer/company made contributions can reduce a company’s taxable revenue.
- Tax Deductions work differently as they reduce the company’s taxable revenue for the year.
- Tax Deductions are generally available to a company for most, if not all retirement plan related expenses that are paid by a company, including annual plan administration expenses, large plan audit expenses, ERISA bond expenses and much more.
- Owner Contributions: Company owners can reduce their own taxable income through contributions into their Plan.
- Roth contributions made to a 401(k) or 403(b) Plan result in tax free earnings.
- Retirement savings contributions credit – see IRS Form 8880, Credit for Qualified Retirement Savings Contributions.
- Once your company approaches profitability, let us know so we can talk tax strategy with you.
- For more information on this topic please visit:
Article ID: 47, Created: 5/6/2021 at 1:01 PM, Modified: 7/13/2021 at 12:05 PM