Retirement Plan Check-Up

By: Chad Halbur

As your company grows and changes, your retirement plan should also grow and change to ensure the plan continues to meet the needs of the company and its employees. The most prudent thing a plan sponsor can do is review the retirement plan annually. We find the most popular time for plan sponsors to do this is at year end.

Some of the key things we review for our clients are the plan design, investment performance and fees paid to maintain the plan.

Plan design has many facets, and I would like to share with you the three F’s we look at in our review.

Funding Level: 
Does the type of plan you have allow you to fund your retirement plan at a level that is necessary to achieve your retirement goals? 2016 IRS Funding Limits for the following plan types:

  • IRA (Traditional and Roth): $5,500, if over the age of 50, can make an additional $1,000 catch-up contribution
  • Simple IRA: Employee contribution of $12000, if over the age of 50, can make an additional $2,500 catch-up contribution, plus an employer contribution (typically 3% of wages).
  • SEP IRA: Contribution up to 25% of wages not to exceed a maximum contribution of $52,000
  • 401(k) Plan: Employee contribution of $17,500, if over the age of 50, can make an additional $5,500 catch-up contribution. With an employer contribution, this plan type could be funded as high as $52,000 annually
  • If the plan funding levels make sense, does the plan itself limit how much you personally can contribute? As the business owner or high level employee are you capped at a level less than the IRS limits?

Flexibility:
Does your plan provide you the ability to change the funding level for employer contributions? For example, in good years you might want to increase the employer contributions and in bad years you might want to suspend employer contributions and preserve cash.

Features:

  • Has your plan adopted the Roth deferral feature?
  • Does your plan offer employees the ability to take a loan? 
  • Does your plan offer in-plan Roth Conversions?
  • If not, would these features help attract or retain quality employees?

If you are considering changes to your plan, some of these changes can only be made at year end so now is a great time to review!