Important Action Items for Your Employee Benefit Plan

The current financial crisis has caused some older workers to postpone retirement due to a drop in the value of their retirement accounts.It has also led to renewed compliance scrutiny.Additionally, a recent Supreme Court case (LaRue vs.DeWolff Boberg and Associates, February 21, 2008) ruled that companies can be held liable if employees lose money in their 401(k) due to negligence.Because of the explosion of 401(k) plans throughout the United States, the consequences of this legal action are potentially far-reaching.

Beware delays.

1.If implementing investment instructions is delegated to a third-party service provider, you need to understand the provider's system for implementing the participant's investment selections accurately and timely.With the increase in paperless transactions, this becomes extremely important.The service provider should notify the participant immediately of all changes in investment selections.
2.The Department of Labor is stepping up enforcement of timely remittance of employee contributions.The law requires employers to separate employee 401(k) contributions from their general assets as soon as practicable, but in no event more than 15 business days after the end of the month in which amounts are contributed or withheld from wages.For small plans, generally plans with less than 100 participants, employee withholding for retirement plans are due within 7 business days.
3.Employers might be tempted, either because of administrative convenience or cash flow needs, to delay contributions.But, in addition to the legal requirement, there is also the risk of harm to the participant's investments.If the contributions are delinquent, these contributions are not being invested timely.With the potential of significant market changes every day, this could cause investment gains or losses.If a loss occurs as a result of delay, it may give rise to lawsuits or, at a minimum, the need to make the participant whole.

Other Items to Consider.
1.For plans which participants have to Opt-In (participants choose to be in or not) update participants' selection annually including those participants which choose not to contribute.
2.For plans which participants have to Opt-Out (participants are automatically in and pay is withheld for 401(k) deferrals unless participant Opts-Out,) make sure you retain completed Opt-Out forms to retain evidence of participants' choice.
3.For Opt-In plans, consider an Opt-Out plan.The government is encouraging plans to become Opt-Out plans by reducing some administrative tests.
4.Given current market conditions consider having a financial planner give a seminar to update participants on their portfolios.
5.Not-for-Profit organizations with 403(b) plans will be subject to filing Form 5500 and are required to have an audit if their plan has 100 or more participants effective for 2009.
6.Check for unused forfeitures and discuss with your tax professional how these can be used such as offsetting matching contribution, profit sharing contribution, pay for administrative fees, etc.
7.Avoid having to make time consuming corrections due to errors in accumulating participant criteria for Benefit Plans.
8.Avoid penalties on plans which are subject to corrective distributions based on excess contributions.Plans need to complete their HC testing and compute and pay the corrective distributions within 2 months of the plan's year end to avoid a 10% penalty.
9.For terminated employees that have less than $5,000 in your plan, consider distributing their funds to them to lower the plan's administrative costs.
10.Prepare census and compliance testing timely.
11.Update files with signed designation of beneficiary annually.
12.For plans with multiple ending dates, review for proper inclusion of new participants.
13.Review computations with matching contributions for correctness.
14.Prepare timely all required Forms 1099R/1096 and Form 945 and remittance of taxes withheld.

Determine Your Audit Need
An audit can provide the documentation that you need to prove compliance with applicable rules and regulations.

1.Companies with 100 or more eligible participants at the beginning of a plan year must have an audit to form an opinion that the financial statements of the plan are presented fairly (ERISA Section 103.) The audit is included with Form 5500 filings.Note the word "eligible" is the key, not participants in the Plan.

Plans with fewer than 100 eligible participants at the beginning of the plan year are considered a small plan for filing purposes.Audited financial statements are generally not required for a small plan filing if specific requirements are met under the small pension plan security regulation.

Types of plans that may require an audit include:
Multi-employer
401(k)
Profit sharing
Health and welfare/VEBA

2.

Make sure that your auditor has experience with 401(k) plans.This is a specialized field.Knowledge of the Department of Labor's requirements is a must.Prohibited transactions, supplemental schedules, and certain footnote disclosures are unique to 401(k) plans.The more an auditor understands the 401(k) field, the more effective that audit will be.

3.Provide the auditor copies of all agreements with third-party service providers.If the plan has reviewed the internal control structure of a service provider, that review should also be provided.In any event, the auditor will need to satisfy himself of the internal control structure of the 401(k) plan and the provider's portions of the plan.This work should be performed before the audit.

4.Finally, before the audit, you should either provide or make sure your auditor has obtained all information and documentation requested.Contracts, investment statements, and participants' files are some of the more common requests.If your auditor does not prepare your 5500 form, they must review it.

Quality audits are very important to the 401(k) plan and your participants' best interests.Take steps now to ensure that you are in compliance!

About the Author

Contact: Leslie Flinn, Director of Marketing, Warady & Davis LLP, Certified Public Accountants & Consultants, one of the top 25

CPA & consulting firms in the Chicago area specializing in employee benefit plan audits.

Contact: Leslie Flinn, 847-267-9600, lflinn@waradydavis.com,

http://www.
waradydavis.com

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Why Insurance Agents Are Frustrated and Fed Up

For such a lucrative business it is unfortunate that most first year insurance agents do not renew their insurance license. Why is that? To start with, Big Insurance often tells the new insurance agent to make a list of 100 (or more) people they know to sell to, everyone from family to friends of friends, and then start dialing.

This is known as the infamous "project 100" which consists of bothering anyone the agent knows to make insurance sales to. The agent tries to sell them insurance, whether they need it or not. When they run out of friends and family then what? So what if the insurance company gave the agent a nice office. Who are they going to sell insurance to now? Most agents in this scenario quit only to become a statistic.

Or, the agent might be handed a 37 page list of phone numbers, maybe even the phone book, most of them dead or disconnected numbers from years ago, and they're told to start cold calling. Or the agent is commonly told about a fantastic lead system that is just a crumpled piece of paper with a few names and numbers. Of course everyone else in the building has already tried and failed to sell to these so called leads.

Newly licensed insurance agents are often told they just need to survive their first year in order to make some real income in their second year. Yeah right, what exactly do insurance agents get paid to do? The truth is, most agents won't or don't last that long because the big insurance companies set them up to fail by default.

It's no wonder insurance companies have morphed into churning factories, turning out agent after agent who decides to quit after investing time and money into taking the insurance exam and getting a few sales. The insurance company's managers are all too happy to accept the renewals left over from these agents. This might make the insurance companies and a few of the managers rich, but agents are fed up with this approach.

Agents are also tired of selling strategies that involve bait and switch techniques in which the agent promises the customer something for free, like a review of their government benefits, only to get in to their homes to sell something unrelated or something they just don't need. It's a "push and sell" style and it rarely works in the long term for agents.

At National Agents Alliance (NAA) we understand that what most agents need to thrive in the insurance business is a proven system. The NAA system consists of a mailed in response client lead program, a unique field underwriting process, a proven agent marketing program, and a powerful agency building opportunity. Systems help the agent make more money in less time and the foundation of our agents success is the exclusive NAA lead system.

A client response lead is the ultimate leverage in insurance sales. Unlike other insurance marketing organizations NAA owns its own lead company that provides its agents a consistent flow of qualified leads from potential clients across the country. This one of a kind program allows the agent to focus their efforts contacting prospects who have mailed a response letter back to the company. The end result is the agent spends most of their time in front of clients selling instead of prospecting.

In their own handwriting, homeowners are leaving contact details expecting an agent to call them back. The perfect marketing campaign in any business is one that can deliver potential clients who have identified a problem in their mind that you have a solution for. That is the backbone of the NAA lead program.

Taking this system-based approach has propelled NAA from $10 Million in sales in 2002 to over $140 Million in sales for 2007. NAA offers a full portfolio of life insurance and annuity products representing top A-rated companies like Old Mutual Life, ING, Foresters, and Aviva.

NAA believes its most important principle is to help others out first and you will be rewarded handsomely in return. This is the motto of Thomas Brown, an NAA agent who runs his own multi-million-dollar agency. My goal is to help change people's lives, to help them improve their lives, says Brown. I want to find winners, the next success story. I want to help people reach high levels of productivity and income. You can too by joining the next wave in the insurance business with NAA.


About the Author

We provide sales leads to our agents. These leads are returned by a homeowner in their own handwriting. This allows the agent to spend most of their time selling versus prospecting. Go to www.powerfulinsurancesales.com for more information.

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