We provide design and implementation services for all forms of
Pension and/or Retirement Plans, in conjunction with many of the nations leading
sponsors and Administrators.
A Brief Overview of What Retirement Plans Are and the Various
Types:
Retirement Plans are generally referred to as either Qualified or Non-Qualified Plans, meaning
that they either do or do not come under the rules, regulations, requirements
and protections of ERISA (the Employee Retirement Income Security Act of
1974).
The reason that plans subject to ERISA are asset protected, is
because there is a Trust created to assure the benefits of a Plan and employees
interests in those Plans. The assets for Plans of a one-person company, or an
owner-only company, may not enjoy the same level of protection as if the
business also had multiple employees, as the primary thrust of any asset
protection afforded under ERISA Qualified Plans is for the covered employees
rather than owners or principles.
Non-ERISA Covered Plans ("Non-Qualified") are generally
not asset protected from creditors and function under a Custodial structure.
Examples include a: Traditional IRA (only Rollover IRAs from ERISA covered Plans
are asset protected from litigation, whereas Contributory IRAs are not); ROTH IRA; SIMPLE; SEP (Simplified Employee
Pension - a variation of an IRA); 403b/TSA (these plans are an evolving area and
it is uncertain as to whether or not they may fall under the asset protection of
ERISA. They are moving towards being the same as ERISA covered 401k Plans. A
403b with employer contributions is likely to fall under ERISA, but employee
salary deferral 403b Plans are not); etc.
ERISA Covered Plans ("Qualified") are generally asset
protected from creditors and function under a Trustee structure. Examples
include a: 401k Group & Single Employer 401k Plans; Money Purchase; Profit Sharing
(New Comparability); Defined Benefit; 412(e)3 Defined Benefit Plans
(historically best known as 412i Plans - fully guaranteed and funded with either
a Fixed Annuity, Whole Life Insurance or a combination of the two).
Please contact us for your specific needs at: 1.800.482.5347
PENSION LAW UPDATES:
The Pension Protection Act of 2006 ("PPA")
In an effort to strengthen
the private pension system, the Pension Protection Act (PPA) of 2006 was signed
into law in August 2007. The Act contains a number of new provisions that
mostly come into effect in 2007 onward and that cover pension funding,
participation education, plan terminations, employee benefits, and other
important retirement-related areas.
The PPA
is the most comprehensive
piece of pension legislation passed in 30-years, and updates many of the
original regulations set forth in the groundbreaking Employee Retirement
Income Security Act (ERISA) of 1974.
The PPA places more
responsibility on individuals to plan their financial futures, and the following
covers certain key aspects of this new Law which are important for you to
consider.
Here are few key provisions in the new PPA:
Direct Rollover of
Retirement Plan Assets to a Roth IRA
Effective January 2008, if
individuals meet the income requirement for conversion, they will be able to
roll over assets from their employer retirement plan directly to a ROTH IRA
without first converting to a Traditional IRA; however, to do this, individuals
will need to report the full amount of the pre-tax dollars rolled over as income
for the year the rollover takes place, and pay any due taxes.
Opportunity:
This is an excellent
opportunity for those who have a 401(k) plan with a high level of after-tax
contributions. In the past, individuals had to roll into a Traditional IRA and
then convert to a ROTH IRA. The amount being converted was pro-rated (pre-tax
and after-tax) based on their total IRA assets, so the amount of after-tax
dollars going to the ROTH was greatly reduced - that no longer has to occur.
Non-spouse Beneficiaries Can
Roll Inherited Retirement Plan Assets to an IRA
After December 31, 2006,
non-spouse beneficiaries of retirement plans will be able to roll over plan
assets into an IRA and continue deferring taxes on the rollover assets.
The rollover must be a “direct rollover” (trustee-to-trustee). The new
account must be titled and maintained as an Inherited IRA, (e.g. titled as "The John A. Doe Inherited IRA" - where the Doe is
the original owner of the IRA, not the non-spouse beneficiary), including taking
of required minimum distributions. Taxes will be paid only when assets are withdrawn.
Opportunity:
Many individuals have
non-spouse beneficiaries (children for example) who decide to leave their
401(k) account with their previous employer. These beneficiaries will now be
able to roll these accounts to a beneficiary IRA and possibly consolidate them
with other inherited qualified beneficiary assets they receive from the same
individual. This is an opportunity for those who include non-spouse
beneficiaries.
Federally Tax-free
Distributions to Charities
For 2006 and 2007 only,
individuals age 70 or older, can make a federally tax-free contribution of up to
$100,000 per year to a qualified charity. The individual does not need to
itemize and the contribution will count toward meeting the required minimum
distribution. The contribution must be made directly from the IRA to the
charity and the amount cannot be counted as a tax-deductible charitable
contribution.
Opportunity:
This is a great opportunity
for individuals who want to see the benefits of their charitable contribution
while they are still living. Donors can avoid paying tax on the contribution,
and still meet their required minimum distribution.
Hyperlink
Disclaimer
Regarding Off-Site - Live Internet Linked Pages
The
information being provided is strictly as a courtesy.
When you link to any of the websites provided herewith, you are leaving
this site. Paul M. League, League
Financial & Insurance Services, LeagueFinancial.com and Royal Alliance Associates, Inc. make no
representation as to the completeness or accuracy of information that is
provided at these sites. Nor are
the companies liable for any direct or indirect technical or system issues or
any consequences arising out of your access to or your use of third-party
technologies, sites, information and programs made available through this site.
You
are now leaving the website of LeagueFinancial.com and you assume total
responsibility and risk for your use of the site you are linking to.
For a complete view of all of the PPA, including updates,
CLICK HERE
for the Department of Labor website.
