401(k)'s for Solo Businesses

Below is a great article written by Jane Hodges:

One-person companies can have the same type of retirement plan common at large corporate employers. And Roth 401(k)s are an option, too.

Talk about control. In addition to managing themselves, self-employed workers have their own options for retirement saving, too.

Two of the best options: solo 401(k)s and solo Roth 401(k)s.

Both have been around a few years but are more common now as accountants with entrepreneurial clients have become more fluent with them, says Rick Meigs, president of Portland, Ore.-based 401khelpcenter.com, a 401(k) research firm.

Their biggest benefit is they often allow for higher retirement-savings contributions than other plans. They also have less-complicated contribution rules than a Keogh, which offers high contribution potential but may require the expense of an actuary and extra paperwork.

Salt Away
Solo 401(k)s let you put away more than a Simple IRA, which allows a maximum contribution of $11,500 a year for those under 50 and $14,000 for those older, plus up to 3% of income (after adjusting for self-employment tax). More than Roth IRAs, too, which set a ceiling of $5,000 for those 49 and under, and $6,000 for those older. Unlike a Roth IRA, solo 401(k) plans also place no income limits on who can participate.

Regular solo and Roth solo 401(k)s also can allow for higher contributions than a Simplified Employee Pension (SEP) IRA at the same income level. In a SEP IRA for 2009 and 2010, entrepreneurs may contribute as much as 20% of their net business profit (up to a maximum of $49,000) if they are sole proprietors, or 25% of their salary if their company is a corporation. (Net business profit is defined as the income of the business after expenses, and minus half of the self-employment tax.)

But with a solo 401(k) or solo Roth 401(k), for 2009 and 2010 you can put into the plan 100% of your first $16,500 in income from the business (or $22,000, if 50 or older), plus 20% of net profit, until you max out contributions at $49,000 (or $54,500, if you are 50 or older).

How can an entrepreneur sock away more with a solo 401(k) than with a SEP IRA? Clint Gharib, director of managed products and insurance at J.P. Turner & Co. in Atlanta, uses the example of a 51-year-old sole proprietor whose business income was $100,000. If the proprietor used a SEP IRA, he or she could invest only 20% of $92,936 ($100,000 minus $7,064, half the self-employment tax), or about $18,600.

But the same proprietor could put $22,000 in a solo 401(k), plus 20% of $92,936, for a total of about $40,600. Under some accounting rules and business structures (if incorporated, for instance), this same entrepreneur might be able to put as much as 25% of his or her salary in a SEP IRA—but that amount would still be far less than a solo 401(k) allows.

Numerous mutual-fund, brokerage and discount-brokerage firms offer solo 401(k) plans. Among fund families that sell them through financial advisers: Invesco Aim, Pioneer Investments and OppenheimerFunds. Self-directed investors can open such plans at T. Rowe Price Group, Charles Schwab Corp., Fidelity Investments and Vanguard Group. The Roth versions are also available from fund companies and securities firms such as Invesco Aim, Pioneer, T. Rowe Price, Vanguard, ING Direct's ShareBuilder unit and E*Trade Financial Corp.

Fees vary, and can include a setup fee, annual administration fee, and routine mutual-fund fees—in addition to adviser fees. The highest fees are for those solo 401(k)s sold through insurance companies, Mr. Meigs says.

Among adviser-sold plans, Pioneer charges no setup fee but has a $25 annual fee that is waived on accounts over $25,000. Invesco Aim charges no setup fee and offers two administration options: a self-service option with a $10 annual fee or a full-service option, in which advisers choose a third-party administrator that aids with plan compliance. Fees for the latter vary but average less than $100 per year.


OppenheimerFunds charges no setup fee and annual administration fees of $10 for accounts over $50,000, and $15 for accounts under $50,000.

ShareBuilder's solo 401(k) products cost $195 to set up, and are assessed a $15 monthly fee, waived on accounts over $250,000; start-up costs are $125 for Costco members.

Russell Lowry, a certified financial planner with Sagemark Consulting Private Wealth Services in Windsor, Conn., says he has opened plans for clients at Plan Administrators Inc., a third-party administrator in De Pere, Wis., which offers adviser-sold plans featuring funds from companies such as American Funds and OppenheimerFunds. At Plan Administrators, setup costs $50, and annual fees are $150 (for balances below $250,000) or $250 (for balances $250,000 and above). Mr. Lowry also charges a fee on the plans; he says it's about 1.5% of assets annually, or less as balances rise.

Solo 401(k)s do in some cases have higher administration fees than SEP IRAs or other plans. Investors need to weigh whether they save aggressively enough to justify those fees. Another detail: With solo 401(k) plans, once accounts hit $250,000, investors are required to file annual paperwork on them to the Internal Revenue Service.

Richard Reyes, a certified financial planner in Orlando, Fla., says to help his clients decide which plan is right for them, he asks them: "How much money are you going to put away yourself? If he/she tells me less than $10,000 to $15,000, then I will always lean toward the SEP and Simple arena. If the owner says a lot more, then one is almost automatically thrown into the solo 401(k) arena."

Mr. Reyes advises that when an investor can reliably contribute at least $15,000 a year, solo 401(k) plans often make more sense than SEP IRAs.

Other Considerations
Investing benefits aside, the ability to borrow is a plus, too. The decision also involves age considerations and guesswork about future tax rules. Investors or their advisers must figure whether it's wiser to contribute after-tax now—to a Roth IRA or Roth 401(k)—or reduce taxable income now and pay tax on retirement income later—with a SEP IRA or solo 401(k).

Mr. Lowry, the financial planner, says that for entrepreneurs under 40 who want to maximize their retirement investment, he generally recommends a solo Roth 401(k) because of likely future tax increases.

The bottom line? As more workers start businesses, work as contractors or opt for self-employment, higher earners should strongly consider a solo 401(k). Even among adviser-sold plans, it's possible to find reasonably priced options.

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: Jane Hodges & online.wsj.com

The Impact of Automatic Enrollment on 401(k) Match Rates: A Methodological Note

Here is a great article written by Barbara A. Butrica and Mauricio Soto:

Automatic enrollment in employer retirement savings plans has received considerable attention recently since behavioral studies show that workers are more likely to participate in their employer’s plan if automatically enrolled. And increased participation means more workers likely will retire with some pension savings. However, our recent study “Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?” raised the question of how employers will pay for these additional compensation costs.

Our paper offers three hypotheses: (1) firms leave pension and other compensation arrangements unchanged, thereby increasing total compensation paid to workers; (2) firms reduce nonpension compensation to keep total compensation at the same level before autoenrollment was introduced (for example, by reducing wages or other benefits); or (3) firms reduce the match offered to workers to offset the increase in costs. Using data from 2007 Form 5500 filings, we find some evidence to support the third hypothesis. Controlling for size, industry, and other characteristics, we find that employers with autoenrollment seem to have lower match rates than those without autoenrollment. While this result is intuitive to us and describes a seemingly rational response by profit-maximizing firms, we also explore other explanations. We do not, however, have information on how nonpension compensation might be changing, so for us to comment on the generosity of plan sponsors is impossible.

More recently, an advance summary of a forthcoming brief from the Employee Benefit Research Institute (EBRI) reports that 225 large plans implementing automatic enrollment between 2005 and 2009 had higher match rates in 2009 than in 2005, suggesting that employers may have increased pension contributions over the period. While EBRI’s results seem to conflict with ours, it is not clear that they do. The two studies measure different concepts—ours measures the ratio of employer to employee contributions for a sample of 826 large 401(k) plans and the EBRI study measures the change in the potential match rate for a sample that includes switches from defined benefit to 401(k) plans. The studies also use different time frames.

Further research is needed to better understand the decisionmaking of plan sponsors. Ideally, researchers would have a large sample of 401(k) plans reporting match rates before and after automatic enrollment to understand employer responses. The question of how employers respond to automatic pension enrollment is an important element of the debate over how to increase retirement income savings for all Americans.

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: Barbara A. Butrica and Mauricio Soto, 401khelpcenter.com, and (EBRI) urban.org

Some Considerations When Reinstating Your 401k Match

Here is an article written by Rick Meigs - President of 401khelpcenter.com

Charles Schwab notes that as our economy begins to show signs of improvement, one of the most difficult decisions many companies will struggle with is whether or not the time is right to reinstate the 401k match. While there is no question that matching contributions were a serious casualty of the recession, Schwab has found that anywhere from one-third to one-half of firms that stopped or reduced their contributions are thinking about reinstating them during 2010.

As companies begin to evaluate their programs to reinstate the match, below are several key areas that employers should pay particular attention to:

Benchmarking Around Peers and Goals
Employers should compare its plan match formula and overall structure to others in their industry, including similar sized companies and those in their geographical region to see if their retirement plan is still competitive and properly designed to attract the candidates it considers desirable.

Breaking Down Demographics
By breaking down plan participants by their salary level, years of service, position and age, employers can observe participation and savings rates for each category. This will allow firms to better identify any weak spots that need shoring up.

The Plan's Match Ceiling
Schwab's research shows that employees will most often set their deferral rate at the plan's "match ceiling"- the amount of salary they must defer to receive the maximum employer matching contribution. Employers should reset to a higher match ceiling to encourage employees to save more.

Investment Education
The reinstatement of the match is also a great time to rethink other key aspects of a 401k plan. Employers should take the opportunity to remind employees about other strong features of its plan including free advice sessions and workshops, target date fund options that make diversifying and rebalancing easier, or a Roth 401k plan option. Schwab has found that on average, employees who receive consultations more than double their savings rates because they feel more confident about investing and are happier with their plan.

Automatic Savings Rate Increases
While auto-enrollment is increasing in popularity, far fewer companies take an important next step: automatically raising participants' deferral levels each year. For employers this can be a particularly smart move as auto-enrollment plans usually start participants off at a relatively low deferral level and an annual bump-up can help put employees on a stronger path to a more secure retirement.

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: 401khelpcenter.com/Rick Meigs

Brand Name Consultant vs. Independent Advisor

Check out this insightful article written by Thomas B. Bastin:

There is a legitimate question in the minds of many as to whom they should be working with to assist in the management of their retirement program. The easy way out is to go with a large brand name consultant or financial institution. After all if they are large and branded they must be competent, right? That is an assumption rather than a careful consideration of what service is actually being offered. In order to answer the real question titled above you must first understand your responsibility/options, and then understand the industry.
ERISA dictates that any person responsible for making decisions impacting ERISA plans are labeled plan fiduciaries.

There are four duties imposed on qualified retirement plan fiduciaries under ERISA Section 404(a)(1):

- First is the duty of loyalty identified as operating in the sole interest and for the exclusive purpose of the plan and participants (ERISA Section 404(a)(1)(A)).
- Second, the duty of prudence (ERISA Section 404(a)(1)(B)).
- Third, the duty of diversification (ERISA Section 404(a)(1)(C) and (4).
- Fourth, the duty to adhere to plan documents (ERISA Section 404(a)(1)(D)).

Let us begin by focusing on the second duty of prudence. You often hear people state that in managing a retirement plan one should act as a "prudent man" would. Prudence is code for process. A proper process involves parties that possess the required expertise and accept liability for their actions. The Department of Labor on their website has stated that LACKING investment expertise, a fiduciary WILL WANT TO HIRE someone with the professional knowledge necessary to carry out the investment & other functions. ERISA has even included a safe harbor definition of a "prudent expert" to be either:

(1) A Registered Investment Advisor
(2) A Bank
(3) An Insurance Company

These three "entities" qualify as prudent experts provided the "entity" accepts liability in writing for the advice of their staff. Thus, consulting firms and individual brokers fall outside of the prudent expert safe harbor and as a result the plan sponsor must document their expertise to justify the service provided. The key fact to recognize here is the government expects a prudent expert to accept fiduciary liability in writing for their advice (a safe harbor requirement). Hiring a consultant who refuses to accept liability runs contrary to the government definition of a prudent expert. The first question to ask a consultant is if they do not qualify as a prudent expert how can you possibly have implemented a prudent process that relies upon their service (remember they provide no advice)?

In the hiring of a prudent expert plan sponsors can reduce their liability for the management of plan assets in two ways:

(1) Appoint a co-fiduciary who accepts liability in writing to assist the plan investment committee in creating an investment policy statement, establishing proper criteria for fund selection, retention and removal, and making written recommendations for the committee to consider when making investment decisions. This will aid the committee in reducing liability by establishing and documenting that a prudent process was followed with the assistance of a prudent expert. The plan sponsor retains ultimate authority over the investment options offered to participants.

Potential Result: In a litigious situation, members of the investment committee retain personal liability for their actions with respect to the investment decisions made.
Potential Result: In a litigious situation, members of the investment committee will be called to testify regarding their investment expertise and decisions made along with the Advisor.

(2) Appoint a Registered Investment Advisor will to accept status as an ERISA Section 3(38) Investment Manager via a written agreement to take over the selection, monitoring and replacement of investment options offered to participants. This option provides the most protection to plan sponsors as their duty shifts from participating in investment decisions to monitoring that the Advisor has followed their stated process for making investment decisions. Ultimate authority for investment decisions lies with the Advisor.

Potential Result: In a litigious situation, members of the investment committee will be called to testify regarding their actions in monitoring that the Advisor followed their stated process. No investment expertise is required to monitor that someone else follows their own stated process. One simply has to review the work product.

Potential Result: In a litigious situation, the Advisor will be called to testify regarding their investment expertise and decisions made. Who do you want on the stand answering these difficult questions an investment expert or a committee member? Who would you want on the stand dealing with prudent process questions an ERISA expert or a committee member?

There is a third option which is to hire a brand name consultant that fails to accept liability for the services provided. Not only would your committee members have to defend their investment decisions for which they lack expertise, but they would also have to defend the decision of using the services of a person who is not considered prudent under the Government's Safe Harbor Definition. The question that really needs to be asked, which surely the plaintiff's lawyer will ask the jury, is why didn't you hire a prudent expert? What will your answer be? I find it unlikely the jury will be as impressed with the brand name credential as you are. Especially when that brand name consultant takes the stand and disavows any and all responsibility for the service they have provided. In fact, a former partner for a large brand name consultant recently disclosed that they were forbidden from ever entering into a services contract of any kind with clients for fear they would actually have to identify the service being provided. I have to think that wouldn't look good to a jury when you testify the brand name assisted with your prudent process yet you failed to even enter into a services agreement with them. Add this to your good friend the consultant looking like an Olympic gymnast jumping from your side of the table to the other safe side where non-fiduciaries congregate and you have some real issues to overcome.

Why not just serve as a fiduciary and prevent guys like me from making this an issue? Brand Name Consulting Firms with big dollar budgets can just as easily buy E&O insurance to cover the liability as I have done. For that answer we need to go back to the first duty which is loyalty. As a plan fiduciary every decision made has to be for the sole purpose and in the exclusive interest of the plan and participants. No conflicts of interest can exist. As you might suspect the reason for refusing to become a plan fiduciary has nothing to do with the liability and everything to do with their refusal to avoid conflicts of interest. Think about the players in this industry and the conflicts they might deal with.

• Brand Name Consultants - In the past we have seen consultants recommending vendors which they had direct financial interest in, or indirect via other consulting, soft dollar or pay to play arrangements. Some Consultants are so large, and the conflicts so numerous, they could never operate solely and for the exclusive purpose of the plan and participants.
• Banks & Mutual Fund Companies - It would be a little tough to have any other banking business with a client and also serve as a plan fiduciary. In addition, it would be impossible to stuff the retirement plan with proprietary funds and still serve as a plan fiduciary. Finally, it would be forbidden to retain revenue sharing without disclosing to the client and still serve as a fiduciary.
• Brokerage Houses - Quite impossible to negotiate undisclosed kickbacks from retirement plan vendors in return for offering their products to the brokers and also serve as a fiduciary. Also forbidden to offer high payouts to brokers who place proprietary funds inside retirement products and still serve as a fiduciary.

Discovery can be a powerful weapon in the hands of the plaintiff's bar. They can find conflicts you would never be privy to. The prudent process you thought was implemented can just as easily be turned around to demonstrate your lack of prudence in hiring vendors. Once you lose the jury via a vendor's conflict you have probably lost the case.

As I tell all potential clients you must implement a prudent process that will stand up in court. However, the decision on whether to hire a consultant or independent advisor is really quite easy. You should identify those services desired then seek the appropriate vendor. For instance will they provide the following?

• Serve as a Section 3(38) investment manager accepting liability in writing,
• Provide an investment policy statement with stated criteria for selecting, monitoring and replacing investment options,
• Identify appropriate asset classes to offer participants,
• Provide Quarterly Investment Reviews, document issues for investments on the watch list and replace funds that fail to meet stated criteria,
• Document annually you adherence to stated fiduciary practices,
• Support stated fiduciary practices with case and regulatory law,
• Provide full fee disclosure and transparency with annual reporting,
• Serve as your Section 404(c) fiduciary and provide an annual 404(c) checklist documenting your adherence to this code section thereby shifting liability for participant investment decisions away from the plan sponsor and to participants,
• Provide an annual vendor stability report so you can be comfortable you assets are safe (have you ever looked into the stability of your vendors),
• Provide ERISA consulting and M&A services as desired,
• Serve as the quarterback to your plan answering all plan related questions.

You can have all of this OR you can hire a consultant with the brand name and do it yourself. Just as it would be easy for the large brand name firm to buy E&O insurance and provide these services it would be just as easy for myself to join the brand name. Unfortunately for those reasons listed above neither will happen. They are unwilling to forgo the conflicts and I am unwilling to provide substandard service with no advice.

I can understand why someone would find comfort in a brand name. My problem has always been the focus is on the wrong brand. Rather than the name of entity your Advisor works for you should be investigating the brand behind the E&O policy which backs up their advice. That is the "only" brand name offering you protection!!! Honestly, what value does a brand offer if they refuse to stand behind their service? To answer the titled question what is the difference between a brand name consultant vs. an independent registered investment advisor: "The Advisor works as your Head Coach calling plays and accepting responsibility while the consultant sits in the stands chirping and second guessing without ever becoming a member of your team".

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: 401khelpcenter.com

Participating in a Retirement Plan: Gender Differences

How does gender affect the likelihood of participating in a retirement plan?

Below is a great article written by John MacDonald:

The November 2009 EBRI Issue Brief, published by the nonpartisan Employee Benefit Research Institute (EBRI), provides answers to these and other questions. Here are some of the key findings concerning race/ethnicity differences in employment-based retirement plan participation in 2008:

• Overall, female wage and salary workers ages 21-64 participate in a retirement plan at a lower level than males did.
• However, among full-time, full-year workers of these same ages, females had a higher level of participating in a plan than men: 56.2 percent for women, compared with 53.7 percent for men.
• Across all of the worker status categories, females were more likely to participate in a retirement plan than males. This result had persisted since 2001, when the full-time, full-year females' participating level was slightly higher than the males' level, at 58.5 percent to 58.1 percent. This difference subsequently grew to 3 percentage points in 2007 before declining slightly to 2.5 percentage points in 2008.
• Concerning earnings level, the proportion of females participating in retirement plan was higher than it was for males at each earnings level. Consequently, it appears the female workers' lower probability of participating in the aggregate was a result of their overall lower earnings and lower rates of full-time work in comparison with males.

Percentage of Wage and Salary Workers Ages 21-64 Who Participated in an Employment-Based Retirement by, Work States and Gender, 2008
Source: Employee Benefit Research Estimates from the 2009 Current Population Survey.

The complete November 2009 EBRI Issue Brief is available at www.ebri.org

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: John MacDonald & ebri.org

Obama Administration Unveils Retirement Security Initiatives

A year ago, President Obama appointed a Task Force on the Middle Class. On January 25, 2010, after a year of meetings held all over the country, the Task Force gave a preview of elements of their recommendations (the full report will be released in February).

In the section on retirement security, they laid out several proposals:

Establishing Automatic IRAs

Currently, 78 million working Americans—roughly half the work force—lack employer-based retirement plans. Fewer than 60 percent of working heads of families were eligible to participate in any type of job-related pension or retirement plan in 2007. The Obama-Biden Administration will promote the establishment of a system of automatic IRAs in the workplace by requiring employers who do not currently offer a retirement plan to enroll their employees in a direct-deposit IRA unless the employee opts out. The contributions will be voluntary and matched by the Savers Tax Credit for eligible families. The Administration is also streamlining the process for employers to automatically enroll workers in 401k plans, which has been shown to boost participation, especially for low- and middle-income workers. New tax credits would help pay employer administrative costs and the smallest firms would be exempt.

Simplifying and Expanding the Saver’s Credit

The struggle to save enough to ensure a secure retirement became particularly pronounced in the wake of the recent financial crisis, which delivered a major hit to the savings on which workers rely for their retirement security. The Administration proposes to help working families save for retirement by expanding and simplifying the Saver’s Credit to match 50 percent of the first $1,000 of contributions by families earning up to $65,000 and providing a partial credit to families earning up to $85,000. The Administration will also make this tax credit refundable to ensure that millions of additional middle-income families can take advantage of it even though they have no income tax liability.

Updating 401k Regulations to Improve Transparency and Reliability

A majority of American workers rely on 401k-style plans to finance their retirements, making it critical that the 401k system be safe, transparent, and well-regulated. Even workers who save significant amounts may see their returns eaten away by fees and expenses. We need to do more to give families better choices to reach a secure retirement. The Administration is:

Improving the transparency of 401k fees to help workers and plan sponsors make sure they are getting investment, record-keeping, and other services at a fair price.

Encouraging plan sponsors to make unbiased investment advice available to workers, helping workers avoid common errors that undermine retirement security, while providing strong protections against conflicts of interest.

Promoting the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their retirees’ living standards will be eroded by investment losses or inflation.

Reviewing and requiring clear disclosure regarding target-date funds, which automatically shift assets among a mix of stocks, bonds, and other investments over the course of an individual's lifetime. Due to their rapidly growing popularity, these funds should be closely reviewed to help ensure that employers that offer them as part of 401k plans can better evaluate their suitability for their work force and that workers have access to good choices in saving for retirement and receive clear disclosures about the risk of loss.

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. www.brightscope.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: 401khelpcenter.com

BrightScope Ratings on 401k Plans

BrightScope quantitatively rates 401k plans and gives participants, plan sponsors, and advisors tools to make their plans better.

What is a BrightScope rating?
The BrightScope RatingTM is a quantitative 401k plan rating developed by BrightScope with the help of leading independent fiduciaries, finance professors and 401k experts. The BrightScope rating algorithm takes in 200+ unique data inputs per plan and calculates a single numerical score for every 401k plan in the country. The algorithm runs thousands of simulations for each plan in order to determine how quickly each 401k plan will get the average 401k participant to retirement. BrightScope believes that this rigorous approach is necessary to ensure that every factor that affects retirement outcomes - company contributions, fees, investment menu quality, vesting schedules, eligibility periods etc. - is accurately reflected in a company's rating.

The BrightScope RatingTM is designed to assist industry participants in determining the relative quality of a company's 401k plan when compared to a unique peer group of companies with employees of a similar demographic makeup. We believe that industry adoption of the BrightScope RatingTM will ultimately lead to more cost-effective plans, increased participation rates, higher employee satisfaction, and better outcomes for employees who depend on their 401k plan for retirement.


Media Coverage of BrightScope:
- The Wall Street Journal
- Business Week
- CNN Money
- USA Today
- Forbes
- CNBC


BrightScope rating of other companies’ 401k plans:
The BrightScope Rating measures the ability of your plan to get the average 401k participant to retirement and is calculated by running thousands of simulations on the plan. The "Plan Component Ratings" provide an easy-to-understand analysis of the health and performance of a 401k plan independent of its BrightScope Rating. What is your company’s BrightScope rating? Go to www.brightscope.com to find out.

Some sample ratings of local companies include:
Nordstrom 56
Amazon.com 59
Starbucks 45

BrightScope rating of our flagship 401k client:

Integrity Financial Corporation’s flagship 401k client is the Association of Washington Business (AWB) in Olympia. AWB is Washington state’s premier advocate for the business community and is recognized as The State’s Chamber of Commerce. The AWB 401k Plan is a defined contribution plan with a profit-sharing component and 401k feature. This plan has a BrightScope Rating of 76, placing it in the top 15% of all plans in its peer group. We are delighted to provide references for the quality of our service model. As a boutique consulting practice, we distinguish ourselves by tailoring solutions to the unique needs of our clients. Integrity Financial Corporation welcomes the opportunity to serve you. To learn more go to www.ifclegacy.com

Are You a 401k Participant? Look up your company in the search bar to see how it compares.
Are You a Plan Sponsor? Benchmark your plan against your competitors'.

Integrity Financial Corporation helps business owners and executives evaluate and make smart financial planning decisions on behalf of their business. Our firm specializes in 401k plans for local mid-size companies. Our flagship 401k client is the Association of Washington Business (AWB) in Olympia. Our state-of-the-art processes will provide greater employee satisfaction and participation, while reducing plan anxiety by the sponsors. As a boutique consulting practice, we distinguish ourselves by tailoring solutions to the unique needs of our clients. Integrity Financial Corporation welcomes the opportunity to serve you. To learn more go to www.ifclegacy.com

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: brightscope.com

Comparison of Roth 401k, Roth IRA, and Traditional 401k Retirement Plans

Since January 1, 2006, employers have had a new retirement savings plan to offer their employees--the Roth 401k plan, which combines features of Roth IRAs and traditional 401k plans.

The plan, commonly referred to as a "Roth 401k," is a hybrid that combines features of Roth IRA and traditional 401k plans but differs in important aspects. Some of the differences and similarities are outlined below.

Employees who already have a regular 401k plan can participate in a Roth 401k if the employer offers it. However, as of April, 2009, the combined total contributions cannot exceed the Internal Revenue Service limit set for individual plans--that is, $16,500 (or $22,000 for employees aged 50 or over). An employee who participates in both plans can designate the amount to be applied to each plan. Once a decision is made, the participant cannot switch money among the plans. (Roth 401k participants who change employers can roll over the proceeds into a Roth IRA.)

If an employer provides a matching contribution to a Roth 401k, two accounts are set up for each participant. The first contains the employee’s after-tax contributions that will be distributed tax free. The second account contains the employer’s before-tax contributions and any investment growth; these funds are taxable when distributed.

The National Compensation Survey (NCS) publication "Employer Costs for Employee Compensation" presents employer costs data for various employee benefits. Currently, information is available for defined contribution retirement plans that includes data for traditional 401k plans. When the NCS encounters the new Roth 401k plans, they will be included as defined contribution plans in the NCS benefits incidence and provisions estimates.

Roth 401k plan
- Employee contributions are made with after-tax dollars.

- Investment growth accumulates without any tax consequences.

- No income limitation to participate.

- Contribution limited to $16,500 in 2009 ($22,000 for employees 50 or over).

- Withdrawals of contributions and investment growth are not taxed provided recipient is at least age 59½ and the account is held for at least five years.

- Distributions must begin no later than age 70½. (This may change.)

Roth IRA

- Employee Contributions: Same as Roth 401k plan.

- Investment Growth: Same as Roth 401k plan.

- Income limits: married couples, $176,000, singles, $120,000 adjusted gross income.

- Contribution limited to $5,000 in 2009 ($6,000 for employees 50 or over).

- Withdrawals of contributions and investment: Same as Roth 401k plan.

- Distribution: No requirement to start taking distributions.

Traditional 401k

- Employee contributions are made with before-tax dollars.

- Investment growth is not subject to Federal and most State income taxes until funds are withdrawn.

- Same as Roth 401k plan. No income limitation to participate.

- Contribution Limit: Same as Roth 401k plan.

- Withdrawals of contributions and investment growth are subject to Federal and most State income taxes.

- Distributions: Same as Roth 401k plan.

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.
Source: John E. Buckley and 401khelpcenter.com

Ten Fiduciary Duties

At the 2005 ASPPA 401k Summit, Marilyn Colister, National Director of Regulatory Policy for Great-West Retirement Services, spoke on the topic "Fiduciary Responsibility in the Spotlight." Ms Colister made the point that few plan sponsors really understand their fiduciary duties and responsibilities, but because of a number of factor including the recent corporate and mutual fund scandals, class action lawsuits and a new focus by the Department of Labor and Internal Revenue Service on a number of issues including fees, plan sponsors need to be more vigilant. They also should take proactive steps to ensure that all plan fiduciaries have a good understanding of their obligations in overseeing the companies retirement plans.

Here is a general overview of fiduciary duties and responsibilities. It is not intended to be a detailed or comprehensive list, but it will give you a starting point in understanding the issues.

1. A fiduciary must act solely in the best interests and for the exclusive benefit of plan participants and beneficiaries.
2. Must defray plan expenses in a reasonable manner. This implies that a fiduciary knows what all the plan expenses and costs are.
3. Must comply with all plan documents and all applicable federal and state laws and regulations. This implies that fiduciaries will become familiar with them.
4. Where a fiduciary is unsure of their expertise, they have a duty to seek the advice of experts and carefully evaluate the advice given.
5. A fiduciary may not engage in certain transactions with parties providing services to the plan such as the sale or leasing of property, lending of money, furnishing goods, services or facilities, or the transfer or use of plan assets.
6. Self-dealing is prohibited and therefore a fiduciary cannot use their position for personal gain.
7. A fiduciary may not act on behalf of any party whose interests are adverse to the interests of the plan or the plan participants.
8. A fiduciary must act with the care, skill and diligence that would be exercised by a reasonably prudent person who is familiar with such matters.
9. Fiduciaries have an affirmative duty to diversify plan investment options.
10. A fiduciary has an obligation to prudently select investment options for the plan, as well as an obligation to periodically evaluate the performance of such vehicles to determine, based on that evaluation, whether the vehicles should continue to be available as participant investment options.
    

Integrity Financial Corporation helps business owners and individuals build a financial legacy through well designed executive compensation and retirement plans. Our clients can expect to receive personalized service and expertise, built on a foundation of trust. Call us at 425-454-1254 for the Seattle or Bellevue area, or at 1-800-794-401k.

Please visit our website at www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation analyze and evaluate your company's 401k plan.

Source: 401khelpcenter.com

Employee Education and Participation

It may come as no surprise to you that your employees are anxious about financial issues such as spiraling healthcare costs, the rising price of energy, high-interest credit cards, and the current mortgage and credit crisis. You have good reason to be concerned.

Consider these stunning statistics: 74% of American workers have difficulty affording gasoline, 65% are experiencing problems affording heat and electricity, 50% are unsuccessfully grappling with increased grocery bills, 32% have no retirement plan other than Social Security, and finally 62% of the self-described “working class” portray their incomes as falling behind the cost of living. Pew Research Center 2007 and 2008.

Remember the unsettling 1968 horror movie, “Night of the Living Dead”? Despite the grainy black and white low-budget production, the film was then and continues to be, desolately disturbing because it taps into the uncertainty and anxiety that we all feel when faced with unaccountable terrors. Recent research confirms that today’s workers are experiencing plenty of terrors, not those of George Romero’s classic film perhaps, but the ghouls of financial stress which keep them awake at night and distracted during the day.

What’s the impact on you - the Plan Sponsor, and what can you do about it?

If many of your workers are struggling to concentrate on the job at hand and functioning at less than optimum capacity, the damage to personal lives and business productivity is a serious one. But you as Plan Sponsor are in the unique position of being able to address these issues for your employees. Consider offering a series of Financial Literacy workshops in which employees are given the tools to budget and plan in a more disciplined manner, figure out their credit scores, understand the principle of compounding and how interest rates work.

Financial Literacy means being educated in matters of money, and American workers are proving to be seriously financially illiterate. Workers are not taught how to budget by their families or their high schools or colleges, leaving most (with the exception of those few with the resources and determination to teach themselves) absolutely ‘at sea’ when it comes to even the most basic economic concepts. And these concepts have the power to shape and determine the quality of the rest of their lives. Moreover, studies show that financial illiteracy is tied to economic behavior; in other words, individuals who do not have a handle on money matters will be less inclined to participate in their company’s 401(K) or 403(b) plan. Lusardi, Annamarie and Olivia Mitchell (2008) “How Much Do People Know About Economics and Finance?”.

Financial Literacy

Here are ten components which comprise a Financial Literacy series of workshops:

1. How to Create a Budget/Strategies of Saving
2. Debt Consolidation
3. How to Read, Monitor, and Improve Your Credit Report
4. Understanding Your Company’s Retirement Plan
5. College Planning
6. The Role of Insurance in Financial Planning
7. Types of Mortgages/How to Qualify
8. Tax Issues – Homeowners, Retirement Savings, Estate Planning
9. Financial Issues of Divorce
10. Pre-Retirement Issues/When Can I Afford to Retire?

Think these are only Boomer issues? Think again. According to Thrivent Financial Survey, 66% of Generation-Xers (those born between 1960 and 1984) admit to thinking about their finances on a daily basis and nearly half, 46%, also worry about the finances of their parents and siblings. All employees, regardless of age, can benefit from one or more of these topics.

Face-to-face education

Seminars offered by professional educators have been proven most effective as long as the educator is well-versed in the details and able to de-mystify and simplify the topic. Employees deserve the opportunity to ask questions, receive answers in “English”, and engage in hands-on exercises, quizzes, tips, and step by step guides that give them the tools to planning their financial lives more effectively.

What’s the benefit to you?

Happier employees, greater company loyalty, increased productivity, perhaps even an increase in revenues. As the Plan Sponsor, you also have the opportunity to assist your employees in defeating their personal financial terrors and in doing so, contributing real lasting value to the quality of their lives.

Please visit our website at http://www.ifclegacy.com to have an independent fiduciary 401k advisor at Integrity Financial Corporation in Bellevue analyze and evaluate your company's 401k plan.

Sources: 401khelpcenter.com and lovejoyassociates.com

Implementing an Automatic Enrollment Arrangement

Implementing a 401(k) Automatic Enrollment Arrangement

Under most 401(k) plans, an eligible employee who does not make an affirmative election to defer salary under the plan has no contributions deducted from his or her paycheck - i.e., the employee is deemed to have elected to make no contributions to the plan. ERISA permits another option, whereby an employee who does not make an affirmative election either to contribute or opt out is deemed to have elected to make a positive contribution of X % of compensation, with the default percentage established under the terms of the plan.

Recent changes in the law under the Pension Protection Act of 2006 and regulations issued thereunder have made this type of "automatic enrollment arrangement" easier to implement and more palatable to both employers and employees. Most importantly, the law and regulations provide safe harbor investment vehicles in which the plan can deposit automatic contributions with reduced risk of a fiduciary breach lawsuit under ERISA. The law and regulations also give employees the right to a minimum 30-day decision period during which an employee can opt-out of automatic contributions before they begin; plus, in most cases, a 90-day "second-chance" opt-out opportunity whereby an employee can cancel participation and get an immediate refund of any automatic contributions made through the effective date of the cancellation.

The primary decision points for adoption and implementation of such an arrangement are the following:

1. Which employees will be subject to automatic enrollment: Any employee who does not have an affirmative election on file, or only new employees hired after the arrangement is first adopted?
2. What is the appropriate default contribution rate(s)?
3. Where should default contributions be invested until the employee exercises investment control?
4. What are the initial set-up and ongoing administrative costs?

Which Employees to Cover

An employer can specify in the plan document which employees are subject to automatic enrollment. For example, the plan could cover all eligible employees or limit automatic enrollment to non-union employees, employees in particular divisions, or employees hired after a specified date, to give a few examples.

While the regulations provide this flexibility, in our experience the decision typically boils down to a choice between the following three coverage alternatives:

Option 1: Include any employee who has not yet made an affirmative election to contribute a positive amount or zero.

* This option is feasible only if the plan can distinguish between employees who never submitted a deferral election (and thus have a zero contribution rate by default) and employees who affirmatively elected zero.
* The option has the benefit of not forcing non-contributing employees, who already signaled their decision not to contribute by submitting a deferral election of zero, to affirmatively opt out of the automatic enrollment program.
* A potential down side is that in the first year, current employees whose failure to submit a deferral election may reflect a conscious decision not to make contributions will be forced to affirmatively opt-out of automatic enrollment if they do not wish to participate.
* Another down side is that leaving current zero-electing employees out of the program will limit initial participation in automatic enrollment.

Option 2: In the first year following adoption of automatic enrollment, include all eligible employees who are not making positive contributions; thereafter, include only new hires and employees who as of each January 1 have not yet made an affirmative election either to contribute or opt-out.

* This option has the benefit that it initially extends eligibility for the automatic contribution arrangement to all employees who have not made an affirmative election to contribute a positive amount, even employees who previously elected to contribute zero. (Any employee can still opt-out.)
* Then in future years, only employees who do not have an affirmative election on file (either to contribute a positive amount or zero) are bothered with the notice and opt-out requirements. Employees who have previously expressed their wishes are left alone - just as under option 1.
* The down side of this alternative is that in the first year, current employees who may have made a conscious decision not to make contributions - either by not making a deferral election or affirmatively electing zero - will be forced to affirmatively opt-out of automatic enrollment if they do not wish to participate.


Option 3: Include only employees hired after adoption of the automatic enrollment option. Extend eligibility for automatic contributions upon hire and in each subsequent year in which the employee has not yet made an affirmative election to contribute a positive amount or zero.

* This option has the benefit of not forcing non-contributing current employees to affirmatively opt out of the automatic enrollment program.
* The down side is that leaving current employees out of the program will severely limit initial participation in automatic enrollment.

Notice and Other Requirements

The regulations require that employees covered by an automatic contribution arrangement generally be given notice at least 30 days (and no more than 90 days) before the arrangement is first implemented, and then again at least 30 days before the beginning of each plan year. For new employees, the notice must be provided as soon as practicable (which can be after the employee has commenced employment, but before any automatic paycheck withholding would go into effect).

The notice need only be provided to employees who will be deemed to have made a contribution election if they do not make an affirmative election to participate or opt-out. After the first year, this generally would include any new employees and employees who did not have an affirmative deferral election on file with the plan.

Once notice is provided, an employee must be given a reasonable amount of time to make an affirmative election to select his or her preferred deferral rate or to opt out. Automatic paycheck withholding (for employees who fail to make an affirmative election) generally should not begin until about 30 days have passed from the notice date.

Default Contribution Rate

The default contribution rate for employees who do not opt-out generally must be a uniform percentage of pay for all employees subject to automatic enrollment - e.g., 3% of pay for all covered employees. However, plans are permitted to have different default rates for union vs. non-union employees, for different unions, and for different "qualified separate lines of business."

It is also permissible to have graduated rates - e.g., 1% in the first year, 2% in the second year, 3% in the third year, etc., maxing out at 10% in the tenth year. Other variations are permitted as well, though certain "uniformity" standards apply.

Default Investment

An employee who neglects to affirmatively elect to make 401(k) contributions or opt out will likely not provide instructions as to how his automatic contributions will be invested within a plan. Accordingly, plans need to designate a default investment or investments. The regulations provide three "safe harbors" which, if utilized, generally shield plan fiduciaries from claims of fiduciary breach related to the performance of the investments.

Two of the safe harbors are not available under most plans and may be costly and/or controversial to implement. Safe harbor one is a so-called "life-cycle" or "target-date" fund. Another safe harbor is to offer professional management of each employee's account, the manager aiming for an optimal allocation for each participant's investments among the plan's various investment offerings based on factors such as age or target retirement.

The remaining safe harbor is a "balanced" fund. Many plans have a fund that may qualify for this safe harbor, though it requires close examination to be sure. One of the requirements for a safe harbor balanced fund is that the selected fund reflect "a target level of risk appropriate for participants of the plan as a whole," taking into account the demographics of the participant population, at a minimum. A plan's existing balanced fund offering would have to be analyzed to determine if it satisfies this standard.

Following the recent stock market collapse, some investment advisors and policy-makers have been critical of the three regulatory safe harbors. As a result, some plans have been considering default investment options that do not meet one of the safe harbors, such as money market or stable value funds. Although these options do not automatically shield plan fiduciaries from fiduciary risk, the potential exposure is likely quite low. A compromise position might be to use the plan's money market fund for the first 120 days of a participant's initial contribution under the automatic contribution arrangement, with assets shifting to the balanced fund thereafter. Indeed, the regulations provide a safe harbor for this structure.

Optional Design Features

More complex designs are permitted under the regulations, and some come with "rewards" in the form of relief from specific rules with which a 401(k) plan must comply. For example, if the default contribution rates meet the standards for a "qualified" automatic contribution arrangement, the plan is excused from annual ADP/ACP nondiscrimination testing (comparing average deferral rates for highly-paid and non-highly-paid employees). To qualify for this testing exclusion, the minimum automatic deferral percentage is 3% for the first full plan year and increases by 1% for each of the three succeeding plan years, up to 6%. Furthermore, the employer would be required to provide either matching or nondiscretionary contributions to all non-highly compensated employees. The minimum match is 100% of the first 1% deferred and 50% of the next 5% deferred, for a total contribution of 3.5% for participants who defer at least 6%. The minimum employer contribution (the alternative to the matching contributions described above) is 3%, regardless of the deferral amount. Matching or company contributions must be 100% vested after two years of service. This structure is more generous than currently provided under many plans.

Another available design option is to apply the automatic contribution feature to each employee every year - so that employees would have to either make a new affirmative deferral election each year or be subject to the applicable default contribution rate. The regulations would reward this design by giving the plan an extra 3 ½ months to refund any discriminatory deferrals made by highly-compensated employees during the year. Unless the plan frequently fails the ADP/ACP test, requiring refunds or other correction strategies, this hardly seems worth the inconvenience of requiring every employee to renew his or her contribution election each year or be defaulted into the plan at the automatic contribution rate.

Plan Amendment and Qualification

Ideally, an automatic contribution arrangement should be implemented as of the first day of a plan year - e.g., January 1, 2010. To encourage employers to adopt automatic contributions in 2010, the Treasury Department on September 5, 2009 released sample amendments to streamline the adoption and implementation process. If an employer uses the sample amendments, modified to the extent necessary to reflect plan-specific design choices, the amendment will be deemed to have received IRS approval even in the absence of a determination letter specifically addressing the amendment. See IRS Notice 2009-65.

If it is not feasible to implement automatic contributions by January 1, 2010, the regulations provide a roadmap for a mid-year implementation. The Treasury sample amendment can be used for mid-year implementations to the same extent as January 1 adoptions.

Administrative Costs

Initial set-up and ongoing administrative costs can be determined in consultation with the plan's administrators. Many 401(k) third-party administrators have already programmed their systems to accommodate automatic enrollment, which should reduce implementation costs significantly.

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Please visit our website at http://www.ifclegacy.com/ to have an independent fiduciary 401k advisor at Integrity Financial Corporation in Bellevue analyze and evaluate your company's 401k plan.

Source: 401khelpcenter.com/www.ipbtax.com

The Tax Benefits of Equity-Indexed Universal Life Insurance

The Tax Benefits of Equity-Indexed Universal Life Insurance

The main emphasis of having life insurance for individuals and their families is to help replace income that is lost, provide death benefits, and an overall protection of family members from the losses possibly resulting from the death of the insured individual. Equity-indexed life insurance offers many additional benefits by way of tax advantages, unique to that of life insurance.

When it comes to speaking about life insurance, there are two typical categories to be discussed. The first is term insurance. Term insurance provides what is known as "pure" insurance protection. This type pays beneficiaries a death benefit if the insured individual is to die during the policies term. On the contrary, if the insured individual lives, the policy will expire without any value at the end of the given term. In many cases, the individual can choose to renew the policy for an addition term. Usually, this decision will carry a higher premium.

The second category and type of life insurance policy is typically known as "permanent" or "cash value" life insurance. Included in these policies are whole life and universal life as well as others. A policy such as this is typically designed to provide the insured with long-term life insurance coverage, usually for the insured's entire life.

This option also features a flexible premium as well as the opportunity to accumulate cash value. This is available to the owner of the policy through policy loans and alternative options. These options reduce the death benefit.

The Advantages

Among financial products, life insurance holds a unique status. The tax benefits of life insurance are:

• No current income tax on interest or other earnings credited to cash value. While the cash value accumulates, it is not subject to current taxation.


• No income tax penalty if you choose to borrow cash value from the policy through loans. Typically, loans are seen and treated as debts, not as taxable distributions. With this option, it can give you practically unlimited access to cash value on the basis of tax advantage. In addition, the loans do not need to be rapid. Over time, after a sizable amount of cash value has accumulated, it can systematically be borrowed against to help supplement retirement income. In many cases, you may never pay even one cent of income tax on the gain.


• *There are several cautions regarding policy loans: First, loans are charged interest and policy loans can reduce the overall value of the policy. Second, the cash value can be potentially subject to income taxes if/when there is a withdrawal from or surrender of the policy. The same situations applies if a certain ratio of death benefit to cash value is not maintained. Third, if the policy is a modified endowment contract, the loan may be taxable.


• The policy holder's heirs pay no income tax on the proceeds. Beneficiaries will receive death benefits completely free of income taxation.


• You can avoid potential estate taxes and probate costs on policy proceeds, as long as the beneficiary designations and policy ownership are arranged in accordance with current law. For instance, if you own your policy at the time of your death or make your estate the beneficiary, the policy proceeds will generally be included in your estate at death. This can increase the value of your estate, triggering estate taxes. This situation may be avoided, however, by placing ownership and naming beneficiaries outside your estate. If the policy is structured properly, proceeds will not be included in your estate. However, to avoid estate inclusion for existing policies, the policy must be transferred more than three years before your death. Consult your tax and legal advisors regarding your particular circumstances.

Equity-indexed universal life insurance is unique among typical financial products. It provides protection of death benefits as well as potential for attractive tax advantages. For more information these benefits listed as well as other benefits of cash value life insurance and details about the best way to arrange your policy beneficiary and ownership designations, consult your attorney and your advisor at Integrity Financial Corporation.

Please visit our website at http://www.ifclegacy.com/ to have an independent fiduciary 401k advisor at Integrity Financial Corporation in Bellevue analyze and evaluate your company's 401k plan.

Why You Should Consider Making Changes to Your Company's Qualified Retirement Plan for 2010

With the holidays approaching and the New Year around the corner, now is an ideal time to consider making necessary changes to your company’s qualified retirement plan for 2010. As a boutique 401(k) advisory firm, we are quite familiar with the different strategies small business owners might implement at this time. There was some sweeping legislation and pension reforms passed in 2006 that impacts qualified plans, and would necessitate a more in-depth review if that has not happened in the last couple of years.

When you couple the current monetary and fiscal policy decisions with the volatility of the stock market in the last two years, only a fraction of the retirement plans that I come in contact with are maximizing the tax benefits that are available under the Internal Revenue Code, and have sound investment strategies that include hedges against a weakening dollar.

Here are a few thoughts from my desk to yours:

1. Make sure that your current retirement plan has investment options that include inflation hedges (like TIPS or Commodities) and a wide array of USD hedges (like global funds).

2. Take advantage of after-tax investments (as a tax hedge) such as Roth 401k, as it is fairly predictable that future taxes will likely be higher than they are now.

3. If you have a SIMPLE IRA consider adopting a 401k plan on January 1. You cannot change in the middle of the plan year, so if you don’t make the change now, it will be another year before you can. A SIMPLE IRA or a SEP IRA do not have a Roth component.

4. If you need access to your retirement account money for a short-term fix, set-up a 401k and roll your IRAs into the plan and take a loan from your account with no penalties or tax (just remember that you will need to pay the loan back in at least 5 years).

5. If you have an IRA, consider converting part of it next year to a Roth IRA, as the income limitations are removed for 2010…particularly if we see a downward slide in the markets between now and then.

The national debt just crossed $12,000,000,000,000, and our deficit spending is looking to nearly double that over the coming decade. The unfunded obligations of Social Security, Medicare, and Medicaid are staggering. There is more to comment on here, but I would say that today’s small business owner must use prudence in their tax, investment, and legal planning to ensure a legacy for their families and friends. Integrity Financial Corporation helps business owners evaluate and make smart financial planning decisions on behalf of their business. Visit our website at www.ifclegacy.com.

Source: 401khelpcenter.com

Business Financial Planning | Strategies: 401(k)

Ensuring the profitability of your business requires substantial time and hard work. Integrity Financial Corporation helps business owners and executives evaluate and make smart financial planning decisions on behalf of their business. Our firm specializes in 401k plans for small to mid-size companies. Our flagship 401k client is the Association of Washington Business (AWB) in Olympia.


The IFC Retirement Plan Solution
Integrity Financial provides a unique and comprehensive 6-Step retirement plan solution for your company:

• Step 1: The Retirement Plan Evaluator: Our easy-to-use tool provides you with an evaluation of your company’s retirement plan objectives and concerns and an analysis of other plan solutions. We’ll also discuss and review funding strategies for fee administration.
• Step 2: The Retirement Plan Optimizer: We conduct a feasibility study to help maximize the tax benefits of your retirement program for both your company and your employees.
• Step 3: The Fiduciary Shield: Meeting your fiduciary responsibilities can be a complex process. We help control risk by developing a formal investment policy statement and establishing clear criteria for selecting and monitoring investment managers.
• Step 4: The RFP Manager: We’re on your team. We’ll sit on your side of the negotiating table to walk you through the RFP (request-for-proposal) process, manage the flow of information, analyze and review proposal and guide you in making an informed and knowledgeable decision.
• Step 5: The Educational Experience: We manage every step of the transition form your current retirement program to your new program. We enroll your employees and educate them on the benefits of their new program. We’ll ensure their satisfaction through quarterly, semi-annual and annual education and financial planning seminars.
• Step 6: The Wealthcare Monitor: We’ll manage the health and welfare of your retirement program over its lifetime, advising you on regulatory changes, program enhancements and investment due diligence on a quarterly or semi-annual basis.


The IFC Retirement Plan Solution Value
Engaging an independent 401(k) advisor to help you navigate through the complexities of the qualified retirement plan landscape has proven invaluable to our clients. Our value is best articulated as follows:

• Boutique Firm that provides Objective and Unbiased 401(k) Consulting
• On-site Financial Planning and Advice for Participants
• Fiduciary Best Practice Solutions
• Proficient Selection of Investments to include in your Plan
• Customized and Sophisticated Plan Design
• Personalized Support for HR Manager
• 56 Point Annual Plan Inspection
• Retirement Plan Benchmarking related to your Industry
• On-site Enrollment and Educational Services
• Partnership in Creating an Investment Policy Statement

Our state-of-the-art processes will provide greater employee satisfaction and participation, while reducing plan anxiety by the sponsors. As a boutique consulting practice, we distinguish ourselves by tailoring solutions to the unique needs of our clients. Integrity Financial Corporation welcomes the opportunity to serve you, and we look forward to a long and rewarding relationship with you.