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