• FAQ

Q.What does TPA mean?
A.Third Party Administrator

Q.What are the primary responsibilities of a TPA?
A.A TPA is responsible to maintain plan document compliance, perform annual discrimination testing, perform calculations and prepare governmental forms.

Q.Why should I appoint a TPA for my plan?
A.A TPA can improve your plan design, monitor plan operation and provide guidance to your plan.

Q.What is the maximum amount that I can contribute to my 401(k)?
A.The maximum dollar amount an employee can contribute to a 401(k) plan is determined annually by the IRS. If the employee is age 50 or older in the current plan year they have the option to contribute an additional “catch-up” contribution. This dollar amount is also determined annually by the IRS.

Q.What are some advantages of implementing a qualified retirement plan?
A.They are as follows;
•100% tax deductible for Employer Company Contributions
•Favorable Plan Design for Selected Employees
•Federal Tax Credit of $500.00 for three years
•Under certain conditions participant account balances are not subject to the claims of creditors under federal
bankruptcy proceedings
•Numerous investment options
•Employees may contribute on a pre-tax basis or after-tax (Roth) basis
•100% tax deductible administrative costs to maintain the qualified retirement plan

Q.When should I sign my new Plan Document or Amendment?
A.All Plan Documents should be signed promptly upon receipt, and they should be dated with a current date.

Q.How long should I keep or maintain my retirement plan files?
A.There is no time requirement or “statute of limitations” for keeping Retirement Plan files. The IRS may audit you, your business or your Retirement Plan at any time. Therefore, your Plan records should be maintained permanently. This includes all Plan Documents, Annual Administration Reports, Annual 5500 Returns, any other records pertaining to the maintenance and administration of the Plan, such as Board Resolutions, Minutes stating the amount contributed to the plan each plan year.

Q.Why must I restate my Plan Document for EGTRRA (Economic Growth Tax Revenue Reconciliation Act)?
A.The Internal Revenue Service (IRS) requires qualified requirement plans be in compliance with all regulations and legislation.

Q.When was the last restatement?
A.The last required restatement period was GUST. That period generally occurred for most plans between 1997 and 2003. It required all plans to be updated for GUST, an acronym with four major pieces of Congressional Legislation of the 1990’s known (by their own acronyms) as GATT (General Agreement on Tariffs and Trade), USERRA (Uniformed Services Employment and Re-employment Rights Act of 1996), SBJPA ‘96 (Small Business Job Protection Act of 1996) and TRA ‘97 (Taxpayer Relief Act of 1997).

The present EGTRRA restatement period extends until 2010. During the period since the GUST restatement period, most plans have been required to add interim amendments for, EGTRRA, Section 401(a)(9) Final Regulations, Mandatory Distributions/Automatic Rollovers, Roth 401(k) Contributions, and Final 401(k)/401(m) Regulations. These interim amendments must be incorporated into standard plan language. The submission process for EGTRRA was completed for all Abacus plans by January 31, 2006, and the IRS issued final approval of our pre-approved Defined Contribution plans between March and June of 2008.

Q.How often will my plan be restated?
A.In general, the IRS requires that all plans be restated periodically to maintain compliance. More recently, the IRS has enacted a 6-year cycle for restating pre-approved plan documents. These types of qualified plans are required to be restated once every six years.
In an effort, to minimize the expense and inconvenience to our clients, we always attempt to do as many of these amendments as possible at the same time, incorporating them into the recent EGTRRA restatement schedule.

Q.Will there be other restatements or amendments required?
A.Yes, The IRS requires that most of these changes be addressed by adopting “interim amendments” which are good faith reliance to remain in compliant.

Q.What is a Defined Benefit Plan (DB)?
A.The Internal Revenue Code refers to a defined benefit plan as “other than an individual account plan” as opposed to a defined contribution plan which is an individual account plan. The Code also specifies the defined benefit must be definitely determinable. A defined benefit plan states a pre-determined benefit in advance.

Q.What are the characteristics of a Defined Benefit Plan (DB)?
A.Characteristics of a DB are:
•  Employer contributions are mandatory each plan year
•  Employer contributions are due within 8.5 months after the end of each plan year
•  Employer is subject to an excise tax of 10% of the amount due payable to the IRS for non payment
•  The penalty is increased to 100% of the amount due if NOT corrected
•  Employer contributions are actuarially calculated by an Enrolled Actuary using IRS approved methods
•  In most instances the employer is subject to PBGC fixed and variable premium depending upon the funded
status of the Plan
•  Employer contributions are based upon the plan investment experience, age of the employee,
compensation, length of service past and future