Due to their qualified status, plans require yearly upkeep, primarily because our actuary needs to validate your yearly contribution. There is a separate fee for document creation and consultation.

Every year, our fee covers the following tasks:

• Yearly discussions about funding;

• Actuarial approval and verification of the finalized contribution;

• Testing the plan for adherence to DOL & ERISA standards;

• Generating both employer and employee benefit statements, inclusive of actuarial valuation reports;

• Making sure the plan adheres to the non-discrimination stipulations set by the IRS;

• Aligning cross-testing with other plans and conducting non-discrimination tests; and

• Completing and submitting the necessary IRS 5500 tax return.

These steps must be undertaken annually.

We are taking a more traditional approach to billing and engaging our clients. We have an upfront fee for engagement for plan document creation and then a monthly package fee for your yearly plan administration as an all-inclusive package.

Annual administration covers all actuarial fees, filing fees and plan reporting fees. Your monthly subscription will continue each month for the following year, each year your plan remains active.

We have a proposal and billing software to make this seamless for our clients, by inputting bank/credit card info and billing automatically as agreed upon in the engagement.

This approach gives us a proactive business model to be constantly engaged with our clients for an excellent service model.

A cash balance pension plan is a unique kind of defined benefit plan. It is funded entirely by the employer, with the plan document stipulating the contribution formula for participants. Unlike the "traditional" defined benefit plan, which spells out a participant's retirement benefit as a monthly annuity due upon retirement, cash balance plans may seem less clear since they do not immediately show the current value of an employee's account.

The IRS classifies a cash balance plan as a defined benefit plan due to its explicit benefit formula. Yet, it is often seen as a "hybrid", blending elements of both defined benefit and defined contribution plans. This is because an employee's benefit mirrors an account balance, much like in a 401(k) plan.

In a cash balance plan, participants get both an annual interest credit and a pay credit. Hence, their balance grows yearly by these credits.

While both traditional and cash balance plans must offer life-long payment series as benefits, they define them differently. Traditional plans detail benefits such as monthly life-long payments starting at retirement. In contrast, cash balance plans present benefits as a specified account balance, often termed as "hypothetical accounts" because they do not show real contributions or actual gains/losses.

Solo plans are not only common, but they are 100% approved by the IRS. You must have income subject to taxes. Age is not necessarily a limiting factor, but it will have an impact on your contribution limits/range. Anyone small business owner can stand up a plan!

We will upload all your plan documents accessible in your secure client portal. Here you design your necessary plan documents and will have secure access to copies of your plan documents and annual reports. When a plan is set up you will have access to the following documents:

• Adoption Agreement

• Plan Document

• Summary Plan Description

• Participant Highlights

• Beneficiary Designation

• IRS Advisory/Opinion Letter

• Copy of Plan EIN

For a defined benefit or cash balance plan, it is essential to have it established by the date you submit your business tax return for that tax year, extensions included. To illustrate, if your business operates in a calendar year, the deadline to initiate a 2023 plan would be September 15, 2024. Note that by this deadline, the associated investment account should be set up and funded. Therefore, make sure to work closely and in advance with your plan administrator and custodian to meet this timeline.

Keep in mind that preparing your plan documents will take around a week. After that, you will need to establish your investment account and provide funding for it. Hence, it is wise to give yourself a minimum of a month to complete everything.

To benefit from the employee deferral on 401k plans, ensure the plan is in place before December 31st. If you employ others, a safe harbor 401k plan might be necessary for you, and the cutoff date for these plans is September 31st.

Many people have this worry. Imagine you have had an excellent year and are keen on making substantial contributions to a cash balance plan. Yet, there's uncertainty about the coming year. What if a major contract does not get renewed? Or are you considering reducing your work hours? The inconsistency of potential future contributions is something frequently brought to our attention.

Annual business revenue can vary. To address these variations, we have developed several approaches:

1. Modify Compensation:

If your business operates as an S-Corporation, your W2 compensation significantly influences the yearly contribution. If there is a dip in income, it is likely your compensation may be reduced as well. However, it is essential to remember that a reasonable salary must still be drawn. Yet, adjusting your compensation is a pivotal factor to consider.

2. Opt for the Lower Funding Threshold:

Actuarial calculations for annual contributions are based on specific estimates and assumptions, often leading to a range of funding options. For instance, you might be presented with a range of $60k to $100k. This allows you flexibility, enabling more substantial contributions in prosperous years and minimal ones in not-so-great years.

3. Revise the Plan:

If necessary, you have the option to modify the plan for reduced contributions (while ensuring compliance). But once employees qualify for the year, typically by working 1,000 hours, you cannot decrease the benefit amount.

The range provided indicates the least and the most you can fund. Typically, the ideal contribution would be somewhere between these two extremes. This flexibility lets you contribute more in profitable years and less during tighter financial periods.

However, it is essential to strike a balance. If you're always contributing towards the lower end, you will notice that the required minimums will rise over time. Conversely, if you are always on the higher end, the ceiling for contributions will gradually reduce, limiting how much you can fund in the future. If any of this is unclear, please let us know, and we would be happy to elaborate.

If the plan is properly terminated, you have the option to transfer the funds into an IRA. You can either withdraw the entire amount from the plan in a one-time payment or choose to transfer this lump sum into an IRA.

For retirement plans including cash balance plans, the notion of a "5-year commitment" is a guideline recommended to set a standard duration expectation for these plans. While the IRS views these plans as ongoing, they can be terminated for valid reasons whenever necessary.

Most clients retain these plans for roughly 5 to 7 years. However, some may end them earlier or extend them beyond that. Giving precise funding projections for the upcoming 5 years can be challenging due to the myriad factors that influence cash balance contributions – factors like mortality tables, IRS rules, compensation, and investment returns, to name a few.

Yes, they can. But if you want to terminate your plan, just make sure that it is a business necessity. A business necessity would usually involve lower business profits, a change in ownership, or an issue that restricts funding the plan. The IRS has even accepted the fact that a company adopted a different retirement plan as a valid reason to terminate.

Many accountants and Certified Public Accountants (CPAs) are familiar with qualified plans, but their knowledge of defined benefit plans might be limited.

Given this, there are several key points your accountant should be informed about:

• These plans fall under qualified plans and come with an IRS approval letter. Ensure you provide your accountant with the plan documents.

• Contributions can be made until the date of your tax filing (including any extensions), allowing for a tax deduction on the tax return for the previous year.

• Depending on your business structure, the reporting of your plan contributions can vary on your tax return.

If there are any uncertainties, your accountant is welcome to contact us. We are here to assist!

Many financial institutions, both big and small, might not be well-versed in setting up bank accounts specifically for retirement plans. Here are some pointers to streamline this process:

Always carry a copy of the EIN assigned during the creation of your retirement plan documents. This EIN is essential for opening a bank account, ensuring you do not use your personal social security number or your company's EIN.

Typically, the bank representative may not request to see the full plan document. However, for added security, consider bringing a printed copy of the Adoption Agreement. Do note that this is usually a lengthy document, often around 30 pages. All essential documents should have been given to you at the time of the plan's establishment.

Make it clear to the banker that you are looking to establish a "Trust" bank account, rather than a standard business or personal one. It is common for bankers to mistakenly think you are trying to open a solo 401k with them acting as the trustee. Clarify that you will be the plan's trustee.

Emphasize that a self-directed 401k is governed by the Internal Revenue Code and belongs to the retirement trust category, and that as the business owner, you can act as the trust's trustee.

As the trustee, you will be directing all investment decisions and choosing where to store the trust's liquid funds at a bank or credit union. The bank, in this scenario, will not act as the trustee for various investments like real estate, precious metals, and others, nor will they administer the plan.

If confusion persists, highlight the following: 401(k) plans operate via a trust that is established to manage and invest the plan assets. At least one trustee is appointed to oversee the trust's operations and assets, which carries significant responsibility and potential liability. This can be the business owner, an employee, or even a financial institution.

Q: How is the account titled?

A: The account is under the name of the solo 401k trust.

Q: Who acts as the trustee?

A: You, as the business owner, are the trustee.

Q: Who holds the signing authority?

A: The solo 401k trustee possesses signing authority.

Q: What banking functionalities are available for the solo 401k trust bank account?

A: Functions like check writing, debit cards, ACH transfers, wires, and cashier checks are all acceptable. However, credit cards and personal credit lines are not permitted.

When it comes to investments, you have a broad range of choices at your disposal. While many individuals opt for traditional investments like stocks, bonds, mutual funds, and CDs, you are also free to explore options such as real estate. However, if you choose to invest in real estate, it is crucial to ensure that you can provide our actuary with its value at the year's end. For our calculations to be accurate, we need the fair market value of all assets in the plan by the close of the year.

No, rental properties produce passive income, which is not subject to employment taxes such as social security and Medicare. Therefore, according to the IRS, this does not classify you as genuinely self-employed. To be eligible for a defined benefit plan, you need to be self-employed or receive a W2 from your enterprise.

That said, there have been instances where rental properties are organized alongside a management company, which could potentially pay you a salary for services rendered. If you are curious about how to set up a plan involving rentals, it is essential to consult both us and your accountant for guidance.

No. We are a third-party administrator for your plan providing plan documents and determining funding and monitoring compliance within the plans. We are not financial planners or advisors although we do partner with them for your assistance if needed. You would be the plan sponsor and trustee, which means you would manage the plan investments. You may hire a financial advisor to do this for you (or use one of our referral partners) or select a broker like Charles Schwab, Fidelity, or Vanguard. You can typically use any financial advisor you like.

Required Minimum Distributions (RMD’s) are not a new concept. These are the mandatory yearly withdrawals a retirement account holder must make starting the year they turn 72.

Every year, those with retirement plans and IRA accounts need to compute and draw the appropriate RMD (Required Minimum Distribution). Neglecting to do so can result in severe penalties from the IRS.

For those with defined contribution plans or IRAs who died after December 31, 2019, their entire account balance needs to be disbursed within a decade. However, the IRS provides exceptions for a surviving spouse, individuals who are chronically ill or disabled, or someone not over ten years younger than the IRA owner or employee. This 10-year stipulation is valid regardless of whether the individual passed away before, on, or after the age threshold for RMDs, which is currently 72.

Yes. You are required to take your first RMD the year you turn 72. Typically, you can delay the first RMD until April 1st of the following year if you turn 72.

Certainly, you have the option to do so, but there are some factors to consider beforehand. You are permitted to borrow either 50% of the employee's vested account balance or $50,000, whichever is lower. It is crucial to note that the maximum loan amount is determined by the employee's hypothetical account balance, not the full balance of the cash balance plan investment account.

Since we do not oversee your plan investments, it is advisable to consult your investment custodian to ensure they can facilitate and fund the loan. They should also be equipped to handle loan repayments.

Payments towards the loan should cover both the principal and interest and must be made monthly or quarterly over a span of five years. As the trustee of the plan, it is your duty to ensure adherence to the guidelines, track the loan, and notify us of any taxable events.

Given these expenses and compliance requirements, we usually recommend clients to assess if this is truly the best route for them. Often, there might be simpler ways to secure the necessary funds.

Yes, and we call this a simple plan takeover. This will save you on the upfront cost of the plan documents since you already have those. For us to take over your plan we will need the following:

• Plan Adoption Agreement with any amendments

• Summary Plan Description

• Form 5500 and attachments from the last two years

• Actuarial valuations for the last two years

• Year-end Statement of plan assets for the last two years

• Compensation history for all employees for the last two years

• Current Employee Census

If you are acquiring a company that already has an active defined benefit plan, you have several choices:

1. Retain the existing plan, allowing the current plan administrator to handle all administrative tasks.

2. Maintain the plan but transition its administration to Birdseye Pension Group.

3. Opt to end the plan and transfer the funds to an IRA or another eligible plan. However, it is vital to grasp the potential consequences of this action. There may be an obligation to contribute, and all participants might gain full vesting rights. Thus, it is essential to consult with us or your present plan administrator before taking this step.