Products December 19, 2013

Millennium Trust Proposes Uncashed Checks Solution

December 19, 2013 (PLANSPONSOR.com) - Millennium Trust Company released a white paper that addresses the growing problem of uncashed checks faced by retirement plan sponsors.
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The paper analyzes the source and magnitude of the problem, along with the legal and financial ramifications for sponsors if not addressed effectively.

Speaking at a conference earlier this year, Susan M. Halliday, senior benefits law specialist with the U.S. Department of Labor (DOL), mentioned an advisory opinion letter in which an attorney argued that, once a distribution is made from the plan, the money is no longer considered part of the plan assets. The DOL disagreed, implying it considered benefits plan assets until a check is cashed or a wire transfer is successfully made (see “Unanswered Questions About Uncashed Checks”).

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“After providing notices to participants that, if they do not make an election for distribution, their accounts will be automatically rolled into an individual retirement account (IRA), how long should plan sponsors or recordkeepers wait for a response,” Janice M. Wegesin, president of JMW Consulting Inc., queried during the same presentation.

Wegesin said this is not a small problem, since estimates show that the highest average uncashed benefit check amount is around $42,000. So, with a lack of guidance, it is a good idea for plan sponsors or recordkeepers to establish written procedures for handling uncashed checks.

“Data from across the country shows that the problem of uncashed checks represents a serious and growing dilemma for retirement plan sponsors,” says Terry Dunne, Millennium Trust senior vice president and managing director of the Rollover Solutions Group. “With administration costs continuing, escheatment not being an option in many cases, and the threat of possible fines and lawsuits increasing the longer plan sponsors fail to follow through on their responsibilities, it becomes clear that automatic rollover IRAs provide an easy solution to the problem,” he contends.

Millennium Trust says it was one of the first to offer an extensive suite of automatic rollover services. Millennium Trust’s automatic rollover service is designed to help plans meet the DOL’s safe harbor requirements for the automatic rollover of plan assets to IRAs.

To receive a copy of the research paper, contact Diane Pressley at 630-368-5614 or dpressley@mtrustcompany.com.

Compliance December 19, 2013

States Rule on Taxation for Same-Gender Couples

December 19, 2013 (PLANSPONSOR.com) - A number of states have released guidance regarding state income taxation for same-gender married couples.
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In August, the Internal Revenue Service (IRS) issued guidance stating it will recognize same-gender couples married in states for which it is legal for them to do so as married for federal income tax purposes regardless of the state they currently reside (see “IRS Provides Procedures for Same-Sex Marriage Tax Credits”). It is still up to the individual states whether they will regard these individuals as married or single.

According to the ADP Research Institute, states that do not sanction same-gender marriages, but have decided to recognize them for state income tax purposes, include Missouri and Oregon. States that do not sanction same-gender marriages and will not recognize them for state income tax purposes include Arizona, Georgia, Idaho, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Utah, Virginia and Wisconsin.

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The following states do not sanction same-gender marriages and have not announced whether they will recognize them for state income tax purposes: Alabama, Arkansas, Colorado, Indiana, Kentucky, Montana, Pennsylvania, Puerto Rico, South Carolina and West Virginia.

The New Mexico Supreme Court issued a ruling today legalizing same-gender marriages in that state.

The ADP Research Institute notes that California, Connecticut, Delaware, Washington, D.C., Hawaii, Iowa, Illinois (effective June 1, 2014), Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Washington sanction same-gender marriages. Arkansas, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no state income tax withholding.

The Institutes Legislative Updates can be accessed here.

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