Compliance February 23, 2007

IRS Publishes 401(k) Checklist for Plan Sponsors

February 23, 2007 (PLANSPONSOR.com) - A checklist published by the Internal Revenue Service (IRS) can help plan sponsors comply with the myriad of laws and rules that govern operation of a 401(k) plan including: The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and annual deferral percentage (ADP) and average contribution percentage (ACP) tests.
Reported by

While the IRS emphasizes in the document that plan sponsors should still consult with their plan provider and advisers, the list presents many of the major potential problem areas that can easily get plans into trouble.

Some of the other checklist points include:

  • Any changes made to plan documents or to the operation of the plan should be conveyed to employees, vendors and tax professionals who service the plan.
  • Everything plan sponsors need to know to operate the plan should be contained in the plan document, including how much and what compensation is used for allocations, for limitations, discrimination tests, etc.
  • Supplying third party administrators (TPAs) or plan service providers with information regarding all employees who receive a Form W-2 might reduce the risk that all eligible employees are not identified and are given the opportunity to make an elective deferral election.
  • Apply the proper definition of compensation in a consistent manner when dealing with deferrals and allocations.
  • Deposit deferrals as soon as they can be segregated from the employer’s assets. Most employers deposit salary deferrals when making payroll tax deposits.
  • Identify all highly compensated employees and key employees, including owners and their family members, so that the TPA can perform non-discrimination tests.

For the full IRS checklist visit   http://www.irs.gov/pub/irs-tege/pub4531.pdf

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Benefits February 22, 2007

Garden State Worker Contract Includes Pension, Health Givebacks

February 22, 2007 (PLANSPONSOR.com) - A tentative agreement with the largest union for New Jersey state workers calls for employees to pay 1.5% of salary toward their health premiums, pay more for their pensions and more for doctors' visits and prescription drugs.
Reported by

The deal between the administration of Governor Jon Corzine and the Communications Workers of America (CWA) also includes an increased retirement age to 60 for new workers, according to a Gannett News Service report.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

In return, union workers won pay raises that compounded, total 13.6% over the next four years and avoided drastic cuts to their existing retirement benefits, according to the report.

While teachers negotiate their benefits with individual school districts, their union, the New Jersey Education Association (NJEA), has also agreed to accept increased pension contributions and new penalties for educators who retire before turning 60.

According to the news report, the health care payments and pension contribution increase, from 5% of salary now to 5.5%, affect all workers.

The union givebacks are expected to save the state more than $100 million in the next fiscal year and hundreds of millions a year by 2022.The pension reforms are expected to save $475.5 million per year beginning in 2022, according to the administration.

For the average CWA worker, who currently earns about $50,000, the salary increases could total roughly $16,300 over the four-year contract. Increased health care and pension costs, above the existing contract, would cost $4,300, or roughly 27% of the total raise, the news report said.

The deal avoids cuts in pensions and state holidays that were recommended by some lawmakers.

«