2016 Q4 Plan Briefing

Fourth Quarter 2016 Plan Briefing: 
IRS Deadlines and Requirements for Q4 2016
Volume 1.4.3

IRS 2017 Plan Contribution Limits
The IRS released the 2017 defined benefit penion plan contribution limits for employees and employers. Please note the following while preparing for 2017. You can find a more detailed explanation on the IRS Website.

 Elective 401(k) Deferrals (plus Catch Up) - $18,000 (plus $6,000 if over age 50)
 Annual Defined Contribution Limit -  $54,000
 Limitation on Annual Benefit  for Defined Benefit Plans -  $215,000
 Annual Considered Compensation Limit -  $270,000
 Highly Compensated Employee (HCE)  - $120,000
   

Deadlines
Please note the following deadlines for Third Quarter 2016.  Note that not all deadlines will apply to each plan.  Contact our office at 949-222-3490 with any questions.

Delivery of Safe Harbor Notices for Plan Year Beginning 01/01/2017 (Safe Harbor Plans Only) -  11/30/2016
 Required Minimum Distribution Requests (All Plan Types)  -  12/15/2016
 New 401(k) Employee Enrollments for 01/01/2017 - 12/31/2016
New Defined Contribution and/or Defined Benefit Plan Set Up (for Plan Year 2016)    - 12/31/2016


Case Study
A new potential client was referred to us from a trusted CPA.  This client was motivated to set up a plan in order to take advantage of the tax deductions offered by qualified retirement plans.  We requested and soon after received a detailed employee census (dates of birth, dates of hire, and W2 earnings) and got to work on a proposed 401(k) plan with profit sharing and safe harbor provisions.  The results were strong for the ownership while providing an opportunity for employees to save for their retirement and receive additional benefits under the plan.  


While looking at the census data, we decided to run a proposal for a defined benefit pension plan as well.  We tinkered with the benefit formula and eligibility in a number of ways and were able to provide a generous benefit for the ownership, however the total contribution amount with all employees included was beyond their level of comfort.  


Still, we believed there was a better way for this client to set up a plan that would truly provide the best bang for their buck.  We made an attempt to run the census data through a few scenarios under a cash balance plan.  The optimal contribution amounts under a cash balance plan showed a very strong benefit for the owners while providing a fair and reasonable benefit for the rank and file employees that was within the budgetary limits for the client.  


We could have stopped at a defined contribution plan for the client, and they would have been satisfied with the result.  However, there's no reason to stop there if other options exist, including those that don't make immediate financial sense.  A strong combination of persistence, insight, and experience allowed us to provide top quality proposals to the new client.