Retirement Plans

The SECURE Act of 2019

On December 20, 2019, President Trump signed into law the Setting Every Community Up For Retirement Enhancement Act of 2019 (the “SECURE Act”).  The SECURE Act is probably the most significant piece of retirement legislation since the Pension Protection Act of 2006.  Here are a few of its most relevant provisions.

  1. Increasing the Age for Required Minimum Distributions

Under current law, participants are required to begin taking minimum distributions from a retirement plan beginning the later of (i) April 1 of the year after they turn 70½ or (ii) the year in which they retire.  The SECURE Act raises the age for required minimum distributions to 72.  This change in law applies to individuals who turn 70½ after December 31, 2019.  It does not affect people who have already begun receiving their required minimum distributions or who turned 70½ last year and are, as a result, required to begin taking distributions by April 1, 2020.

  1. Elimination of “Stretch IRA”

Under current law, if the beneficiary of a decedent’s IRA was a so-called “designated beneficiary”, the beneficiary could take required minimum distributions from the IRA over the lifetime of the beneficiary.  Under current law, the term “designated beneficiary” could include the decedent’s adult children.  Under the SECURE Act, most adult children will no longer be considered a “designated beneficiary”.  As a result, distributions from the decedent’s IRA must be completed within ten years of the death of the decedent.  A decedent’s spouse is still considered a “designated beneficiary”.

  1. Coverage of Part-Time Employees

Under current law, an employer can exclude any employee who does not work at least 1,000 hours in a year.  The SECURE Act changes the law for 401(k) plans.  Under the SECURE Act, a 401(k) plan will be required to permit any employee who works at least 500 hours for three consecutive years to contribute to the plan.  The SECURE Act does not change the rules regarding employer contributions to a 401(k) plan.  So, employers are not required to make contributions for these so-called “long-term part-time employees”.

This change in the law goes into effect beginning in 2021.  This means that the soonest that a long-term part-time employee must be allowed to contribute to a 401(k) plan is 2024.

  1. Lifetime Disclosure Requirements

Under current law, there is no incentive for sponsors of defined contribution plans to offer a lifetime annuity distribution option.  The SECURE Act encourages the use of a lifetime annuity distribution option by requiring sponsors of defined contribution plans to provide a “lifetime income disclosure” on a participant’s benefit statement at least annually, even if the plan does not offer a lifetime annuity distribution option.  The disclosure is an estimate of a participant’s monthly benefit, if the participant were to elect a qualified joint and survivor annuity or a single life annuity.

The Secretary of Labor is required to issue a model disclosure by December, 2020.  This requirement becomes effective no more than one year after the Secretary has issued the model disclosure.

  1. Annuity Safe Harbor

The second way in which the SECURE Act encourages the use of annuity contracts by defined contribution plans is by providing a fiduciary safe harbor for plan sponsors.  The decision whether to offer an annuity option in a defined contribution plan occurs before a plan is adopted.  As a result, the decision to offer the annuity option is not a fiduciary act.  However, the selection of the annuity provider is a fiduciary act, and a plan sponsor could be held liable for the financial well-being of the annuity provider.  The SECURE Act provides a safe harbor for the plan sponsor as long as the annuity provider represents that, for the prior seven years and on a going-forward basis, the annuity provider (i) is licensed by a state to offer guaranteed retirement income contracts, (ii) files audited financial statements, and (iii) maintains sufficient reserves to satisfy the requirements of all states where the annuity provider conducts business.  This safe harbor is available effective January 1, 2020.

  1. Earliest Age for Distributions from Defined Benefit Plan

Most defined benefit plans permit distributions to a working employee upon attainment of a certain age.  Prior to 2006, that age was 65.  After 2006, that age became 62.  The SECURE Act permits in-service distributions to employees as early as the attainment of age 59½.  This is not a requirement, but a plan provision that an employer can adopt.  It becomes effective beginning after December 31, 2019.

  1. Adoption of Plan after Close of Tax Year

Under current law, an employer must adopt a qualified plan by the end of its tax year in order to deduct its contributions to the plan for that tax year, even though contributions do not have to be made until the due date, including extensions, of its tax return for such year.  So, for example, an employer would have had to have created its plan by December 31, 2019, in order to deduct its contributions in 2019, even if the contributions are not actually made until September 15, 2020.  The SECURE Act changes this and provides that the plan can be adopted as late as the due date, including extensions, of the employer’s tax return.  This change is effective for tax years beginning after December 31, 2019.

  1. Pooled Employer Plans

One of the reasons that a small employer might hesitate to adopt a qualified plan is the costs inherent in set-up and administration.  Large employers have greater negotiating power and are able to reduce their costs.  Current law permits unrelated employers to come together under a single plan as long as there is some “commonality of interest” among the employers.  Under current law, “commonality of interest” requires that the employers be engaged in the same industry or share a common geographic location.  The SECURE Act permits unrelated employers to participate in a “pooled employer plan”, even without this so-called “commonality of interest”, as long as the plan has a single trustee, named fiduciary, and administrator and offers the same investment options to all plan participants.  This provision becomes effective for plan years beginning after December 21, 2021.

  1. 401(k) Safe Harbor Plans

There are two ways to create a safe harbor 401(k) plan.  The first is through a matching employer contribution.  The second is through a non-elective employer contribution.  Under current law, a safe harbor 401(k) plan must be adopted before the beginning of the plan year and the employees must receive notice of the adoption of the safe harbor plan before the beginning of the plan year.  The SECURE Act changes the rules with respect to a non-elective employer contribution safe harbor plan.  It eliminates the requirement that participants receive notice prior to the start of the plan year.  In addition, it permits a non-elective safe harbor plan to be adopted at any time during the plan year.

  1. Penalty for Failure to Timely File Form 5500

In order to pay for some of these provisions, the penalty for failure to timely file the Form 5500 was increased to $250 per day with a maximum of $150,000.  For obvious reasons, it is vital that a plan sponsor choose its plan administrator wisely.

Retirement Plans

Who is a Candidate for a Retirement Plan?

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Let’s face it our clients can always use more planning help.

Do you have profitable businesses that are looking for better solutions?

Perhaps they’ve already paid their salaries.

They’ve already done their year-end bonuses.

Maybe they’ve already done capital improvements into the business.

BUT they still have surplus profits

They’re still looking for ways to spend that money creatively and effectively and tax efficiently at the end of the year.

Do they already have enough money to live on?

What do you tell these clients?

What solutions do you present to them?

A qualified retirement plan could be a perfect solution!

Let’s take a look at some real numbers…

Perhaps it’s a 401(k) plan where the employee can defer up to $19,000 and salary on a tax efficient basis. An additional $6,000 if they’re over age 65.

Maybe they need more…

Perhaps a profit sharing plan where they can put away and this is the business putting away all in a tax favored basis that can do up to $56,000 a year…

…or maybe they need even more…

Maybe a defined benefit plan will help them.

In a defined benefit plan, let me give you an example…

For example at age 55, a business on a tax favorite basis can put away anywhere from $200,000 to $500,000 depending on the type of plan.

And that is annually!

That is huge and on the benefit side that contribution can provide a benefit of up to $225,000 a year…

And that’s every year for the rest of their life!

These are absolutely compelling benefits.

These are incredible benefits, very meaningful to the clients.

Perhaps the client wants to control their own investment.

It’s in a traditional defined benefit plan or maybe they have a lot of employees or they have multiple owner employees with bearing ages and a cash balance plan award from.

Or maybe they are interested in guarantees only and they want to eliminate all market risk and they can go with a fully insured 412(e)(3) plans.

Talk to us, talk to your clients. Allow us to help you help them!

Contact us today and learn more.

How we can help you and your clients with qualified retirement plans?

Retirement Plans

‘Tis the Season for Qualified Retirement Plans

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The time is now.

It’s the fourth quarter…

As we like to say ‘tis the season and no I don’t mean for the holidays.

‘Tis the season for qualified retirement plans.

First and foremost, every single business out there should have some type of qualified retirement plan.

These are absolutely fabulous planning tools and your business clients they need to have these plans.

You need to introduce them to these concepts.

So there’s a lot of plans out there but we can help you find the most suitable plan for your clients.

Allow us to help you whether it’s

  • A 401(k) plan
  • or a Profit Sharing Plan
  • or some type of Defined Benefit Plan
  • or Traditional Plan
  • or how about a Cash Balance Plan
  • or even a Fully-Insured 412(e)(3) Plan

We have the right answers for your clients.

We are the experts so you do not have to be.

It’s a win-win for everybody!

For your clients, they get a fabulous retirement plan benefit for them and their business and all in a potentially tax-favored basis.

For you, you get to introduce them to this concept.

You get to be their hero!

It’s your value-added and you can do this all about growing your practice as well.

So it’s the fourth quarter…

Is it too late for these plans?

Absolutely not!

We can establish plans all the way up through December 31st of this year.

That’s right 12/31!

Now we don’t recommend that you wait that long, but we do have the ability.

We’ve got the experience and we’ve got the expertise to literally do last-minute plans all the way through 12/31.

So don’t hesitate!

Please contact us now.

Let us help you introduce these concepts to your client and we can give your client an invaluable benefit that they’ll need for the rest of their life.

Retirement Plans

Traditional Plan vs. 412(e)(3) Plan

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When you get to 65, you have X-benefit…

$10,000 a month…the number is irrelevant…

You can do the Traditional Plan, provides the same benefit, the $10,000 a month

It’s just how you get there.

You can invest in the market, the market will appreciate more than a very conservative investment in the 412.

So it’s not, the beauty of the 412 as you pass it…

It’s called Fully-Insured cause you pass it on to an insurance company, the liability, but the insurance company says as long as you pay these very conservative premiums…

We will 100% guarantee that for the rest of your life when you get to retirement until you pass away – you can live until you’re 110 – we’re going to pay you that benefit!

Now conversely, in the Traditional Plan – I said it cost $100,000 in a 412, in a Traditional if I have decent market performance, it might only cost me $70,000 a year.

Now conversely though, I can put $70,000 a year away and when I turn 64 the market, we can have a 9/11 event or we can have a Black Friday or whatever it was (Friday I think it was when the market crashed…)

The market can cut in half and then my reserve at 64 cuts in half and now I have one year until I retire to make that up.

So that’s why the conservative nature of the 412, sometimes people really like that!

Press Release

CJA Wins Multi-State Retirement Planning Specialists of the Year Award

CJA and Associates, Inc., a member of the RMC Group, has been named Multi-State Retirement Planning Specialists of the Year by U.S. Business News.

U.S. Business News “is the leading magazine for deal makers, game changers and decision makers in the U.S. business market”. Its awards are “100% based on merit” and recognize the most innovative and pioneering financial organizations and firms in the United States.

Thomas Bacharach, Northeast Regional Vice President of RMC Group commented, “On behalf of the entire CJA family of retirement plan professionals, I want to thank U.S Business News for this award. It recognizes our hard work, mastery of the subject matter, exemplary design services and commitment to our client’s retirement planning”.

CJA and Associates, Inc. is a national employee benefits company that specializes in the design and marketing of innovative insurance products and employee benefit plans for the small business and estate planning markets. CJA partners with PlanGen, a web-based illustration and presentation system, to generate fast, compliant illustrations for retirement plans. CJA also partners with First Actuarial Corporation to administer all of its retirement plans.

For more information on CJA’s award, CLICK HERE or visit

Retirement Plans

Different Types of Retirement Plans

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So we’ve got a lot of different types of qualified plans from the Defined Contribution the 401(k)s and Profit Sharing to the Defined Benefit Plans.

The most conservative and guarantees all the benefits to fully-insured 412(e)(3) but we also have for people that want to take a little more risk and invest in the market Traditional Defined Benefit Plans and Cash Balance Plans.

So some of the times people would lean towards a Traditional Plan or a Cash Balance Plan is they want to invest in the market.

In addition, Cash Balance Plans are typically fabulous for companies with more employees and especially a number of owner employees, different partners in the group, and it’s particularly important for groups with owners that have bearing ages.

Can help equalize the contributions rather than typically in a qualified plan the employees with higher wages or the owners with higher wages are typically going to put more contributions in on behalf of a donor employee versus an owner that is a younger age and their contributions can be limited.

So Cash Balance Plans can help equalize these contributions for the owner employees.

Retirement Plans

What happens if you live too long?

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So why retirement plans?

Why do businesses want to put their money there?

Their hard-earned money…

First of all everybody knows Americans, just in general are not saving it up for retirement.

We’re always worried about dying too soon…

But what happens if we live too long?

What then?

What do we do?

We don’t have the resources in our retirement years.

This is why a retirement plan is fabulous!

Put money away now in your peak earning years.

Businesses can put this money away all on a tax-favored basis so they save now and plan for tomorrow.

And for this reason defined benefit plans and defined contribution plans are fabulous planning options for business clients.

Retirement Plans

Section 199A Threshold Increased in 2019

The Tax Cuts and Jobs Act of 2017 (the “Act”) cut the corporate income tax rate from 35% to 21% for tax years beginning with 2018.  In addition, the Act reduced the top individual rate to 37%.  So, where does this leave a “pass-through entity”, such as an s-corporation, LLC or partnership, whose income is taxed to the entity’s owner at the owner’s individual rate?  The Act also added section 199A to the Code, which seeks to equalize the rate paid on business income, whether from a c-corporation or a pass-through entity, by providing a deduction to the owner of a pass-through entity.  The deduction reduces the owner’s taxable income from his business, thereby effectively reducing the tax rate paid by the owner.

However, this deduction is not necessarily available to every owner of a pass-through entity.  In order to take advantage of the section 199A deduction, a taxpayer must have income from a “qualified trade or business”.  The problem is that certain professions are not considered a “qualified trade or business” and would, therefore, not seem to be eligible for the section 199A deduction.  However, there is an exception for taxpayers with taxable income below a threshold amount.  Those taxpayers may be eligible for the section 199A deduction even if their income is not derived from a qualified trade or business.  The threshold amounts for 2018 were $157,500 for a single taxpayer and $315,000 for a married taxpayer.

The Act provides that the threshold amounts are indexed for inflation.  The IRS recently announced the threshold amounts for the 2019 tax year.  The threshold amount for a single taxpayer has increased to $160,700, and the threshold amount for a married taxpayer has increased to $321,400.  Further, for a single taxpayer, the deduction phases out for incomes between $160,700 and $210,700.  For a married taxpayer the deduction phases out for incomes between $321,400 and $421,400.

If you are a professional or have clients who are professionals, section 199A provides another reason to consider adopting a defined benefit pension plan.  For purposes of the section 199A deduction, taxable income is determined after allowable deductions.  For a professional with income above the threshold amount, a contribution to a defined benefit pension plan may, to the extent that the contribution is deductible, lower taxable income below the threshold amount.  So, a professional, who makes a contribution to a defined benefit pension plan, may not only reduce taxable income by the amount of the contribution, but may also be able to further reduce taxable income by becoming eligible for the section 199A deduction.  The increase in the threshold amounts makes this strategy available to even more professionals.

RMC Group has been in the pension business since 1974. Call today to learn more about our pension offerings at 239.298.8210 or email us at [email protected]. Our pension team of experts will be able to help you find the right qualified plan for your business clients!

Press Release

Don’t Miss Out on 4th Quarter Opportunities

The fourth quarter provides a unique opportunity for you to help your clients.  While risk management tools, including captives, pensions and other employee benefit plans can and should be offered throughout the year, many business owners are more focused at the end of the year.  They often have a better idea in December whether they can afford to implement one of these business solutions.

RMC will help you leverage the year-end deadline to pursue these 4th quarter opportunities with your clients. Contact RMC today at 239.298.8210 if you have any questions about our offerings or want to discuss the specific needs of your clients.

For more information on our business solutions or other news and updates, visit our website at or follow RMC Group on social media.

Retirement Plans

Maximum Pension Limits for 2019

Each year, the IRS sets limits for pension plans. These limits are reviewed annually and adjusted for inflation. The following are some important limits in effect for 2019:

  • Maximum compensation for plan purposes is $280,000
  • Maximum monthly benefit for defined benefit plans ages 62 to 65 is the lesser of 100% of compensation or $18,750 with an annual benefit $225,000
  • Highly Compensated Employee compensation $125,000+
  • Maximum Defined Contribution / Profit Sharing Contribution $56,000
  • Maximum SEP Contribution $56,000
  • Maximum 401(k) Contribution $19,000. Catch-up Contribution for age 50 and over $6,000
  • Maximum SIMPLE Contribution $13,000

CLICK HERE for a PDF copy of the 2019 limits.