Well, 2021 is here. Now what? Your retirement plan participants will appreciate reminders about nuts and bolts—especially considering some of the regulatory shifts made as COVID-19 emerged last year.
Participants In Their 70’s?
Whether employed or retired, participants in their 70s (or headed toward them) need to plan for Required Minimum Distributions (RMDs) from IRAs, 401(k)s, and Roth 401(k)s. Think Advisor offers these reminders;
Due to the pandemic, required minimum distributions — intended to spread out a retiree’s savings, and the related taxes, over an expected lifetime — were waived in 2020. Also, the RMD age was raised due to the Secure Act, so those who turn 72 this year have until April 1, 2022, to take their distribution. Those older than 72 must take their RMDs by Dec. 31.
The cost of not taking the distribution is significant: a 50% excise tax for the amount that should have been taken. Therefore if a retiree is mandated to take a distribution…they are required to take withdrawals on an annual basis….
Early Withdrawals?
Last year, some of your plan participants may have needed to take early withdrawals. As they grappled with financial challenges. They now need a strategy for paying the applicable taxes—and or replenishing the withdrawals. Forbes provides this advice:
The Coronavirus Aid, Relief and Economic Security Act (CARES) Act eased the rules for taking early withdrawals from tax-advantaged retirement accounts. People who were impacted by Covid-19 were permitted to withdraw up to $100,000 from retirement accounts like 401(k)s and IRAs. CARES waived early withdrawal penalties, but you still owed any applicable income taxes on the amount—although you had the option to spread the tax bill over three years.
Experts at Forbes further suggest that those who can, should try to pay off the taxes this year—all at once, as your economic hardship in 2020 might place you at a lower tax bracket now than you may have in the future. It is also helpful if the money withdrawn can be paid back into the retirement account—doing so means you won’t owe the taxes and you’ll ultimately benefit from earning interest on these funds.
Working Hard for the Money
While you and your plan participants are working hard to save for retirement, don’t forget to also do everything you can to protect the plan’s funds—and your own, as a fiduciary. Remember, you are required to protect the assets of the retirement plan with an ERISA Bond. Let a leading national leader in the field help you with that —and more: Colonial Surety Company offers a comprehensive coverage plan. Select an affordable package and receive:
- The ERISA bond required to protect the assets of the retirement plan from theft;
- Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach; and,
- Fiduciary Liability coverage to protect you and your assets from personal liability.
Colonial makes it easy, fast, and direct to quote and purchase your coverage package online, from anywhere.
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Available Everywhere In the USA
With Colonial’s unique, affordable packages, plan sponsors can secure up to $1,000,000 of fiduciary liability insurance.
Remember, the ERISA bond required for the retirement plan protects the participants of the plan, but does not cover the plan sponsor as the fiduciary. Colonial’s 2 or 3-year ERISA bond packages provide great overall savings and protection. In addition to fiduciary liability coverage, you can add cyber liability insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber attack. Colonial even includes extended coverage to ensure your ERISA bond remains US Department of Labor compliant.
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