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December 3, 2018

2018 Year-End Retirement Plan Update

Key Dollar Limits for Retirement Plans Will Be Higher in 2019

We encourage you to be sure to adjust your 401(k) or 403(b) deferrals for your first payroll in 2019, if you would like to save the maximum allowable amount. The new limit for retirement plans is $19,000, plus another $6000 catch-up for those 50 years or older.

Other Retirement Planning Revisions Occurring in 2019 include:

Retirement plan contributions can be based on up to $280,000 of salary. This salary provides for the maximum defined benefit or cash balance contribution. The maximum amount of credit to an employee account, in a defined contribution plan, will be $56,000. By adding another $6000 in 401(k) catch-up, this would bring your allowable contribution to $61,000. If this contribution is not high enough for your situation, please contact us to discuss using a Cash Balance plan for your particular situation. If you want to see entire dollar limitation changes, please visit the Benefit Equity, Inc. website at www.benefitequity.com.

What’s up with the new MEP or PEP regulations?

There are newly proposed regulations that will make it easier for employers to pool together retirement plans for their workers. If you are burdened by all the rules and regulations these Multiple or Pooled Employer Plans will be an option.

Section 199A Deduction

Be sure to see your CPA before the year ends if you have a pass-through business entity. The new 20% tax deduction may be available to you. Business owners are getting the tax break by starting a Cash Balance Plan, but you need to run the numbers. The rules are a bit tricky. You may need to adjust your salary to take advantage of the tax break. We are seeing tax savings of 48%!

A Note Regarding Bankruptcy

Retirement plans are almost always exempt from creditors. In a recent bankruptcy trial, a divorced man didn’t come out on top. Here is what happened.

In a divorce, a man was awarded his wife’s IRA and half of her 401(k). He later filed for bankruptcy and held that the money in those accounts were shielded from creditors. Under bankruptcy law 401(k)’s and up to $1,283,025 of IRA’s are exempt from creditors.

However, the bankruptcy court said that the exemption was only available to the person that created the funded the accounts.

New rules are in Effect for Hardship Distributions

See our Hardship Distribution Update for more information. In a nut shell, a participant in a 401(k) or 403(b) plan does not have to take a loan from the plan to get a hardship distribution nor be excluded from making deferrals for 6 months. However, your plan document must be amended by 2020 to stay in compliance.

For more information, please call you BEI sales consultant at 800-899-9141 or email us at planservices@benefitequity.com.

Author: Robert Gorelick, APA, Founder Benefit Equity Inc.

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