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If you might not have heard yet, a new tax law was put in place this year. The new law offers a 20% tax deduction to owners of pass-through entities such as sole proprietorships, S corporations, and partnerships. The deduction limited specified service businesses including health, law, accounting, actuarial science, performing arts, consulting, athletics, financial, brokerage, or any business where the principal business is the reputation or skill of one or more of its employees.

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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.

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In medieval times, people shared scarce and sacred bathwater and after a baby had been bathed, the water was so murky the baby was in danger of being thrown out with the bathwater!  A common misconception about 401(k) plans is that companies are stuck with their initial 401K plan as it was originally designed….and that no changes can be made without throwing out the plan and starting over.  The parallel in the former analogy should be pretty obvious.

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Internal Revenue Code section 414(v) defines eligibility criteria for catch-up contributions.

A catch-up contribution is an elective deferral made by a participant at age 50 or older. It is only available if the participant’s contribution exceeds anyone of three conditions.  See Determination of Applicable limit below.

For 2018, the limitation on catch-up contributions is $6000 for 401(k) and 403(b) plans and $3000 for a SIMPLE 401(k) and SIMPLE IRA.

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BEI strives to keep our client’s plans “plain vanilla” and we take this approach because when retirement plans become too complex, there are increased government regulations, and thus more oversight.  Advanced plan design also drives up the cost of maintenance and this will become a “cost - to - benefit” comparison. However, we are finding adding some chocolate swirl, in certain situations, can be worth the hassle.

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