All posts tagged retirement

On October 18, 2016, the Social Security Administration (SSA) announced the maximum amount of earnings that are subject to the Social Security payroll tax will increase in 2017 to $127,200. This adjustment is effective as of January 1, 2017 and equates an $8,700 increase from the maximum for years 2015 and 2016, which was $118,500. According to the SSA, of the estimated 173 million workers who will pay Social Security taxes in 2017, about 12 million will pay more because of the increase in the taxable minimum.

How does Social Security work?

The SSA uses the Social Security taxes that workers pay into the system to pay Social Security benefits and these taxes are based on workers’ earnings, up to a certain amount. As of January 2017, that amount is $127,200.

This adjustment, done annually, is based on the increase in average wages. Subsequently, by January 1 of each year employers must adjust payroll systems to account for the potential for a higher taxable wage (per SSA determination) and if there is an adjustment, impacted employees should be notified of the hit to their paycheck. So for your employees whose compensation exceeds the previous maximum ($118,500), this new amount means they will see a decrease in their take-home pay without an annual raise to account for the larger payroll tax. Keep in mind, Social Security is a retirement benefit but also works toward aiding older Americans, workers who become disabled, and families when a spouse or parent dies.

This increase not only impacts workers, it impacts employers as well because as the employee contributes so does the employer. The Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) tax rate for wages paid in 2017 is set by statute at 6.2 percent, for both employees and employers. So, an individual with wages equal to or larger than $127,200 would contribute $7,886.40 to the OASDI program in 2017, and his or her employer would contribute the same amount (the OASDI tax rate for self-employment income in 2017 is 12.4 percent).

What should an employer do now?

Take the time to adjust your payroll system to support the new dollar amounts, and while assessing your annual budget account for the increased tax amount and the impact on affected employees.

Of note, other adjustments from the SSA that are effective January 2017 are a 0.3 percent cost-of-living adjustment, which increases the monthly Social Security and Supplemental Security Income (SSI) benefits. The 60 million Social Security beneficiaries will see the benefit increase in January 2017 and the 8 million SSI beneficiaries will see the increase on December 30, 2016.

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IRS Issues Second Notice to Assist in Developing Cadillac Tax Regulations | Ohio Benefits Broker

Categories: General News
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By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

The IRS has issued its second notice regarding the upcoming implementation of the Patient Protection and Affordable Care Act’s (ACA) excise tax on high cost employer-sponsored health coverage, also known as the “Cadillac tax.” Beginning in 2018, plans that provide coverage that exceeds a threshold will owe the tax. The threshold generally willCadillac tax be $10,200 for single benefits and $27,500 for benefits provided to an employee, retiree or member of a bargaining unit, and dependents. The tax is 40 percent of the value of coverage provided over that threshold level.

The IRS has begun the process of writing regulations that will provide details on how this tax will operate. On February 23, 2015, the IRS issued Notice 2015-16, which provides some information on the types of benefits that will count toward the tax.

On July 30, 2015, the agency released Notice 2015-52, which addresses IRS thoughts on: (1) the definitions of applicable coverage; (2) the determination of the cost of applicable coverage; and (3) the application of the dollar limit on the cost of applicable coverage to determine any excess benefit subject to the excise tax. The IRS is seeking public comment on all of these issues.

The public comments on the two Notices will be the final steps the agency takes prior to drafting and releasing the proposed regulations. There is currently no target date set for those regulations.

UBA’s free resource, “IRS Issues Second Notice to Assist in Developing Cadillac Tax Regulations” details the issues on which the IRS is seeking public comment, including:

  • Who is liable
  • Controlled groups
  • Tax calculation
  • Exclusion amounts attributable to the excise tax
  • HSAs, Archer MSAs, FSAs, and HRAs
  • Cost of coverage under FSAs with employer flex credits
  • Inclusions of self-insured coverage includible in income
  • Age and gender adjustments
  • Notice requirements
  • Payment forms


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5500 Due Date Approaching | Maumee Benefits Broker

Categories: HR
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Generally, plans that must comply with ERISA must file a Form 5500 by the last day of the seventh month after the close of their plan year. For calendar year plans this means the due date for the Form 5500 is July 31. Government plans (which includes most public schools) generally do not need to comply with ERISA and therefore do not need to file a Form 5500. Many church plans also are exempt from this requirement.

A Form 5500 is needed for both qualified (retirement) plans and welfare (group) plans. Welfare plans include plans that provide medical, prescription drug, dental, vision, long term and short term disability, group term life insurance, health flexible spending accounts, and accidental death and dismemberment benefits. While other plans may also be considered welfare plans, these are the most common. Qualified (retirement) plans include defined benefit, profit sharing, stock bonus, money purchase, and 401(k) plans, Code section 403(b) plans covered by Title I of ERISA, and IRA plans established by an employer. Qualified plans generally must file even if they have fewer than 100 participants, although Form 5500-SF often may be filed instead of the full Form 5500.

Welfare (group) plans generally must file the Form 5500 if:

  • The plan is fully insured and it had 100 or more participants on the first day of the plan year  (dependents are not considered “participants” for this purpose unless they are covered because of a qualified medical child support order)
  • The plan is self-funded and it uses a trust, no matter how many participants it has
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year

In addition, beginning with the 2013 Form 5500, all plans that must file a Form M-1 must also file a Form 5500 regardless how small they are.

Beginning this year, welfare plans need to include an attachment labeled “Form M-1 Compliance Information.” There is not a question on the form for this – it is a free form attachment.  See page 18 of the Form 5500 Instructions for details. It is important to include this attachment, even if the plan does not need to file an M-1, because the Form 5500 will be considered incomplete if this section is skipped.  Generally, multiemployer (union) plans that have been in operation for less than 3 years and multiple employer welfare plans (non-union plans that cover multiple employers that are not a part of a controlled group) must file the Form M-1.

Employers may obtain an automatic 2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

Target Date Fund Investors More Confident About Reaching Retirement Goals

Categories: Team K Blog
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Individuals investing in a target date fund within their workplace defined contribution (DC) retirement plan feel more confident about investing and meeting their retirement goals than those that don't use target date funds, according to recently updated survey results from Voya Financial's Investment Management business. Read more

Financial fears have many workers planning to delay retirement

Categories: Team K Blog
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Although U.S. workers on a whole are more satisfied with their current financial situation than in years past, most (58%) remain concerned about financial stability in retirement and say they plan to continue working until age 70 or later, a new Towers Watson survey shows. Read more