Archive for April, 2011

Are You Retirement Ready?

Tuesday, April 26th, 2011

Are You Ready For Retirement

By: Gary Zurek

Do you know how much money is needed for your retirement? Do your participants know how much they need? Retirement readiness…what does that mean?

There are many Baby Boomers turning 65 this year who now know they don’t have enough money for retirement.  This year (2011) is the beginning of the Baby Boomer generation turning 65. Over the next 20 years, 78 million Americans will turn 65. Sixty-five has, in the past, been synonymous with retirement. However, a recent article in the Wall Street Journal entitled “Retiring Boomers Find 401k Plans Fall Short” talks about the lack of retirement preparedness. According to the article the typical pre-retirement baby boomer has less than 25% of what he/she needs in a 401k plan to retire.

Why are they so woefully unprepared for retirement? There are many reasons for this problem including procrastination, boomer imprudence, participant loans, apathy, too little investment advice and too little being saved. I believe the number one reason is the fact that too little money is being saved for retirement.  Unfortunately, many boomers will either need to work longer than they anticipated or scale back their lifestyle to conserve their retirement funds.

While the boomer generation, particularly those over 55, may not be in a position to change their retirement readiness, there is still time for younger boomers, Gen Xer’s and Gen Yer’s to achieve an adequate retirement benefit. How? It’s called Retirement Planning.

I am constantly reading about all of the participant features that produce a great 401k plan: online annual contribution increase, take-home pay calculator, custom date portfolio returns and more. All of these items are wonderful features and tools but none of them provides the one thing that every participant needs to know: How much money do I need in my 401k account to achieve a meaningful retirement benefit. Once a participant knows how much money he/she needs in their account they can then, with the help of their investment adviser, establish a plan on how to get there. You notice I said “a plan”. For all of the talk about features and educating the participants on how to invest we miss the most important piece – planning. You may have heard this before but we, as Americans, spend more time planning our vacations than we do our retirement readiness.

As a reminder, TSC’s 401k Health Check™ provides the piece of information that participants are often missing to enable them to plan. It tells the participant if they are on track to save and achieve a meaningful retirement benefit. In addition to the Health Check, our website has a retirement benefit calculator which allows participants to customize their benefit package based on investments held outside their 401k account. Go to www.tsc401k.com, with your Health Check and see how you measure up for your retirement.

The only way to have a meaningful retirement benefit is to plan for it. At TSC, we make corporate retirement plans easy… Ask your participants the simple question: do you know what you’ll need to be retirement ready? Help your participants plan today for retirement before they are “sixty-five”.

Contributed By:

Gary Zurek
President
TSC
952.806.4343 Direct
garyz@tsc401k.com

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Tip of the Month – Payroll Best Practices

Tuesday, April 26th, 2011

Tip of the Month - Best PracticesWe all know that payroll submission day can be hectic and whether you upload from a time keeping system or hand key your entries there is always a concern for accuracy.  The last thing you want to deal with is an angry employee who wasn’t paid correctly on payday.  By following some simple procedures, you should be able to drastically reduce the number of employee check issues you deal with on payday.

1.)  Complete all employee record changes in advance
Try your best to avoid last minute employee changes.  Changes to the employee records can be completed throughout the pay-period, so there is no need to wait to do these on your busiest and most stressful day.  Some of the most common issues we come across are due to pay rate changes or deduction amounts were not entered prior to the payroll being processed.  Keep a handy list of these changes so you can easily check them against the Preprocess Register.

2.)  Have reliable control totals
If you have a time system, this step becomes easier as it will offer a report that will have control hours by earning code.  If you have manual time cards, calculating control totals also becomes a manual process.  There are many items within payroll that could have a control total however the basic control would include total company hours by earning code.

3.)  Balance Preprocess Register to control totals
With reliable control totals, this step can catch the majority of payroll entry errors.  Once the payroll entry, and/or time clock upload is complete, you should run the Preprocess Register.  The Preprocess Register will give you a snap-shot of what your payroll will look like after it processes.  You should be able to balance your control totals to the totals page of this report in order to verify the accuracy of the entry into the payroll system.  You should also verify that the Preprocess Register accurately shows the employee changes you made prior.

4.)  Always save your Preprocess register
We cannot stress this enough, always save your Preprocess Register.  You can choose to save it in paper for, or as a PDF file, either way it is an important document to keep.  If PCS is called upon to research or troubleshoot an issue, it is likely that one of the first questions we’ll ask is for you to send us a copy of the Preprocess Register.  You should also verify your payroll once it is received using this report.

5.)  Balance Preprocess Register to the Payroll Register received after process
Once you receive your payroll back after processing, you should compare the totals pages of the Preprocess Register to the totals page of the Payroll Register.  Any variances should be researched immediately and escalated to your Client Account Manager if needed.

6.)  Count the number checks/vouchers and compare to Payroll Register
Last but not least count the number of checks/vouchers received back and compare to the total listed on the Payroll Register.  This will verify that you received the number of documents you were expecting.  Again any variance should be researched and escalated to your Client Account Manager.

Following these simple procedures will help verify the accuracy and help catch any errors in the payroll.  Remember to always save a copy of the Preprocess Register, and do not hesitate to get your Client Account Manager involved sooner rather than later.

Contributed By:

The PCS Support Team

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

401k Fees… Let’s Remember Value

Tuesday, April 26th, 2011

401KFees-ValueBy: Randy Reese
Manager
Boulay, Heutmaker, Zibell & Co. PLLP

If you Google “401(k) Fees” you may see the following headlines – Are Fees Draining your 401(k) Retirement Savings? – Hidden Charges Can Rob You of a Comfortable Retirement – The High Cost of 401(k) Fees – and the list goes on and on. While these are excellent questions and concerns, examining them out of context may do more harm than good. Instead of looking only at fees, a more reasonable approach would be to step back and 1) understand that specific services are necessary and must be paid for, 2) discover what total fees are being paid and how they are being paid, and 3) determine what value you are receiving for these expected and required services. Only after you have gone through these three steps would you have any basis for determining if your fees are reasonable.

Let’s start by acknowledging that some fees are necessary because services are necessary. Successful retirement plans need services ranging from compliance to investments. Compliance requirements are set forth in the Employee Retirement Income Security Act of 1974 (ERISA) and more recently the Pension Protection Act of 2006. These Acts set minimum standards for retirement plans in private industry. Investment services are necessary to assist in asset allocation decisions designed to achieve the investment objective of plan participants. By understanding that someone needs to get paid for providing this oversight, you have the opportunity to save for retirement in a tax efficient manner.

The second step is to determine what you are actually paying in fees, both direct and indirect costs. Direct costs are fees paid by writing a check. You may never see indirect costs because they are netted out of your investment return. A study conducted by AARP* revealed that 83% of 401(k) plan participants did not know how much they were paying in fees and expenses. The perception has been in some cases that there are no fees, that it is “no-cost.” This could not be further from the truth. Someone, somewhere, is getting paid somehow. The same study also discovered that 79% who make the decisions about their 401(k) investments said fees are an important consideration. If fees are that important, how can you rationalize your investment decision without knowing how much you are paying? To help uncover both direct and indirect costs, effective January 1, 2012, 401(k) plan vendors must start disclosing their fees to plan sponsors and plan sponsors must start disclosing fees to plan participants (see Doug Johnson’s article, 401(k) Plan Fee Disclosure Requirements by clicking here).

The third step is to determine if there is a fair ”balance” between fees you are paying and value you are receiving. Value can be viewed as both tangible and intangible. Tangible value may positively affect your investment performance while intangible value will benefit both the employer and employee.

How does tangible value affect your investment performance? It is easy to find many examples in the financial news on how a 1% difference in fees can have a dramatic affect on the value of your account at retirement. While that is very true in its most simplistic form, there is often no mention of the fact that the net performance of a particular investment with higher fees may be greater than an investment with lesser fees. As an example, if Fund A has a 2% investment fee but delivers a net return of 8% and Fund B has a 1% investment fee but delivers a net return of only 7%, Fund A has more “value.” If you were to make your investment choice based only on expenses, you would choose Fund B, overlooking the fact that other investments may offer the potential for a higher net return even with higher expenses.

And then there is the intangible side of value. Certain benefits should emanate from your retirement plan on which you cannot place a “dollar and cents” value. Some of these benefits should be:

  • Your employees are educated on the simplicity of making appropriate investment choices
  • Your service provider accepts responsibility to provide personal hassle-free, day-to-day support as an extension of your Human Resource Department
  • Your employees are encouraged to participate through regularly scheduled meetings to keep them abreast of market conditions and aware of 401(k) topics of interest
  • Your fiduciary responsibility is reduced because your 401(k) advisor monitors the 401(k) investment vendor who is providing fund choices for plan participants

After going through these three steps, you should realize that a successful 401(k) plan requires specialized services and fees necessary in order to obtain these services. Furthermore, if you have done your due diligence and uncovered all of the fees you are paying, you can now consider the original question of whether or not your fees are reasonable. Before you give a final answer to that question, maybe you should acknowledge that reasonable fees are not measured entirely in dollars and cents, but rather by the balance between fees paid and value received. If the fee side of the scale outweighs the value side, perhaps you should expect more from your service provider and increase the VALUE of your 401(k) plan. With this approach, everyone wins at retirement, even if it did “cost” a little more to get there!

Article Contributed By:

Randy Reese
Manager
Boulay, Heutmaker, Zibell & Co. PLLP 7500 Flying Cloud Drive, Suite 800
Minneapolis, MN 55344 952.893.9320 | learnmore@bhz.com

Boulay provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

 

Minnesota Taxability for Non-Tax Dependants

Tuesday, April 26th, 2011

Dependent Taxability of Insurance2010 closed without a final decision from the state of Minnesota on whether to follow suit with the Federal tax provisions contained in the Patient Protection and Affordable Care Act of 2010.

On March 21st of 2011, Minnesota legislation elected to adopt the federal changes but for 2010 only.  Effective September 23 through December 31, 2010, the value of health insurance benefits for employee’s non-dependent children younger than the age of 27 is exempt for tax purposes in Minnesota.

What do employers need to do for 2010?  Nothing. The law specifically states employers are not required to issue corrected W-2 forms due to Minnesota’s adoption of these federal tax changes. In addition, employers are not required to amend withholding tax returns.

What do employers need to do for 2011? Because Minnesota adopted the federal changes for tax year 2010 only, the health care benefits for adult children and adoption expenses over $12,170 remain taxable.

However, until the Minnesota legislature fully addresses adoption of these provisions and all other changes to the Internal Revenue Code since March 18, 2010, the Department of Revenue will not require employers to withhold taxes from those federally exempt employer provided benefits.

Unless Minnesota law is changed, employees will be required to include those federally exempt benefits as income on their 2011 tax returns. The Department of Revenue encourages employers to share this information with affected employees so the employees can decide whether to elect additional withholding if they are concerned about being sufficiently withheld.

Stay tuned!

To visit the State of Minnesota Website for details, click here.

With Regard to Other States:

Maine: The governor signed legislation conforming to the Internal Revenue Code (IRC) effective December 31, 2010, thereby adopting conformity to the federal tax treatment and excluding the benefit value from state taxable income.

Mississippi: The Department of Revenue explained that although no guidance has been published, the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

Pennsylvania: The state conforms to the current IRC and therefore excludes the benefit value from state taxable income.

Virginia: The Department of Taxation determined that until this issue is addressed by the General Assembly, the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

West Virginia: The State Tax Department explained that the state will conform to the federal tax treatment and exclude the benefit value from state taxable income.

Five Others Recently Conformed, (including MN): Arkansas, California, Kentucky, Minnesota (2010 only), and Oregon

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

Joe’s Jottings

Tuesday, April 26th, 2011

Joe ReillyApril 26, 2011

Several industries are “notorious” for asking for referrals…insurance and car sales are the two most notable.  And yet, there’s a reason they ask…it works!!

Because Payroll Control Systems receives so many “unsolicited” referrals, we often forget to ask our most important source for referrals… you, our satisfied customers!  So, here is a shameless request; please keep us in mind when talking to colleagues, friends, or anyone who may have a need in the payroll area.  Many times, an off-handed comment can be a hint that there’s a need.  Hopefully you’ll agree, that by telling someone about us, you’re doing them a favor…we really are interested in helping them!

Telling them is the first step.  Because today’s business people have so many “irons in the fire,” they don’t always remember or have time to follow up on suggestions.  So, please call your CAM (or me), and let us know who needs our help.  Or, you can just visit the Client Referral section of our website by clicking here.  We’ll take it from there.  Because our recent customer satisfaction poll showed that 99% of our customers would recommend PCS, you know that we’ll do the right thing for your referral.

We’ll also make it worth your time… If your referral results in a new Client for PCS, when their first payroll runs with us, you’ll receive a $50 gift card to the establishment of your choice!  This is just a small token of our appreciation for taking the time to make the introduction.

As always, we appreciate your business, and look forward to continuing to serve you.  If you have any questions or comments, please call me anytime on my cell phone, 763-567-8387.

Best wishes for continued success,

Joe Reilly
Founder and CEO
Payroll Control Systems

SSA No Match Letters Are Back!

Tuesday, April 26th, 2011

Social Security NotificationsAre you ready for them?

After a break of three years, the Social Security Administration (SSA) started sending out ‘No Match’ letters to employers at the end of March. These letters let employers know if a Social Security Number (SSN) does not match the information that the SSA has in their database for that particular SSN.

A No Match letter should in no way trigger immediate termination or adverse actions against the employee.  The discrepancy needs to be carefully researched and documented before any sort of disciplinary action might be taken.

Possible Reasons for a Mismatch

  • Typo – a simple entry error was made when setting up the employee in the human resources and/or payroll system
  • Omitted information – The middle name or names, or initials, were not entered into the HR/PR system
  • Name Change – the employee was married or divorced or changed their legal name but never notified the SSA of the change
  • Reporting Errors – Incorrect information was reported during the New Hire Reporting process and was then reported to the SSA

How to Correct Incorrect Information

Before contacting the employee, verify that the information entered in your HR/PR system is correct and that it matches the employee’s paperwork, most notably the I-9. Make corrections as needed to your HR/PR system as needed.  If your review does not show any discrepancy, approach the employee and ask them to verify what information is on their Social Security card, paying special attention to not only the number, but the names and how they are spelled.  Have them verify that there is or is not a middle name or initial. Has their name changed and they did not notify the SSA? Or did they forget to show/give you a copy of the new Social Security card with the new information?

If the employee confirms that what is in your HR/PR system, then advise them to contact the SSA as soon as possible.  Ask them to report back to you the results of the inquiry.

So what should I as an Employer do to reduce the possibility of receiving a No Match letter?

  • Make certain that names are completely entered in your HR/PR system match exactly what is on the employee’s Social Security card or I-9
  • Use the SSA’s Employee Verification Service (EVS) prior to ensure accuracy (a service provided by PCS at no additional fee)
  • Remind your employees to keep you informed of name changes (do at least annually)

Resources

Links to sample no match letters:

Sample Employer Letter – One Employee
Sample Employer Letter – Multiple Employees
Employer Instructions
Sample Employee Letter
Social Security Administration

Article By:
Susan Lindsay
PCS Service Team

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.