Checking Under the Hood

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How to Perform a Six-Step Maintenance Checkup on Your Retirement Plan

Does your retirement plan make curious noises when it travels over a few market bumps? Are you getting enough mileage out of your savings rate? Is your diversification strategy as energy-efficient as it should be? Performing annual maintenance on your 401(k) can help make the road to retirement as smooth as possible. Here’s a six-step checkup that can be performed in just a couple of hours over a weekend.

STEP 1: Review Your Goals and Plans

Each year you should ask yourself if you’re on track to reach your retirement goals. Part of that process is imagining (in detail) what you would like to be doing during that stage of your life. Are your goals and plans realistic? Has your thinking changed at all — and why? The American Savings Education Council (www.asec.org) has a wealth of resources to help you review and adjust your goals and plans as needed, including their “Savings Goal Calculator” and other tools that can help you determine how much money you need to save for retirement.

STEP 2: Maximize Your Contributions

If you’re not contributing the maximum possible to your plan, increase your contributions by at least 1% each year, with a general goal of eventually reaching around 15% of your salary. Try to contribute at least enough right now to get the full employer match (if offered). It’s one thing to read this and say to yourself “yes, I can definitely increase by 1%.” But it’s only going to happen if you stop everything you’re doing right now, log into your account on your recordkeeper’s website and make the change!

STEP 3: Review Your Investment Strategy

Given all the market turmoil over the past few years, including inflation and economic events beyond our control, it’s smart to ask yourself each year if your asset allocation is still appropriate. Or, if your tolerance for risk has fundamentally changed. Your plan recordkeeper likely has a risk tolerance assessment exercise you can access on their website. In addition, consider working with a financial advisor to help you determine if your investment strategy is in sync with your current personal situation.

STEP 4: Rebalance

Rebalancing is the process of adjusting your portfolio’s investments so they match your original allocation. When your portfolio gets out of balance, you may stray from your original risk comfort zone. For example, due to ongoing market volatility, your portfolio may have drifted toward either a more aggressive or conservative allocation than you are comfortable with. Rebalancing keeps your portfolio risk within your tolerance limits.

STEP 5: Check Beneficiaries

Your spouse is automatically the primary beneficiary of your 401k plan. But, if you are divorced, widowed or remarried, you should review your beneficiary designations to make sure the correct person is named. Also, if you want to name someone else (such as a child) as your primary beneficiary, and you are married, your spouse needs to sign a waiver of rights to your 401(k) benefits.

STEP 6: Check on Retirement Plan Changes

Does your retirement plan offer any new plan features, tools, or resources? What can you do to take advantage of these opportunities? Also, be sure you have a copy of the Summary Plan Description for your plan (available for free from Human Resources). The Summary Plan Description defines, in plain language, how your plan works and what its features are.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com

©2023 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

RP-840-0523 Tracking #1-05376250

Exciting Announcement: Introducing Our New Chief Investment Officer and Operations Team

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We have some thrilling news to share! Brahm Rossiter is stepping into the role of Chief Investment Officer (CIO). Brahm Rossiter will be overseeing all investment strategies and decision-making processes, ensuring the utmost level of expertise and attention to detail in managing your accounts. Brahm will be working with each team member behind the scenes. As always, Brahm is available by phone and in person.

To ensure a seamless transition and uninterrupted day-to-day operations, we’ve assembled a powerhouse team. They will be responsible for handling all administrative tasks, client inquiries, and operational aspects of your accounts. Allow us to introduce you to the members of our operations team:

Jake Taylor

Jake brings a wealth of experience in financial operations and client service. He will be a key point of contact for your account-related inquiries and will work diligently to ensure your needs are met promptly and efficiently.

Marcus Sasaki

Marcus is a seasoned professional with a strong background in investment management. He will play a crucial role in supporting the execution of investment strategies and monitoring market trends to optimize your portfolio.

Kirby Moreno

Kirby is a highly organized individual with a keen eye for detail. She will be responsible for the administrative aspects of your accounts and facilitating smooth operations.

Desiree Jacobs

Desiree is a dedicated professional with extensive experience in business operations. She will work closely with our team to ensure streamlined processes and effective communication, ultimately enhancing your overall client experience.

Rest assured, Brahm Rossiter will lead with unparalleled expertise, and our team will guide you toward financial success.

RWM Financial Group consultation
401K INVESTMENT ADVISORY SERVICES Brahm going over papers

Our team remains dedicated to understanding your unique financial goals and tailoring strategies to help you achieve them.

If you have any questions or concerns regarding this transition, or if you would like to schedule a meeting to discuss your portfolio, please do not hesitate to reach out to us. We are here to address any queries and provide you with the support you need.

We are thrilled about this positive change and the enhanced capabilities it brings to our firm. Thank you for entrusting us with your financial journey, and we look forward to continuing our partnership with you.

Addressing Common Employee Questions and Concerns about 401(k) Plans

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As an employer offering a 401(k) plan, it is important to provide your employees with the necessary information and support to help them make informed decisions about their retirement savings. In this blog, we will address common questions and concerns that employees often have regarding 401(k) plans. By proactively addressing these issues, you can promote employee engagement, boost participation rates, and enhance overall satisfaction with your retirement benefits program.

What is a 401(k) plan, and how does it work?

We’ll start by providing a clear and concise explanation of what a 401(k) plan is and how it functions. We’ll cover topics such as employee contributions, employer matching contributions, vesting schedules, investment options, and the tax advantages of participating in a 401(k) plan.

How much should I contribute to my 401(k) plan?

This section will guide employees on determining an appropriate contribution level based on their individual circumstances and financial goals. We’ll explain concepts like the power of compounding, maximizing employer matching contributions, and the potential long-term benefits of consistent contributions.

What investment options are available in a 401(k) plan?

Employees often have concerns about choosing the right investments within their 401(k) plan. We’ll provide an overview of common investment options such as mutual funds, target-date funds, and individual stocks. Additionally, we’ll emphasize the importance of diversification and the benefits of consulting with a financial advisor for personalized investment advice.

Can I access my 401(k) funds before retirement?

This section will address common questions about accessing 401(k) funds in case of financial emergencies or other unexpected circumstances. We’ll explain the rules and potential implications of early withdrawals, loans, and hardship distributions. It is crucial to educate employees about the potential impact on their long-term retirement savings and encourage them to explore alternative options before tapping into their 401(k) funds prematurely.

What happens to my 401(k) if I leave my job?

Employees often express concerns about their 401(k) funds when changing jobs. We’ll explain the available options, such as leaving the funds in the current plan, rolling them over to a new employer’s plan, or transferring them to an individual retirement account (IRA). By providing clear guidance, employees can navigate these transitions and make informed decisions regarding their retirement savings.

​​What is the difference between a traditional 401(k) and a Roth 401(k)?

Employees may have questions about the distinction between these two types of 401(k) plans. In response, explain that a traditional 401(k) allows pre-tax contributions, reducing taxable income in the year of contribution, while a Roth 401(k) allows after-tax contributions, with tax-free withdrawals during retirement. Discuss the advantages and considerations of each option to help employees determine which is more suitable for their needs.

How can I monitor and track the performance of my 401(k) investments?

Employees may express concerns about tracking the performance of their 401(k) investments. Provide guidance on accessing online portals or tools offered by the plan provider for monitoring account balances, investment performance, and contribution history. Explain the importance of regularly reviewing investment performance and making adjustments as needed to align with long-term goals.

What are the penalties for early withdrawals from a 401(k) plan?

Discuss the penalties associated with early withdrawals from a 401(k) plan. Explain that if funds are withdrawn before the age of 59 ½, they are generally subject to income tax and a 10% early withdrawal penalty. Emphasize the long-term impact of early withdrawals on retirement savings and encourage employees to explore other options, such as loans or hardship distributions, only as a last resort.

Are there any limits on annual contributions to a 401(k) plan?

Inform employees about the annual contribution limits set by the IRS. Explain that for 2023, the limit for employee elective contributions is $19,500, with an additional catch-up contribution of $6,500 for individuals aged 50 and older. Discuss the benefits of maximizing contributions up to these limits to take full advantage of the tax benefits and potential employer matching contributions.

Can I roll over funds from a previous employer’s retirement plan into my current 401(k) plan?

Explain the process of rolling over funds from a previous employer’s retirement plan into the current 401(k) plan. Discuss the benefits of consolidation, such as simplified account management and potential access to a broader range of investment options. Encourage employees to consult with their plan administrator or a financial advisor for guidance on the rollover process.

Final Notes

Addressing common employee questions and concerns about 401(k) plans is essential for fostering a sense of financial security and well-being among your workforce. By providing clear and accessible information, you empower your employees to make informed decisions about their retirement savings. Remember to encourage employees to seek professional guidance from financial advisors and periodically review their retirement strategies to ensure they stay on track towards a financially secure future.

By proactively addressing these questions and concerns, you can create a positive and supportive retirement benefits program that helps your employees achieve their long-term financial goals.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

The Inflation Reduction Act’s Impact on 401(k) Plans

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The Inflation Reduction Act (IRA) was signed into law by President Joe Biden on August 16, 2022. It addresses various important topics like healthcare, climate change, corporate taxation, and retirement plans. This blog specifically focuses on how the IRA affects 401(k) plans, providing an overview of the key provisions and offering insights for employers to ensure they comply with the new rules.

Understanding the Inflation Reduction Act:

The IRA was created to deal with the increasing inflation rates and minimize their negative impact on the economy and individuals’ financial well-being. The Act includes specific measures that directly affect retirement savings plans, such as 401(k) plans. It recognizes the importance of retirement planning, especially in an environment with rising prices.

In simpler terms, the Inflation Reduction Act was passed to address inflation’s effects and how it impacts people’s ability to save for retirement. It introduces changes to retirement plans, including 401(k) plans, to help individuals cope with inflation and secure their financial future.

Impact on 401(k) Contributions:

One notable effect of the IRA on 401(k) plans is the adjustment in contribution limits. To preserve the purchasing power of retirement savings, the legislation introduces changes that align with the effects of inflation on the economy. Typically, these changes result in an increase in contribution limits, allowing individuals to save more for retirement and protect their financial security from erosion due to inflationary pressures.

Tax Advantages and Withdrawals:

The IRA maintains the tax advantages of 401(k) plans while introducing adjustments to align with changing economic conditions. Individuals can continue to enjoy tax-deferred growth on their contributions, and the benefits of pre-tax contributions and potential tax-free growth remain intact. However, the Act may introduce changes to the tax treatment of withdrawals to strike a balance between preserving retirement savings and addressing inflationary pressures. This may include penalties for early withdrawals and the potential expansion of options such as Roth 401(k) plans, which offer tax-free withdrawals.

Additional Minimum Tax on Corporate “Book Income”:

The Act introduces an additional minimum tax of 15% on corporate “book income” for companies with income exceeding $1 billion. To determine if a company meets the “book income test,” its average annual adjusted financial statement income (AFSI) for the past three taxable years must exceed $1 billion. Corporations must exclude qualified retirement plan asset and income changes when calculating AFSI. Employer retirement plan deductions for 401(k) contributions and plan-related expenses should be subtracted, but if 401(k) assets revert back to the employer, they must be included in the AFSI calculation.

Additional Tax on Corporate Stock Repurchases:

The Act imposes a 1% excise tax on the fair market value of corporate stock repurchases that are not contributed to a 401(k) plan. When a company repurchases its stock from shareholders for cash, the excise tax applies. However, if the repurchased stock is contributed to an employer-sponsored retirement plan like a 401(k), the excise tax does not apply.

Compliance Considerations for Employers:

Employers, particularly large corporations, need to understand how to calculate “book income” and exclude relevant 401(k) plan expenses and deductions to ensure compliance with the additional minimum tax provisions. It is crucial to accurately calculate AFSI and evaluate potential tax consequences. Employers engaging in stock repurchases should be aware of the excise tax implications and carefully assess their strategies.

Financial Planning Considerations:

The IRA’s impact on 401(k) plans highlights the importance of thoughtful financial planning. Individuals should reassess their retirement savings strategies considering the adjustments to contribution limits, tax treatment, and potential penalties. Maximizing savings potential and taking advantage of tax benefits require collaboration with financial advisors to determine appropriate contribution levels aligned with long-term financial goals. Retirees must understand potential changes in withdrawal rules and engage in comprehensive retirement planning to navigate complexities and make informed choices.

Final Notes

The Inflation Reduction Act’s impact on 401(k) plans represents a significant development for retirement savings in an inflationary economic environment. By adjusting contribution limits, preserving tax advantages, and addressing withdrawal rules, the legislation seeks to protect individuals’ long-term financial security. As with any major policy change, it is vital for individuals to stay informed, evaluate their financial strategies, and seek guidance from professionals to optimize their retirement planning in light of the IRA’s provisions. By staying proactive and adaptable, individuals can navigate the evolving landscape and ensure a solid foundation for their future retirement.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Retirement Planning: Q&A For Employers

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Ah, retirement. It’s that magical time in life where you can finally kick up your feet and relax after years of hard work. But let’s face it, retirement planning can be a bit overwhelming, especially for employers who want to ensure their employees are taken care of.

Retirement planning, in a nutshell, is the art of squirreling away some of your hard-earned cash into investments that will provide financial security when you decide to call it quits. It may not sound like the most exciting thing in the world, but trust us, it’s important!

As an employer, offering retirement benefits is not only a way to attract and retain top talent, but it also shows that you care about the financial well-being of your employees. Plus, it’s a win-win situation since it can also have tax benefits for you as the employer.

So, whether you’re an employee dreaming of the day you can retire to a beach somewhere, or an employer wanting to do right by your staff, understanding retirement planning is key. Let’s dive in and learn more about retirement plans, obligations, and all the fun stuff that goes along with it!

Types of Retirement Plans

Retirement plans come in all shapes and sizes, but don’t worry, we’ll break them down for you in a fun and easy-to-understand way!

Defined Benefit Plans

First up, we have defined benefit plans. These are the granddaddy of retirement plans and have been around for ages. They’re typically offered by government entities or large corporations and provide a fixed, monthly benefit to retirees based on a formula that takes into account factors like salary and years of service.

Defined Contribution Plans

Next, we have defined contribution plans, which are a bit more common these days. These plans allow employees to contribute a portion of their paycheck into an account that is then invested in a variety of options. The two most popular defined contribution plans are the 401(k) and the IRA.

401(k) Retirement Savings Plan

The 401(k) is a retirement savings plan that is offered by employers. Employees can contribute a portion of their pre-tax income into the plan, and in some cases, employers will match a portion of those contributions. The funds in a 401(k) plan are invested in a variety of investment options, such as stocks, bonds, and mutual funds.

IRA

An IRA, or individual retirement account, is a personal retirement savings account that individuals can set up on their own. There are two types of IRAs – traditional and Roth. Traditional IRAs allow individuals to contribute pre-tax income, while Roth IRAs allow individuals to contribute after-tax income. Both types of IRAs provide tax benefits and offer a range of investment options.

Others

Last but not least, there are other retirement plans that employers may offer, such as profit-sharing plans, employee stock ownership plans, and cash balance plans. These plans are a bit more specialized, but can be a great option for some employers.

Understanding Employer Retirement Plan Obligations

Employers have certain obligations when it comes to offering retirement plans to their employees. Let’s dive into these obligations and break them down into four sections:

Eligibility and Participation

Employers must establish eligibility requirements for their retirement plans, such as age and length of service. Once an employee meets the eligibility requirements, they must be allowed to participate in the plan.

Vesting

Vesting refers to the amount of time an employee must work for an employer before they are entitled to the employer’s contributions to their retirement plan. Vesting can be immediate, where an employee is immediately entitled to all employer contributions, or it can be graded, where an employee becomes increasingly vested over time.

Contribution Limits

Contributions to retirement plans are subject to limits set by the IRS, and employers must ensure that they are adhering to these limits. Exceeding contribution limits can result in penalties for both the employer and employee, so it’s important to stay on top of this.

Fiduciary Responsibilities

Employers who offer retirement plans are considered fiduciaries and have a legal obligation to act in the best interests of plan participants. This means employers must carefully choose investment options, monitor plan fees, and provide regular communication about the plan to participants.

By understanding these obligations, employers can ensure they are providing their employees with a valuable benefit while avoiding any potential legal issues. It may seem like a lot to handle, but with proper planning and management, offering a retirement plan can be a win-win for both employers and employees.

Common Retirement Planning Questions for Employers: What Employers Need to Know

As an employer, you play a key role in helping your employees plan for retirement. Here are some common retirement planning questions that employers should be aware of.

What retirement plans should I offer my employees?

The retirement plans you offer will depend on your business and budget. Common options include 401(k) plans, pension plans, and SIMPLE IRAs. It’s important to do your research and choose the plan(s) that work best for your employees.

How do I encourage my employees to save for retirement?

One way to encourage retirement savings is to offer an employer match. This means that you contribute a certain percentage of your employee’s salary to their retirement plan, which can incentivize them to save more. You can also provide education and resources about retirement planning to help your employees make informed decisions.

What are my obligations as a retirement plan sponsor?

Employers who offer retirement plans are considered plan sponsors and have certain obligations under ERISA (Employee Retirement Income Security Act). These obligations include providing plan information to employees, adhering to contribution limits, and acting in the best interests of plan participants.

How do I monitor the performance of our retirement plan?

It’s important to regularly review and evaluate the performance of your retirement plan. This includes monitoring fees, investment options, and participation rates. You can work with a third-party administrator or investment advisor to help with this process.

What happens if our retirement plan is not compliant?

If your retirement plan is not compliant, it can result in penalties and legal issues. It’s important to stay up-to-date on any regulatory changes and to work with a professional to ensure your plan is in compliance.

How do I handle employee turnover and their retirement accounts?

When an employee leaves your company, they may have vested funds in their retirement account. As an employer, it’s important to have a process in place for handling these funds, such as allowing the employee to keep the funds in the plan, rolling them over into a new retirement account, or distributing the funds.

How can I help employees who are behind on retirement savings?

Some employees may be behind on their retirement savings, which can lead to financial stress and uncertainty. As an employer, you can provide education and resources on catch-up contributions, encourage them to meet with a financial advisor, and explore offering financial wellness programs.

Can I make changes to my retirement plan?

Yes, employers can make changes to their retirement plan, but it’s important to follow certain guidelines and procedures. Changes should be communicated to employees in advance and should not violate any legal requirements or affect employees’ accrued benefits.

Should I offer a Roth option in my retirement plan?

A Roth option allows employees to contribute after-tax dollars to their retirement account, which can be withdrawn tax-free in retirement. It’s a good option for employees who expect to be in a higher tax bracket in retirement. Employers should consider whether a Roth option would benefit their employees and be feasible for the business.

By understanding these common retirement planning questions, employers can help their employees save for their future while also meeting their obligations as plan sponsors. It’s important to stay informed and seek professional guidance when needed to ensure your retirement plan is a success.

Learn More About RWM

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

How Not to Get Sued 101: Fiduciary Responsibility For Business Owners

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As a business owner, you’re the captain of your ship, and fiduciary responsibility is like the lighthouse that guides you through the treacherous waters of legal liabilities.

Just like how a captain must always act in the best interest of their ship and crew, you have a duty to always act in the best interest of your company and its stakeholders.

If you fail to uphold your fiduciary responsibility, you could face legal action and criminal charges. That’s like running your ship aground on a reef – not a good situation!

So, make sure you understand and practice fiduciary responsibility like a seasoned sailor navigating the high seas. It’ll keep your business sailing smoothly and your stakeholders happy!

In this blog, we’ll discuss some of the key concepts related to fiduciary responsibility and provide some tips on managing it effectively. By the end, you should have a solid understanding of the basics of fiduciary responsibility and how to navigate it in the world of business. So let’s get started!

What is Fiduciary Responsibility for Business Owners?

A fiduciary is someone who has been given the authority to act on behalf of another person or entity. This person or entity has a legal obligation to act in the best interests of the person or entity they represent and to avoid any situation where their personal interests might conflict with the interests of the person or entity they represent. They must make decisions with great care, loyalty, and honesty when acting on behalf of the person or entity they represent.

In simple terms, a fiduciary is a person or entity that is trusted to act in someone else’s best interests.

The Three Main Duties of Fiduciary Responsibility

Duty of Care: The fiduciary has a duty to exercise reasonable care, skill, and diligence when managing their client’s finances and investments. This includes developing an investment strategy that aligns with the client’s goals and risk tolerance, selecting appropriate investments, monitoring performance, and making adjustments as needed. 

The fiduciary must also be aware of any potential conflicts of interest and take steps to avoid them. This means disclosing any conflicts of interest and ensuring that all investment decisions are made solely in the client’s best interests.

Duty of Loyalty: The fiduciary must remain loyal to their client, always acting in their best interests. This means putting the client’s interests before their own and avoiding any actions that could benefit themselves or others at the expense of the client. For example, a fiduciary cannot recommend investments that provide them with a higher commission or fees if those investments are not in the client’s best interests.

Duty of Good Faith: The fiduciary must act with honesty, integrity, and transparency when making decisions on behalf of their client. This means disclosing all material information that could affect investment decisions and avoiding any misrepresentations or omissions of material facts. The fiduciary must also act in a timely manner, keeping the client informed of any changes or updates. Finally, the fiduciary must be accountable for their actions, keeping accurate records and promptly addressing any concerns or complaints raised by the client.

Overall, these duties of fiduciary responsibility are designed to ensure that the fiduciary always acts in the client’s best interests, with care, skill, loyalty, and good faith. By following these duties, the fiduciary can help their client achieve their investment goals and build trust and confidence in their relationship.

How Can Business Owners Practice Fiduciary Responsibility?

To practice fiduciary responsibility as a business owner, it is important to prioritize the best interests of the company and its stakeholders. This involves maintaining high ethical standards and making decisions that align with the company’s mission and values.

One way to do this is by minimizing financial risks through responsible financial management. This includes being mindful of expenses, budgeting effectively, and seeking out potential opportunities for growth while weighing the associated risks.

Transparency is also key to practicing fiduciary responsibility. Business owners should make financial information readily available to stakeholders, including employees, investors, and customers. This includes being transparent about decision-making processes, financial reporting, and any potential conflicts of interest.

To protect the company from legal liabilities, business owners should consult with legal and financial experts when making important decisions. They should also educate themselves on relevant laws and regulations that apply to their industry.

In addition to personal responsibilities, business owners should ensure that their employees understand their own fiduciary duties and have the necessary resources to make informed decisions. This can include training programs, access to financial experts, and clear guidelines on how to handle financial matters.

By prioritizing fiduciary responsibility, business owners can build trust with stakeholders, ensure the long-term success of their company, and contribute to a healthier business ecosystem.

In Summary

Overall, understanding and practicing fiduciary responsibility as a business owner is of the utmost importance. Fiduciary responsibility is a legal obligation that must be taken seriously, and a breach of fiduciary responsibility can lead to legal action. By understanding and practicing the duties of care, loyalty, and good faith, business owners can protect themselves and their businesses from potential legal action.

There are many moving parts when designing, implementing, and administering a retirement plan. However, when you focus on the key areas in your initial design or partner with a professional specializing in retirement plans and administration, you can strive to avoid the common challenges and unnecessary costs while helping your employees succeed.

At RWM Financial Group, we help commercial businesses and governmental agencies design and oversee well-managed retirement plans in non-tribal and tribal organizations. Learn more about building a custom, cost-effective strategy that is compliant and promotes success for you and your employees.

This information is not intended as authoritative guidance or tax or legal advice. You should consult your attorney or tax advisor for guidance on your specific situation. In no way does the advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Managing Tribal Trusts: A Comprehensive Guide

Tribal trusts are a vital component of many Native American communities, providing important benefits to tribal members, such as healthcare, education, and housing. These trusts are often managed by employers who have a fiduciary responsibility to act in the best interests of plan participants. However, managing tribal trusts can be complex, with unique legal and regulatory requirements that must be met. In this blog post, we will provide a comprehensive guide for employers and plan participants on how to effectively manage tribal trusts. 

We’ll discuss the legal and regulatory framework for tribal trusts, offer best practices for managing these trusts, and highlight the challenges that employers and plan participants may face. Whether you’re an employer responsible for managing a tribal trust or a plan participant looking to maximize the benefits of the trust, this guide will provide valuable insights and practical advice to help you navigate this important area of tribal governance.

Understanding Tribal Trusts

Tribal trusts are specialized types of trusts established by Native American tribes for the benefit of their members. These trusts are created under federal law and are subject to unique legal and regulatory requirements. There are several types of tribal trusts, including land and resource trusts, education trusts, and health and welfare trusts. Tribal trusts are administered by tribal governments, with oversight from federal agencies. 

The creation and administration of tribal trusts must follow specific legal and procedural requirements, including consultation with affected parties and compliance with relevant laws and regulations. Understanding these legal and administrative requirements is crucial for effectively managing tribal trusts.

Responsibilities of Employers and Plan Participants

Employers and plan participants both have important responsibilities in managing tribal trusts.

Employer responsibilities for managing tribal trusts include ensuring compliance with legal and regulatory requirements, monitoring the trust’s performance, and providing plan participants with information about the trust. Employers must also establish clear communication channels with plan participants to ensure that they are aware of the benefits available to them and understand how the trust operates.

Plan participant responsibilities for managing tribal trusts include understanding the benefits available to them, keeping their contact and beneficiary information up to date, and reporting any changes in their circumstances that may affect their eligibility for benefits. Plan participants should also communicate any questions or concerns they have about the trust to their employer or the trust administrator.

Effective communication between employers and plan participants is crucial for ensuring that the trust is managed effectively. Employers should provide regular updates to plan participants about the trust’s performance, any changes to the benefits available, and any legal or regulatory requirements that may affect the trust. Plan participants, in turn, should provide their employers with accurate and up-to-date information about their eligibility for benefits and any changes in their circumstances that may affect their benefits.

How to Manage Tribal Trusts: Best Practices

Understand Your Fiduciary Responsibility

Employers who manage 401(k) plans have a fiduciary responsibility to act in the best interest of the plan participants. This means that employers must carefully select and monitor investment options, ensure that fees are reasonable, and provide participants with clear and accurate information about the plan.

Select Appropriate Investment Options

Employers must carefully select investment options for their 401(k) plans. This includes considering the risk profile of the plan participants and selecting a mix of investment options that is appropriate for their needs. Employers should also regularly review and monitor the performance of the investment options and make changes as needed.

Monitor Fees and Expenses

Employers must ensure that the fees and expenses associated with their 401(k) plans are reasonable. This includes reviewing the fees charged by investment providers and recordkeepers and negotiating lower fees when possible. Employers should also provide plan participants with clear and accurate information about the fees associated with the plan.

Provide Participant Education and Communication

Employers must provide plan participants with clear and accurate information about their 401(k) plans. This includes information about investment options, fees and expenses, and plan rules and regulations. Employers should also provide regular education and communication to help participants make informed decisions about their retirement savings.

Monitor Plan Performance

Employers must monitor the performance of their 401(k) plans to ensure that they are meeting the needs of their plan participants. This includes regularly reviewing plan data and participant feedback and making changes as needed.

Encourage Participation

Employers should encourage participation in their 401(k) plans to ensure that plan participants are adequately saving for retirement. This can include offering employer contributions, automatic enrollment, and education and communication campaigns.

Challenges in Managing Tribal Trusts

Managing tribal trusts can pose several challenges, including legal and regulatory challenges, communication challenges, and financial management challenges.

Legal and regulatory challenges may include complying with complex federal laws and regulations governing tribal trusts, as well as any state or local laws that may apply. There may also be challenges related to legal disputes or changes in legal requirements that can affect the trust’s operations.

Communication challenges may arise due to the need to communicate complex legal and financial information to plan participants, who may have varying levels of familiarity with the trust and its operations. Effective communication can be challenging, particularly if plan participants are spread out across a large geographic area or speak different languages.

Financial management challenges may include ensuring that the trust is properly funded and managed to meet the needs of plan participants over the long term. There may be challenges related to investment management, risk management, and financial reporting.

Addressing these challenges requires a proactive and collaborative approach by employers, plan participants, and trust administrators. By working together, stakeholders can identify and address potential issues before they become more serious problems and ensure that the trust continues to provide important benefits to tribal members.

Learn More About Our Tribal Services

At RWM Financial Group, we are committed to upholding independence, excellence, and supporting tribal sovereignty to help achieve your tribe’s financial goals. Our extensive range of services include but are not limited to:

  •  Tribal Council Retirement Plans, 401(k) Investment Management (both ERISA and Non-ERISA)
  • Children’s Trust Investment Management
  •  Fiduciary Investment Management, Discretionary and Non-Discretionary Investment Management
  • Investment Monitoring
  •  And,  Detailed Reporting

We also provide services such as Investment Committee Education, Tribal Member Financial Education, Third-Party Administrator assistance and Provider Liaison, 401(k) Provider Request for Proposal, Participant Education, and Financial Wellness Program, Onsite Meetings, and Retirement Plan Enrollment Assistance. Our team is dedicated to providing exceptional service and building long-lasting relationships with our clients.

The purpose of RWM Financial Group is to promote plan success via our knowledgeable team and a robust set of tools. By working with us, you can help put your employees on the path working toward a secure retirement. Learn more about our services, here.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Sit, Stay, Retire, Rollover: Let’s Talk Retirement Plan Rollover Options

Retirement planning is an essential aspect of every working person’s financial life. A retirement plan rollover is a process of transferring funds from a qualified retirement plan to another. Many individuals consider rolling over their retirement plan when leaving an employer, retiring, or for other reasons.

In this blog, we’ll answer some of the most frequently asked questions about retirement plan rollovers.

What is a Retirement Plan Rollover?

A retirement plan rollover is a process of transferring funds from a qualified retirement plan, such as a 401k, to another retirement plan or an individual retirement account (IRA). The funds are transferred without any tax implications, provided the transfer is done correctly.

Why Rollover?

By rolling over, you can defer taxes on the distribution until you withdraw it from the new plan, allowing your savings to continue growing tax-free. If you choose not to roll over the distribution, it will be subject to taxation (excluding qualified Roth distributions and previously taxed amounts), and you may also be liable for additional taxes unless you qualify for one of the exceptions to the 10% early distribution penalty. Additionally, reasons for rolling over can include:

More Control over Investment Options: 

When you roll over your retirement plan, you have more control over your investment options. In many cases, an IRA provides more investment choices than a 401k.

Simplify Your Finances: 

Consolidating all your retirement accounts in one place can make it easier to manage your finances and track your investments.

Lower Fees: 

401k plans can charge higher fees than IRAs. Rolling over your 401k to an IRA can reduce your investment fees.

Easier to Access Funds:

 In some cases, accessing funds in an IRA may be easier than accessing funds in a 401k.

Rollover Options:

You generally have four options when you leave a job and have a 401k account:

  • Leave the money in your former employer’s 401k plan
  • Roll the money over to a new employer’s 401k plan
  • Roll the money over to an IRA
  • Cash out the 401k

Let’s take a look at each of these options.

Leave the Money in your Former Employer’s 401k Plan

Leaving the money in your former employer’s 401k plan may be a viable option for individuals who are satisfied with the investment options and fees associated with their existing plan. This option allows you to keep your retirement savings in a familiar place, and you can still keep an eye on your account balance through the plan’s online portal or periodic statements.

Another advantage of leaving your money in your former employer’s 401k plan is that it can be easier to manage and track your retirement savings. By keeping all of your retirement savings in one place, you can get a better sense of how much you have saved and how much more you need to save to meet your retirement goals.

However, keep in mind that you may not be able to contribute to the account once you leave the company, and your investment choices may be limited to the options provided by your former employer’s plan. Additionally, your former employer may charge administrative fees for maintaining your account. Be sure to check with the plan administrator about any associated fees and investment options before deciding to leave your money in the plan.

Roll the Money Over to a New Employer’s 401k Plan

Rolling the money over to a new employer’s 401k plan is an option that can allow you to continue saving for retirement while consolidating all of your retirement savings into one account. This option may be suitable if you have found a new job with an employer that offers a 401k plan and you are satisfied with the investment options and fees associated with the plan.

One advantage of rolling over your 401k to a new employer’s plan is that it can be easier to manage and track your retirement savings. By keeping all of your retirement savings in one place, you can get a better sense of how much you have saved and how much more you need to save to meet your retirement goals.

Another benefit of rolling over your 401k to a new employer’s plan is that you may have access to different investment options or lower fees, which can potentially help your retirement savings grow faster. Additionally, some employers offer matching contributions to their employees’ 401k plans, which can help boost your retirement savings.

However, it is essential to review the investment options, fees, and matching contribution rules of the new plan before deciding to roll over your 401k. Some plans may have higher fees or limited investment options, which can negatively impact your retirement savings. Additionally, rolling over your 401k may take time to process, which could leave your retirement savings temporarily in limbo.

Rolling Over into an Individual Retirement Account (IRA)

Rolling the money over to an Individual Retirement Account (IRA) is another option when leaving a job and having a 401k account. This option can offer more control over your retirement savings by providing access to a broader range of investment options than those offered by a 401k plan.

One advantage of rolling over your 401k to an IRA is the potential for lower fees. Some 401k plans charge high fees for administration and management, which can eat into your retirement savings. Rolling over your 401k to an IRA can potentially reduce these fees, which can help your retirement savings grow faster.

Another benefit of rolling over your 401k to an IRA is the potential for increased investment flexibility. An IRA can offer access to a broader range of investment options, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs), which can help you diversify your portfolio and potentially earn higher returns.

However, it is essential to note that rolling over your 401k to an IRA may also have disadvantages. For example, you may lose the ability to borrow against your retirement savings, as IRAs do not typically offer loans. Additionally, some IRAs may charge fees for account maintenance or investment management, which can also impact your retirement savings.

Before deciding to roll over your 401k to an IRA, it is crucial to review the investment options, fees, and potential tax implications of the IRA. Additionally, it is essential to consider your retirement goals and investment strategy before making any decisions about your retirement savings.

Cash out the 401k

While cashing out your 401k may seem like a tempting option when leaving a job, it is generally not recommended. Cashing out your 401k means you will receive the funds as a lump sum payment, but you will also be subject to taxes and penalties.

Firstly, any funds you withdraw from your 401k account will be subject to ordinary income taxes. This means that you will have to pay taxes on the full amount of your withdrawal, which could be a significant tax bill.

Additionally, if you are under the age of 59 ½, you will also be subject to a 10% early withdrawal penalty on the amount you withdraw. This penalty is in addition to any taxes you may owe and can significantly reduce the amount of money you receive from your 401k account.

Cashing out your 401k also means you will be losing out on potential future growth of your retirement savings. If you withdraw your funds now, you will no longer have the opportunity to earn investment returns on that money in the future.

Finally, cashing out your 401k may also have long-term consequences for your retirement savings. Withdrawing a large sum of money from your retirement savings early can significantly impact the amount of money you have available for retirement in the future.

Overall, cashing out your 401k should be a last resort option when leaving a job. It is essential to consider the potential tax implications, penalties, and long-term consequences before making any decisions about your retirement savings.

How Long Do You Have to Move Your 401k after Leaving a Job?

If you decide to roll over the money, you typically have 60 days to complete the rollover. However, it’s usually best to complete the rollover as soon as possible to avoid potential tax implications or penalties.

Learn More About RWM

Contact RWM today to review your existing 401k or talk through a plan of action to offer retirement savings to your employees. 

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does the advisor assure that, by using the information provided, the plan sponsor will be in compliance with ERISA regulations. 

Tribal Council Retirement Plans: What You Need to Know

Tribal council retirement plans are a crucial aspect of the compensation and benefits package that tribal governments offer their employees. These retirement plans help ensure that employees are financially confident after they retire and provide a sense of stability to both the employee and the tribe.

Tribal governments, as sovereign nations, have a unique relationship with the federal government, which has implications for the types of retirement plans they can offer their employees. 

In this blog, we will discuss the importance of tribal council retirement plans, the impact of the Pension Protection Act of 2006 on these plans, and how tribal governments navigate federal regulations to provide their employees with comprehensive retirement benefits. Let’s dive in!

Tribal Retirement Plans vs Non-tribal Retirement Plans: What is the Difference?

When it comes to retirement plans, tribal governments have unique considerations and challenges that differ from those faced by non-tribal employers. Tribal governments, as sovereign nations, have a special relationship with the federal government, which impacts the types of retirement plans they can offer their employees.

Let’s discuss some of these differences between tribal and non-tribal retirement plans and how these differences can prove advantageous to providers.

Compliance with the Employee Retirement Income Security Act (ERISA)

One notable difference is that tribal governments are not required to comply with the Employee Retirement Income Security Act (ERISA), a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans. Instead, they may choose to offer their employees non-ERISA plans that are subject to less stringent regulations. 

However, the tribal retirement plans must be government plans in order to not be subject to the requirements of ERISA. 

According to the IRS, “A tribe may be eligible for a 401(k) or 403(b) governmental plan…. Whether the plan qualifies will depend on the facts and circumstances at hand. If a plan does not qualify as a governmental plan, then it would be presumably non-governmental and subject to the requirements of ERISA.”

What Does the Term “Government Plan” Mean Exactly?

The IRS states, “Prior to 2006, a ‘governmental plan,’ as defined in IRC Section 414(d), included a plan established and maintained for its employees by the U.S. Government, a State government or political subdivision thereof, or by any agency or instrumentality of the foregoing but did not include plans established and maintained by an Indian tribe or a tribal subdivision.

As amended by the Pension Protection Act of 2006 (PPA), the definition of ‘governmental plan’ in IRC Section 414(d) now includes a plan established and maintained by an Indian tribal government, a tribal subdivision, or an agency or instrumentality of either, and all of the participants of which are employees of such entity substantially all of whose services are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function).”

How Can Non-ERISA Plans be Advantageous for Employers?

Non-ERISA plans can be advantageous for employers because they are subject to fewer regulatory requirements than ERISA plans. This can lead to lower administrative costs and greater flexibility in plan design.

Non-ERISA plans can also provide greater autonomy for the employer in terms of plan management and decision-making. Additionally, non-ERISA plans may be exempt from certain taxes and fees that are associated with ERISA plans. 

Qualifying Governmental Plans for Indian Tribal Governments

Tribes may be eligible for a 401(k) or 403(b) governmental plan, subject to certain requirements and limitations. To qualify as a governmental plan, the plan must meet specific criteria outlined in Section 414(d) of the Internal Revenue Code.

 A tribe may decide to maintain two separate plans.

Separate Retirement Plans

Another difference is that tribal governments may offer separate retirement plans for their commercial and government employees, while non-tribal employers are typically required to offer the same retirement plan to all eligible employees. This is due to the fact that tribal commercial entities are often separate from the government and have their own unique legal considerations.

However, it’s important to note that tribal governments are still subject to federal regulations, such as the Pension Protection Act of 2006, which has implications for the types of retirement plans they can offer their employees. Additionally, tribal governments are encouraged to file Form 5500 for their retirement plans to ensure compliance and avoid potential penalties.

Multiple Plans

One unique aspect of tribal council retirement plans is the defined benefit (DB) plan for elected officials. Elected tribal council members do not earn Social Security benefits during their term of service, and the DB plan was created to address this issue. Tribes want to ensure that their plans are well-funded and promote the social and financial well-being of their members.

Challenges and Variations

Tribes face challenges in complying with IRS regulations, including the complexity of tribal governance and the unique functions of tribal governments. Each tribe does business differently, with some doing business by consensus while others delegate decisions to a select few members. To address these challenges, tribes need a team that understands federal law, state law, and tribal law.

Summary

Understanding tribal council retirement plans is essential for both tribal governments and employees. The Pension Protection Act of 2006 and ERISA regulations have a significant impact on the design and administration of tribal employee benefit plans. 

Tribal governments must balance compliance with federal law with their inherent sovereignty to govern themselves and their affairs. Providing retirement benefits to tribal council members and other government employees presents unique challenges, but tribes can overcome these challenges with the right team and expertise.

Learn More About Our Tribal Services

At RWM Financial Group, we are committed to upholding independence, excellence, and supporting tribal sovereignty to help achieve your tribe’s financial goals. Our extensive range of services include but are not limited to:

  •  Tribal Council Retirement Plans, 401(k) Investment Management (both ERISA and Non-ERISA)
  • Children’s Trust Investment Management
  •  Fiduciary Investment Management, Discretionary and Non-Discretionary Investment Management
  • Investment Monitoring
  •  And,  Detailed Reporting

We also provide services such as Investment Committee Education, Tribal Member Financial Education, Third-Party Administrator and Provider Liaison, 401(k) Provider Request for Proposal, Participant Education, and Financial Wellness Program, Onsite Meetings, and Retirement Plan Enrollment Assistance. Our team is dedicated to providing exceptional service and building long-lasting relationships with our clients.
The purpose of RWM Financial Group is to promote plan success via our knowledgeable team and a robust set of tools. By working with us, you can help put your employees on the path working toward a confident retirement. Learn more about our services, here.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.

Administering a 401(k) Plan: Who Does What?

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Managing a workplace retirement plan is a team effort. Everyone needs to understand their roles and responsibilities to ensure the retirement goals of all employees.

The key players in administering a 401(k) or similar employer-sponsored plan include:

  • The plan sponsor, who appoints an officer or employee of the company as the named fiduciary (plan administrator).
  • The plan administrator, who may outsource certain tasks to service providers, but still retains ultimate responsibility for any outsourced activities.
  • The plan participants, who play a key role in the administration of the plan.
  • Service providers and regulators, who have specific responsibilities related to the plan.

Read on to learn more about how this team functions and how each member plays an important role in ensuring the success of the 401(k) plan.

The Plan Sponsor (The Employer)

The plan sponsor has a legal obligation to act as a fiduciary. This means they must act in the best interest of the plan’s participants, and make informed decisions. 

One of the key responsibilities of the plan sponsor is to conduct regular audits of the plan. This includes reviewing the plan’s financial statements, ensuring compliance with legal and regulatory requirements, and monitoring the performance of the plan’s service providers.

The plan sponsor should also have a process in place for selecting and monitoring service providers, such as investment advisers or recordkeepers. This includes conducting due diligence, reviewing contracts, and monitoring performance on an ongoing basis.

In addition, the plan sponsor should verify the plan has adequate insurance coverage and that all necessary documents, such as the summary plan description and trust agreement, are up to date and in compliance with applicable laws.

It’s important for the plan sponsor to keep themselves informed about the current laws and regulations and make sure that the plan is in compliance. They should also take steps to educate their employees about the plan and the responsibilities of all parties involved.

Named Fiduciary/Plan Administrator

The Named Fiduciary/Plan Administrator is the person chosen by the employer to manage and run the 401(k) plan. 

As a fiduciary, they have a legal duty to act in the best interest of the plan’s participants and make informed decisions. This includes choosing and monitoring service providers like investment advisers or recordkeepers and making sure the plan is following all laws and regulations.

The Named Fiduciary/Plan Administrator’s duties may also include:

  • Filing annual reports and other paperwork
  • Communicating with plan participants and giving them information about the plan
  • Approving transactions and investments
  • Checking financial statements and other reports
  • Keeping the plan’s records and documents
  • Working with service providers to make sure the plan is being run correctly
  • Communicating With the employer, service providers, and participants to make sure the plan is working in their best interest.

Plan Participants

401(k) plan participants have certain rights and responsibilities related to the plan, including the right to contribute, receive information, and direct the investment of their contributions.

Participants can choose how much to contribute, subject to any limitations established by the plan sponsor. They also have the right to change their contribution amount at any time and to direct the investment of their contributions among the options offered under the plan.

401(k) plan participants also have the right to receive certain information about the plan, including the summary plan description,  financial statements, and information about investment options. They also have the right to file a complaint or appeal if they believe their rights under the plan have been violated.

It’s important for 401(k) plan participants to communicate with the plan sponsor and administrator to stay informed about their rights and responsibilities.

Service Providers and Regulators

Service providers and regulators play an important role in the administration of a 401(k) plan. Service providers are companies or organizations that provide various services to the plan, such as investment management, recordkeeping, and trustee services. Regulators are government agencies that oversee and enforce compliance with laws and regulations governing 401(k) plans.

Service providers may include:

  • Investment managers, who manage the plan’s investment options and provide investment advice to the plan sponsor and plan administrator;
  • Recordkeepers, who maintain records of the plan’s assets, transactions and participant account balances;
  • Trustees, who hold the plan’s assets in trust and are responsible for safekeeping the assets;

Learn More About 401(k)Plans

Employers should create an effective 401k communication plan that helps employees make informative decisions for retirement.

Contact RWM today to review your existing 401k or talk through a plan of action to offer retirement savings to your employees. 

This information was developed as a general guide to educate plan sponsors but is not intended as authoritative guidance or tax or legal advice.  Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.  In no way does the advisor assure that, by using the information provided, the plan sponsor will be in compliance with ERISA regulations.