Very often the exact impact of a new law can be open to interpretation, and the Affordable Care Act passed by Congress in March and signed into law by President Obama is no exception. Recently, the IRS issued guidance on one aspect of the new health law impacting small businesses:
Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small employers determine whether they qualify for the credit and to estimate the amount of the credit. The notice also requests public comments on issues that should be addressed in future guidance.

Responding to a number of taxpayer questions about the interaction of the credit with state-level health care tax credits and subsidies, the IRS guidance provides that the new tax credit will not be reduced by a state health care tax credit or subsidy, except in limited circumstances to prevent abuse of the credit.

In particular, an employer that receives such a state tax credit or subsidy will also receive the full federal credit based on its entire contribution so long as the federal credit does not exceed the employer’s net contribution. Approximately 20 states offer these benefits.

If you would like assistance in benefits planning in this ever-changing regulatory environment, please contact , or of REDW Benefits.

The Department of Labor has announced new rules aimed at buttressing confidence in retirement programs. As part of an annual report on the middle class, the White House unveiled plans for:

• Improving the transparency of 401(k) fees to help workers and plan sponsors make sure they are getting investment, record-keeping, and other services at a fair price.

• Encouraging plan sponsors to make unbiased investment advice available to workers, helping workers avoid common errors that undermine retirement security, while providing strong protections against conflicts of interest.

• Promoting the availability of guaranteed lifetime income products, which transform at least a portion of retirees’ savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their living standards will be eroded by investment losses or inflation.

• Reviewing and requiring clear disclosure regarding target-date funds, which automatically shift assets among a mix of stocks, bonds, and other investments over the course of an individual’s lifetime. Due to their rapidly growing popularity, these funds should be closely reviewed to help ensure that employers that offer them as part of 401(k) plans can better evaluate their suitability for their workforce and that workers have access to good choices in saving for retirement and receive clear disclosures about the risk of loss.

According to AccountingWEB, "Written comments on the investment advice proposal should be addressed to the Office of Regulations and Interpretation, Employee Benefits Security Administration, Room N-5665, U.S. Department of Labor, 200 Constitution Ave. NW, Washington, D.C. 20210, Attn: 2010 Investment Advice Proposed Rule. The public also may submit comments electronically by e-mail or through the federal e-rulemaking portal."

If you have questions about what these changes could mean for your organization, please contact us today.

Offering your employees a 401(k) retirement plan is one tactic that can be used to attract and retain top-quality employees. Of course, just offering a plan is not enough. You also have to promote and manage your fiduciary responsibilities once the plan is in place. We’ve listed some of the top mistakes that plan sponsors make with their 401(k) plans, along with a few articles that might be of interest to you:

Failing to Understand Your Fiduciary Responsibility

You or the person you select to carry out these responsibilities must comply with the standards provided under the Employee Retirement Income Security Act of 1974 (ERISA). This federal law protects private-sector pension plans. The law's standards include ensuring that you act prudently and solely in the interest of the plan's participants and beneficiaries.

Understanding fees and expenses is important in providing for the services necessary for your plan's operation. This responsibility is ongoing. After careful evaluation during the initial selection, the plan's fees and expenses should be monitored to determine whether they continue to be reasonable. While ERISA does not set a specific level of fees, it does require that fees charged to a plan be "reasonable."

Failing to Educate Plan Participants

Plan disclosure documents keep participants informed about the basics of plan operation, alert them to changes in the plan’s structure and operations, and provide them a chance to make decisions and take timely action with respect to their accounts.

Failing to Review Plans Annually

Once you have a plan in place, review it annually, quarterly or as often as needed. You'll want to ensure that your company's current investment lineup is consistent with established plan goals and objectives. The key, says Ledbetter, is to identify strengths and weaknesses of the investment program and make changes accordingly.

You might also consider forming an investment committee comprised of key staff members such as a chief financial officer or hiring someone to specifically oversee your company's 401(k).

This is only a partial list of mistakes made by plan sponsors. If you'd like to learn more about other pitfalls to avoid, please contact the REDW Benefits team to learn about the strategies you can put into place.

The University of New Mexico Anderson School of Management Foundation Board has announced that REDW Benefits principal, Carol Mayo Cochran, has been selected for induction into the 2010 Anderson School Hall of Fame.

Candidates for induction are selected for their professional success, contribution to community involvement and an ongoing commitment to continuing education. Each year the Foundation Board receives nominations for an extremely talented pool of business leaders making the selection as inductee all that more prestigious.

On behalf of the entire REDW team, we congratulate Carol for this well-deserved honor.

As we come to the end of one year and close in on the start of the next, it is important to revisit what may or may not have changed regarding cost‑of‑living adjustment dollar limitations for pension plans and other items for Tax Year 2010. For example:

The limitations that are adjusted by reference to Section 415(d) will remain unchanged for 2010. This is because the cost-of-living index for the quarter ended September 30, 2009, is less than the cost-of-living index for the quarter ended September 30, 2008, and, following the procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced limitation. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) will be $16,500 for 2010, which is the same amount as for 2009. This limitation affects elective deferrals to Section 401(k) plans and to the Federal Government’s Thrift Savings Plan, among other plans.

Effective January 1, 2010, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $195,000. For participants who separated from service before January 1, 2010, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2009, by 1.0000.

If you have any questions after reviewing this information, please contact the REDW Benefits team.