Subject: The Importance of Cybersecurity for Retirement Plans

Subject: The Importance of Cybersecurity for Retirement Plans

Cybersecurity should never be an afterthought, but sometimes it is not taken seriously enough. With the ever-increasing risk of cyber-attacks, it is imperative that every company and every employee take threats extremely serious.  PWC’s 2018 Global State of Information Security survey found that cyber attacks have been growing quickly and will continue to increase. With the prevalence of attacks it is imperative that companies ensure they have Cybersecurity processes in place.

Cybersecurity processes are put in place to protect both the individual user and companies as a whole from hackers, cyber criminals, and hacktivists, among others. Not only does a lack of cybersecurity in an organization affect the individual whose personable identifiable information (PII) may have been compromised; the average cost of a data breach to an organization is $6.5 million.

The law governing cybersecurity is developing and is currently a patchwork of state and federal regulations. There is no comprehensive federal law governing cybersecurity.  However, there are many established state and federal laws that govern the financial industry’s use of financial information, as well as laws regarding personable identifiable information, giving TPA’s ample inspiration for best practices to implement and stay ahead of data breaches. TPA’s should ensure protections such as:

  • Technology tools and measures to prevent and detect attacks and data breaches.
  • Detailed processes and procedures to follow when sharing benefits plan and personable identifiable information.
  • Proper authentication processes to ensure everyone accessing information is verified.

With the growing risk of cyber-attacks, we at EJReynolds take client privacy very seriously. In our efforts to protect the financial information provided by our clients and entrusted to our employees, EJReynolds, Inc. offers a Cybersecurity Commitment to give you the comfort and peace of mind when working with us.

Our Cybersecurity Commitment stems from the core principles of trust, integrity and ethics: We collect only client information that is pertinent to the services provided by our team. Thus, we have implemented security standards and processes including physical, electronic and procedural safeguards to ensure that access to client information is limited only to select employees who may need it to do their jobs.

  • Secure file sharing links put in place to provide a safe & secure way to share sensitive information online.
  • Advanced Firewall Security system protects computer networks from being attacked online by hackers, worms, viruses, etc.
  • Use of Advanced Threat Protection (ATP), an industry leading threat protection network used internally to protect from malicious attacks.
  • Two-factor authentication, 2FA, requires the user to have two out of three types of credentials before being able to access an account.

If you have any questions about our services and/or how we protect your information please feel free to contact us.

New 2019 IRS Retirement Plan Limits Announced

The IRS on Thursday released new contribution limits.  Below you will find a complete table with the new limits, important deadlines to keep in mind and an outline for the most commonly applied limits.

We have outlined the most commonly applied limits for your reference.

Maximum Defined Contribution Annual Additions Limit: 

In a Defined Contribution Plan, which includes Profit Sharing and 401(k) Plans, the Internal Revenue Code sets limits on contributions made to a participant’s account. The Code uses the term “annual additions” which represents both employee and employer contributions as well as reallocated forfeitures. Effective January 1, 2019, the annual dollar limit for defined contribution plans increases to the lesser of 100% of compensation or $56,000.

Maximum Defined Benefit Limit: 

In a Defined Benefit Pension Plan, the Internal Revenue Code sets limits on the ultimate benefit that may be funded for at retirement. Effective January 1, 2019, the annual dollar benefit under a defined benefit pension plan increases to the lesser of 100% of compensation or $225,000

Annual Compensation Limit:

Effective January 1, 2019, the annual compensation limit increases to $280,000Compensation in excess of the limit will be disregarded for all computation purposes.

Key Employee defined for Top Heavy determination: 

  1. A 5% owner, without regard to compensation, or
  2. 1% owner whose annual compensation is over $150,000, or
  3. Officers with annual compensation in excess of $180,000.

Highly Compensated Employee (HCE) defined for 401(k) / 401(m) testing:

  1. A 5% owner of an Employer or an Affiliate in the current or the immediately preceding plan year, or
  2. Any employee earning more than $120,000in 2018 ($125,000 for 2019)
  3. Constructive ownership rules apply attributing ownership to spouses and lineal ascendants and descendants (parents, grandparents, children and grandchildren) of the owner in both of the above employee definitions.

Maximum Limit on 401(k) Elective Deferral Contributions:

A participant’s elective deferral contributions under all 401(k) plans in which he or she participates during any taxable year remains at $19,000 for the 2019 Calendar Year. 401(k) plans may permit participants who have reached age 50 by the end of the plan year to make annual catch-up contributions once the annual dollar limit or a plan-imposed limit on elective deferrals has been reached.  For calendar year 2019, the limit remains at $6,000.

Maximum Limit on SIMPLE 401(k) or SIMPLE IRA Deferral Contributions:

A participant’s elective deferral contributions under a SIMPLE 401(k) plan or SIMPLE IRA account in which he or she participates during the year remains at $13,000 for the 2019 Calendar Year. Participants who have reached age 50 by the end of the plan year to make annual catch-up contributions once the annual dollar limit or a plan-imposed limit on elective deferrals has been reached.  For the calendar year 2019, the limit remains at $3,000.

Taxable Wage Base:

The Taxable Wage Base for 2019 increases to $132,900.

Please call us with any questions you may have. To print out the 2019 plan limit EJReynolds report, click here.

New Rules for Hardship Distributions in 401(k) Plans

Hardship Distribution Rules Relaxed

The Bipartisan Budget Act of 2018 liberalized the rules applicable for hardship distributions in 401(k) plans. These changes impact the “safe harbor” hardship distribution rules (the ones most commonly used in plans) and will generally become effective for plan years beginning after December 31, 2018.

To assist plan sponsors with implementing these changes, the IRS issued proposed regulations in November 2018, and it is anticipated those regulations will be finalized in early 2019.

What is changing?

In general, the new rules make it easier for participants to qualify for hardship distributions, expand the sources available for such distributions, and remove the 6-month deferral suspension period following a hardship distribution. They also make it easier on plan sponsors by simplifying the substantiation process.

What qualifies for a hardship distribution under the new rules?

Under the existing rules, hardship distributions may only be made from a participant’s 401(k) and/or Roth account for the following:

  1. Unreimbursed, tax-deductible medical expenses (without regard to the deduction limitation);
  2. Certain costs associated with the purchase of a participant’s principal residence;
  3. Post-secondary educational expenses for a participant, his or her spouse, children or dependents (for the next 12 months);
  4. Funeral expenses for a participant’s spouse, parents, children or dependents;
  5. Expenses necessary to repair damage to a participant’s principal residence incurred as a result of a casualty (tax-deductible loss); and
  6. Amounts necessary to prevent foreclosure or eviction from a participant’s principal residence.

Under the new rules, the conditions under which a participant can obtain a hardship distribution have been expanded to include the following:

  1. Expenses incurred as a result of a natural disaster in a federally-declared disaster area; and
  2. Medical, post-secondary educational, and funeral expenses for a participant’s primary beneficiary.

Click here for additional information on the New Rules for Hardship Distributions.

Note: Plans are not required to permit hardship distributions; this is an optional plan feature that must be in the Plan Document. Recent rulings by the IRS have indicated that the plan may operate in compliance adopting these changes prior to formally adopting a Plan Amendment. EJReynolds, Inc. will be relating these options to our clients in the coming months, and alert you to any changes made by made by our mutual clients.

Feel free to call or email us with any questions you may have.