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Cabana Retirement Solutions: 2019 Savings Limit Increased and Hardship Rule Changes Proposed

6 years ago

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It is with great excitement that in 2018 we expanded our list of services to include group retirement plan consulting and fiduciary investment management through Cabana, LLC d/b/a Cabana Retirement Solutions (“CRS”).

Our holistic retirement plan consulting approach will help organizations that offer and manage retirement plans for their employees by providing fiduciary guidance and plan support. CRS will take on a co-fiduciary 3(21) role or full-fiduciary investment management through our 3(38) advisory services.  We can also assist organizations with the tedious process of evaluating the fees they are paying and the services they are receiving through their various service providers. Thus, helping our plans comply with the Department of Labor (DOL) guidelines to ensure a plan is paying reasonable fees. Our services include employee enrollment and education, one-on-one employee meetings, and a financial plan at no cost to the employee. In the coming months we will expand upon what this means to the organizations that we work with and will follow up with more specific details on each of these components and much more.

Stay tuned!

In the meantime, below are a few important 2019 updates that should be helpful to any and all retirement plan participants.

2019 Savings Limit Increased

The IRS is giving a bump in 2019 to retirement plan savers in 401(k), 403(b) and 457 plans to $19,000 – this is the limit an employee can defer from compensation into a retirement plan. Unfortunately, we did not see an increase in the catch-up limit of $6,000 for those over 50, this limit will stay in place for 2019 for plans that allow for catch-up contributions. The limits in Individual Retirement Accounts (IRA) did get a bump as well to $6,000 in 2019. The limit was $5,500 for 2018 and 2017 which will still apply for those making last minute contributions to their IRA’s for the 2018 tax year. The 50+ catch-up contribution to IRA’s remains unchanged at $1,000. SIMPLE IRAs also get a boost. The max contributions to a SIMPLE IRA in 2019 will be $13,000, in 2018 the max contribution was $12,500. Again, the 50+ catch-up remains the same at $3,000. For more information regarding these limit increases and other cost-of-living adjustments to retirement plans please see Notice 2018-83, released Nov 1, 2018.

Make sure to adjust your payroll deduction in 2019 if you choose to take advantage of these increases.

Hardship Rule Changes Proposed for 2019

The Bipartisan Budget Act of 2018 had provisions focused on changes to hardship distribution rules that the IRS has finally provided some long-awaited proposed regulations to address.  The proposed regulation released in November 2018 will make it easier for participants to obtain a hardship distribution from their plan and will allow them to access more of the funds in their account.

Key components of the regulation will modify the safe harbor list of expenses for which distributions could be granted, will affect the amount available for a distribution and will make it easier for participants to seek a hardship distribution.  We have provided some highlights below and suggest contacting your plan’s administrator for further guidance as to how the proposed regulations will directly affect your plan.

  • Expanding the definition of beneficiary to “primary beneficiary under the plan” as an individual for whom a qualifying medical, educational and funeral expense may be incurred (previous regulations referenced only a spouse or dependent);
  • Clarification that the home casualty reason for a hardship does not have to be in a federally declared disaster area (the Tax Cuts and Jobs Act of 2017 had adversely impacted this provision);
  • Adding that expenses incurred because of certain disasters that the IRS and Congress have traditionally, but separately, provided relief for in the past, such as hurricanes, floods, wildfires, and the like, be added as a qualifying expense.
  • Expanding access to other balances such as earnings on deferrals, QNECs, QMACs, safe harbor contributions, QACA – plus related earnings. Previously only elective deferrals were allowed for hardship distributions. Plans can choose to expand access to these contribution types if they choose to, it is not mandated that they do.
  • Removal of the six-month prohibition to saving into the plan once a hardship has been taken. This will allow employees who take a hardship to continue to save in their retirement plan as of January 1, 2019 and will affect those who are currently prohibited from saving in the plan for a hardship they took in the second half of 2018.

If these proposed regulations become law, sponsors of retirement plans will need to amend their plan documents as they relate to the plans’ hardship distribution provisions by the end of the second year after the issuance of the Required Amendments list.  We encourage our employers who sponsor a retirement plan to be on the lookout for specific guidance from their record keepers and plan administrators for further guidance.

We look forward to working with you and your employees in 2019!

Kelly Majdan

Director, Institutional Retirement Plans

kelly@cabanaportfolio.com

Disclaimers:
 

Cabana LLC (dba “Cabana Asset Management” and “Cabana Retirement Solutions”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at https://www.adviserinfo.sec.gov/.

By using this website the user agrees as follows:

All written content on http://cabanaportfolio.com website (the “Website”) is for informational purposes only. The material presented is believed to be from reliable sources and no representations are made by Cabana, LLC, Cabana Law Group, or Cabana Financial, LLC (collectively, “Cabana”) or its affiliates as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with a financial advisor, accountant or legal counsel prior to implementation. No party, including but not limited to, Cabana and its affiliates, assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.

The views and opinions expressed are those of the authors do not necessarily reflect the official policy or position of Cabana or its affiliates. Any content provided by our bloggers or authors are of their opinion, and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything.

Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a financial advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

Viewers or recipients of the information herein that do not agree with the term and conditions of use, should not utilize this website or any information contained herein. Decisions based on information contained herein are the sole responsibility of the person viewing the website. In exchange for utilizing the information on this website, the visitor agrees to indemnify and hold Cabana, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys’ fees) arising from the use of this website, violation of these terms or from any decisions that the viewer makes based on such information.

Please consult with a tax advisor before making any investment decisions.

Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of Cabana. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

“CARA” is Cabana’s Cyclical Asset Reallocation Algorithm. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time in an effort to obtain efficiencies and provide clarity of investment objective. 

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV Part 2A or Form CRS. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.

All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq