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.
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!
Director, Institutional Retirement Plans