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R&R Insurance Blog

Mid-Year Checklist: 5 Tips for Financial Wellbeing

Posted by the knowledge brokers


For those of us in the Midwest, there is an uncomfortable reality that sets in about this time every year. Summer is reaching its waning days, and though Autumn is a favorite season for many of us we know all too well that Old Man Winter will not be far behind. But from a personal financial planning standpoint, this time of year does possess tremendous opportunity to make certain that we have not only done all of the things that we were supposed to do during the year, but that we were also intelligent in the manner that we did so.

With more than half of the year gone, we now can reflect on the things that we have done, and whether they have helped us to improve our situation. At the same time, however, there is still enough time to look at the things that still need to be done, and to make progress on them. What are the steps that you should be taking right now to ensure a successful finish to your year?

  1. Retirement Plan opportunities – Every American with a 401(k) retirement plan at work possesses the opportunity to improve their financial security, and perhaps their income tax situation, simply by utilizing this benefit. In 2020, every American with a 401(k) can contribute up to $19,500, and those who have reached the age of 50 can contribute up to $26,000 for the current year. Even if those levels are not feasible, make sure that you are contributing enough to receive the full match from your employer at your current contribution. Simply bumping your current contribution by 2-3% can create a significant improvement in the long-term.
  2. Flexible Spending Plans – If you are enjoying the benefits of a Flexible Spending Plan at work, either for Health Care or Child Care expenses, this is a great time to evaluate how much you have left to spend before year-end. This is critically important since these are “use it, or lose it” accounts, and unused dollars are wasted. If it looks like your medical reimbursements for the year appear lower, consider finding expenses to move into the current year so that you can use every last dollar. Need a new pair of eyeglasses? Move an annual checkup from January to December? Complete them prior to year-end and get them on the current year.
  3. Schedule a planning meeting with your CPA – This year has been an incredibly challenging one for all, and more than ever it is a wise idea to spend 30-60 minutes with your CPA or tax preparer to review the expectations for the year. Collect your pay stubs, your investment information, and review your expenses and potential deductions, and get them to your accountant so that they can “mock up” your 2020 income tax return and provide educated projections. Should you expect a refund? Are you going to owe more than expected? Are there things that you can do now to improve the outcome? Don’t wait until April 15th for an answer that is hard to stomach. (And if your CPA is not interested in planning ahead, you still have time to find a new one before the end of the year.)
  4. Review your expenses and cash flow – “I spend how much on coffee?!” Let us face it, no matter how frugal we believe ourselves to be, we each have areas within our spending patterns that could likely be adjusted. Thanks to programs like Quicken and Mint, tracking these spending patterns is easier than ever. And with so many of us on automatic payments to our vendors, when was the last time that you really asked if you could get a better price? Do you qualify for your Satellite TV provider’s $50 monthly customer loyalty discount? Is your home security provider willing to reduce your current monthly fee since you do not use every benefit that your system has to offer? Is your pest control service willing to waive the December quarterly bill since wasps are not a huge problem around the pool when the snow is flying? If you don’t ask, the answer is always “no”.
  5. Ask “What has changed?” – Life gets so busy at times that it is too easy to lose track of the changes that happen in a given year, and how those changes may impact us. Have you retired a mortgage? Has a child or grandchild graduated from high school (triggering new educational expenses) or college (creating less required spending)? Did you change jobs, and if so have you found the experience to be financially enabling, or is it creating new challenges? Has it forced you to rethink how you will approach your family’s health or insurance benefits when open enrollment comes up again in just a few short months? By taking the time to think through these issues now, you will find that you not only arrive at better answers, but that your stress level in getting there will be lower as well.

With as hard as you have worked this year to help your family to get ahead, don’t miss an opportunity to improve your situation with a few simple actions. The hour of time that you spend may pay you handsomely over the coming months, and should allow for many more nights of restful sleep along the way. Plan ahead, get ahead!

Topics: Wealth Management

Your 401(k) plan’s investments.  Are you paying attention?

Posted by the knowledge brokers

When you made the decision to set up your company’s 401(k) retirement savings plan, you carefully considered the investment options that your plan provider had available.  Your choices were likely based upon factors such as management style, historical performance, the types of asset classes necessary to offer true diversification, and the underlying investment costs to your employees. 

Now, when was the last time that you went back and looked at them again with that type of scrutiny? 

Well, if it was within the last year, and your process was thorough and documented, you are likely in good shape.  But if it has been two years or more since your last analysis, you are creating a risk that must be addressed.  As is true in so many areas nowadays, even the best intentions can create litigation risk when proper due diligence and procedures are not consistently followed.  What are the primary risks?

  • Under-performance - Investment performance and rankings are always changing. Are the “top rated investments” that you originally picked still at the head of their class, or are they now lackluster shadows of what they once were?
  • Unreasonable Costs - Are the investments that are offered cost effective as compared to their peers, or are you effectively forcing employees to utilize options that are now expensive as compared to other readily available options?
  • Failure to Monitor - Within actively managed funds, investment managers at times tend to stray from their original investment goal. This “style drift” can result in stronger investment performance when effectively managed, but a failure to monitor these changes can create a lack of diversification and heighten investment risk.
  • Excessive Proprietary Investment Use - Has your plan made substitutions in their offerings leaving your employees with fewer independent investment options, and a slate of proprietary offerings that are more generous to the investment management firm than to your employees.

Any one of these issues, combined with a disgruntled employee, could be enough to trigger civil or class action litigation.  The good news, however, is that there are effective ways to protect your company and your Plan Fiduciaries.

Has your Plan Advisor prepared and presented to you a full review of your company’s 401(k) Plan within the last 18 months?  If they have not, you should be asking why.  And if they are not, let us know and we would be happy to do so.

At R&R we are specialists in helping to protect you against risk, and to work with you to mitigate your risks as you grow.  Our in house Retirement Plan specialists are available to provide a complete review of your company’s Employer-Sponsored Retirement Plan, and to help you to understand what risks are present and how you should be working to address them.  There is no cost for this review service, and it requires only a modest investment of time and effort on your part.

You have the option to either work from the belief that your Retirement Plan is in good shape, or you can know for certain that it is.  Give us a call and let us provide you with greater peace of mind.  It’s what we do at R&R.

Topics: Wealth Management

Avoiding a DOL Audit with 401(k) Fidelity Bond

Posted by the knowledge brokers

Audit.  The word alone is enough to give most Americans chest pain.  And while most equate the term with their personal income taxes, business owners and senior managers are also aware that the US Department or Labor can inflict an adverse reaction to their health with the word as well.  As such, it only makes sense to run your business in a manner that keeps you in the good graces of the DOL, and doesn’t raise any red flags.  Right?

Most would likely agree with that, and yet every year as we meet with our clients or new prospects we are surprised to see just how many companies are unknowingly leaving themselves at risk of triggering a DOL audit.  And it’s especially frustrating given how cost effective and simple the fix is.

As a company that provides a 401(k) plan to its employees, you are a Fiduciary and while that duty covers various aspects, none is more fundamental than protecting your employees’ assets against Fraud, Theft, or other acts of dishonesty.  This is such a fundamental tenet that the Employee Retirement Income Security Act of 1974 (ERISA) mandates that certain individuals who are responsible for the day-to-day administration of your 401(k) plan must be covered by Fidelity Bond.  Some basics:

  • All 401(k) plans require a Fidelity Bond, with the notable exception of Solo 401(k) Plans
  • A Plan’s Fidelity Bond is designed to bond each official tied to the Plan, and must be sufficient in size to bond each official for an amount of no less than 10% of the funds that they handle as of the first day of the Plan year (subject to a $1,000 minimum)
  • Generally no plan is required to bond an amount higher than $500,000, however that cap increases if a plan holds Employer Stock
  • Special rules also apply for plans that hold “non-qualifying assets” such as real estate or Limited Partnerships

Do you know if your plan is sufficiently bonded, or are your running the risk of facing a plan audit by the Department of Labor?  If you are uncertain, there is good news.  As your trusted partner in risk protection, R&R Insurance has the in-house resources and talent to help you to determine whether or not you are at risk for an insufficient 401(k) Plan Fidelity Bond, and the ability to help you correct it in a timely manner.  While this should be a primary discussion point at every single plan review meeting that you have with your 401(k) Plan Advisor, it too often is missed.  Don’t let a complacent plan advisor put you, your Plan Trustees, or your company at risk.

If your plan provider is NOT being proactive in helping you to make your 401(k) offering the most effective plan for your employees that it can be, contact your R&R Insurance Agent and let them know.  We have Professionals in the Insurance and Wealth Management areas who look forward to meeting with you to review your plan and provide specific guidance as to how to improve your plan and safeguard it against risk.

You made the commitment to provide the tools that your employees need to be successful, now let us put you in contact with the team that will provide the value that you should expect.

Topics: Wealth Management

Improving Your 401(k) by Increasing Your Employee Participation

Posted by the knowledge brokers

As an astute employer, you make investments in your employees in many ways.  You hire the best people that you can find and compensate them fairly.  You train them to excel at their position and to grow into new roles with greater responsibility.  And when you make the decision to invest the time and resources to offer them a high-quality retirement plan you are investing in the platform that will help them to build a lifetime of financial security. 

Few things though are more frustrating than when the employees that most need to work to build that security choose not to do so.  Compounding this frustration is that a lack of participation across your workforce can also create problems with your retirement plan’s non-discrimination testing at the end of the year, which can create an adverse result for those employees that are actively using the plan. 

When this issue arises in plans, there are a few steps that are recommended to help motivate and guide your employees to taking full advantage of the benefits that you have put into place.  Among them are:

  1. Automatic enrollment of all employees into your plan. According to data provided by Vanguard’s small plan division, employee participation increased from 57% to 82% by simply defaulting employees into a plan, as opposed to waiting for them to enroll.
  2. Automatically increasing deferral rates on an annual basis is one way to take employees from a relatively modest deferral to a healthy, meaningful contribution over time. After all, it’s great to have employees contribute 3% of their pay as compared to nothing, but a deferral rate that remains stagnant over time will likely not be sufficient to help your employees retire comfortably.
  3. Making it easier for employees to increase their deferral rates as their financial situation improves is one of the surest ways to help employees them do so. Rather than filling out new forms and offering limited time windows to make changes, your platform should be set to offer your employees the opportunity with a few clicks of a mouse.  This is especially true for employees that see variances in their income from month-to-month or as a result of production incentives.
  4. There is no substitute for quality education. How often does your plan provider spend time with your employees to help them to understand the opportunity that they have in plain, easy-to-understand language?  And does your plan advisor make themselves available in a way that encourages your employees to take responsibility for their future, or do they inadvertently dissuade them by them by being hard to reach?  Do not let a complacent provider diminish the value or your plan with poor service.

These are just a few of the different techniques that can be implemented into an existing plan to provide the encouragement that your employees need to get started, or to ramp up their efforts.  If your plan provider is NOT being proactive in helping you to make your 401(k) offering the most effective plan for your employees that it can be, contact your R&R Insurance Agent and let them know.  We have the Wealth Management talent and resources in-house who look forward to meeting with you to review your plan and provide specific guidance as to how to improve your plan.

You made the commitment to provide the tools that your employees need to be successful, now let us put you in contact with the team that will provide the value that you should expect.

Topics: Wealth Management