31 October

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7 Ways You Are Mishandling Retirement Plans in Your Tarrant County Divorce: Bedford divorce lawyer

in Benefits, Divorce, Property Division, Retirement Plan/401k/Pension

, next to perhaps the home. Regardless of the value in these retirement plans, 401k plans and pension plans, many couples mishandle these accounts in divorces. The result can be a substantial financial loss for one spouse, sometimes even for both. Today's post will detail some of the most common ways people in Texas divorces mishandle their retirement plans. The best way to protect your retirement assets is with the help of a divorce lawyer who understands retirement plans. 1. Ignoring retirement assets in a divorce in Fort Worth, Texas I hear often people about to divorce decided not to bother with dividing the...

25 October

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Pension overpayments / pension recovery: Dallas pension lawyers

Posted by Adam Kielich

in Benefits, Employee rights, Employment Litigation, Retirement Plan/401k/Pension

You worked for decades at an employer, retired and began receiving your defined benefit pension from your employer. You have planned your finances around your pension payments, social security and other sources of retirement savings. Then a letter shows up from the pension administrator. No, it isn't your monthly check. It isn't a spare check, either. It's a letter stating that the plan miscalculated your benefits, they should have paid you less. They need you to pay it back or they will reduce your monthly payments to recover the pension overpayment. This scenario is unfortunately a growing trend in Texas and around...

29 September

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Blackberry layoffs show why KSOPs are bad for employees

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

In my 2010 article about KSOPs, I discussed how KSOPs risk employees over-leveraging their employment into excessive financial risk. KSOPs blend 401k and ESOP plans in which the employer uses an ESOP with the employer's stock as an investment as an investment option within the 401k to let employees use their retirement savings to invest in the employer's stock. When employees invest in the employer's stock in their 401k, they place life-long financial risk on the employer. The employee's current income stream is dependent on the employer's financial stability. The employee is also dependent on the employer's financial stability for other benefits,...

18 September

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DOL releases official guidance on ERISA and same sex marriage

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

In a highly important move, the Department of Labor released guidance on how ERISA-governed employee benefit plans will treat same-sex marriages following the Supreme Court's overruling of DOMA's definition of marriage as limited to one man and one woman. ERISA-governed benefit plans include private employer benefit plans like 401k plans, defined benefit pensions and health insurance plans. The guidance is significant because it affects how spousal benefits extend in retirement savings plans and health care. The guidance asserts administrators shall treat same-sex couples as married if the marriage is valid in the state where celebrated. Why the new DOL guidance matters The Employee...

17 September

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Health Savings Accounts: when you can have one

Posted by Adam Kielich

in Benefits

Earlier this week I wrote about Flexible Spending Accounts (FSA) and the "use it or lose it" rule. Today's post discusses Health Savings Accounts (HSAs), which are a very different kind of account. FSAs and HSAs both give employees tax-advantaged opportunities to finance health care costs in a consumer-driven health insurance plan; but HSAs are far more advantageous if you have a plan that permits you to open an HSA. What is a health savings account? A Health Savings Account, or HSA, is a tax-advantaged savings account that can only be used for qualified medical expenses when an individual opens the account in...

16 September

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Flexible Spending Accounts: Use It or Lose It

Posted by Adam Kielich

in Benefits

Flexible Spending Accounts, or FSAs, allow employees to make tax-advantaged contributions towards their health care costs for the year. The FSA is distinct from the employer's ERISA-governed health insurance plan; but the two operate closely. The employer's insurer may even administer the FSA. The employee, and possibly the employer as well, contributes each year which may then pay for qualified medical expenses. If the funds are not depleted at the year's end they become subject to "use it or lose it". How FSAs work Each plan year the employee elects a particular dollar amount he or she wants to set aside to the...

21 August

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Can my employer stop contributing to my 401k?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

Generally yes. Employers are not required to offer retirement benefits; nor are they required to make matching contributions, profit sharing, or any other contribution. (With the exception of certain safe harbor plan designs that require safe harbor contributions.) If your employer has a 401k, ESOP, or other defined contribution plan and makes contributions for you, in most cases they can stop contributing at their discretion. Exceptions when an employer cannot stop contributions to your 401k There are some exceptions. Employers cannot stop contributing to some employees and not others over unrelated issues. For example, an employer could not stop contributing to your...

17 August

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Should I invest in company stock in my 401k?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

In an article I authored back in 2010 published in the National Law Review I discussed the risks involved for both companies and employees in allowing employees to invest in company stock within their 401k plans. The company stock becomes available through an ESOP (Employee Stock Ownership Plan) within the 401k known as a KSOP. Companies can obtain tax benefits through the ESOP as well as buoy its stock. Although ESOPs are numerically most often in small, private companies, it is the larger companies that get press when the ESOP becomes a problem. When it comes to finances, everybody’s investment goals, strategies and...

07 August

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I am the benefit administrator for my company’s 401k. An employee has come to me and asked about making an exception to the rules to help him make a withdrawal. Can I help him?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

Generally no. ERISA requires 401k plans to strictly follow plan rules and treat employees fairly. The intended effect is for the plan to treat employees equally. To violate plan rules can result in as little as fines or as much as forfeiting the entire plan. Changing distribution rules requires amending the plan for all participants and amendments often cannot go into effect immediately. Even with plan amendments ERISA rules do not permit a wide range of discretionary withdrawal options. 401k plan hardship withdrawals in Dallas and Fort Worth, Texas As far as your employee, you may want to see if that employee...

07 August

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Should I contribute Roth, after-tax, or pre-tax in my 401k?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

It depends. Each option gives you a different benefit and the respective benefits will have a maximum positive impact depending on your current financial situation, retirement needs/goals and your expectations for future tax rates. Pretax 401k contributions Pre-tax contributions provide an immediate tax benefit because you do not pay taxes on income contributed to your 401k. You also get the benefit of tax-free growth in your 401k. The downside is that all of the pre-tax money in your 401k is taxable upon distribution. 401k Roth contributions Roth contributions, on the other hand, do not provide an immediate tax benefit. You pay taxes on your...

29 July

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Can my employer change the 401k plan or make an exception for me?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

Generally, no. The federal regulations that govern 401k plans require that 401k plans do not discriminate against employees. Plans must have uniform rules and the rules must apply in a uniform manner. For example, if your plan permits hardship withdrawals it must establish specific rules for those distributions. Plans can establish some variances in rules across different business units, but once the rules become effective they cannot change without amending the entire plan. In order to make an exception or change the rules, the plan has change for everybody. Even when a 401k plan desires to make a change, changes often require amending...

25 July

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Should I be concerned about 401k fees?

Posted by Adam Kielich

in Benefits, Employment Litigation, Retirement Plan/401k/Pension

401k fees have come into focus as one of many ways the financial services industry leeches money from the investors. That focus turned into litigation by participants against their plans (and plan service providers). Eventually the Department of Labor instituted fee disclosure rules that require plan service providers to break down fees charged to the plan and participants. Although most of the litigation has been unsuccessful in recovering awards for participants, the fee disclosure rules did force the financial service industry to better expose the relationships between the plan, participants, investments and fees. That way the plan can assess the fees paid...

19 July

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Employment Attorney explains: When can I take a 401k loan?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

401k loans allow you to borrow against your 401k account tax-free (as long as you pay it all back). The loan payments typically occur by payroll deductions. If considering a 401k loan you should carefully consider he loan terms and the ramifications. Your employer does not have to offer 401k loans and can severely limit what options are available to you. Dallas employment attorney explains the types of 401k loans There are two types of 401k loans available: general loans and home loans. General loans, by law, may only extend for the maximum of five years; but you can take out these loans...

18 July

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Retirement Plan Participant Disclosures

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure these retirement plans provide plan participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Why these retirement plan disclosures began In the 1990s mutual fund and insurance companies realized the...

14 July

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What is the difference between a 401k plan and a deferred compensation plan?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

Generally, both plan formats defer compensation because the employee has elected to defer taking cash in hand to obtain some additional benefit, such as deferring taxes on the money or investing on a tax deferred basis. Under more specific legal definitions, there is a distinction between how these different plans work. Today's post will discuss some of the key differences between these types of employer-sponsored retirement plans through the eyes of an employment law attorney. 401k plans and ERISA 401k plans are governed by the Employee Retirement Income Security Act (ERISA) along with other defined contributions plans like ESOPs. They must be available to...

12 July

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ERISA Retirement Plan Participant Disclosures

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

By now you received fee disclosure statements on your 401k, ESOP, 403(b) and profit sharing plans. These fee disclosure statements, known as 404a5 Participant Disclosures, ensure retirement plans provide participants with a minimum amount of information about the fees charged by plan investments and fees paid by the plan (often from those investment fees) to companies that provide services to the plan, such as auditing, accounting and investment management. These disclosures provide participants with information necessary to adequately assess the investment options within your plan. Confused about the disclosures? Talk to an employment lawyer near you. Why these 401k fee disclosures began In the...

10 July

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Benefits of staying in your 401k after you leave an employer

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

When employees leave employment, the common response is to want to sever ties and move on, especially if the employee left involuntarily or on bad terms. However, withdrawing or rolling over your 401k may not be the best decision in every case. There are important financial and legal considerations. Before making decisions about your 401k benefits you should consider talking to a financial adviser and lawyer near you to discuss financial and legal concerns. Financial Considerations for employees and retirees Many financial considerations can come into play in this decision. If you leave one employer to go to a next, you may...

08 July

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What is a KSOP?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

KSOP is jargon used within the financial and employee benefit industries as shorthand to explain the arrangement where a 401k plan houses an ESOP of the employer’s stock as an investment option. An ESOP is an Employee Stock Ownership Plan that allows employees to purchase company stock through a retirement plan. It is an ERISA plan all on its own but also an investment option within a 401k plan along with the other common 401k investment options. A KSOP is an ESOP housed within a 401k plan. What is a KSOP retirement savings plan? KSOP structures became popular among employers as a...

03 July

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How are pensions calculated?

Posted by Adam Kielich

in Benefits, Retirement Plan/401k/Pension

Defined benefit pension benefits are calculated in a variety of ways, depending on what formula your plan has adopted. ERISA requires defined benefit pension benefits expressed in the normal form of payment at the plan’s normal retirement age. (Often referred to as the accrued benefit.) This is normally a monthly annuity benefit paid out over the lifespan of the employee-participant. That does not necessarily mean the benefit must pay out either in that payment method or at that time. The benefit pays in the payment options at ages defined in the plan document and summary plan description. Even cash balance plans, typically expressed as...

02 July

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Why does my spouse get part of my 401k or pension in a divorce?

Posted by Adam Kielich

in Benefits, Divorce, Property Division

Spouses in Fort Worth and Dallas are entitled to part of your retirement accounts in Texas because the federal law surrounding retirement plans allows for spouses to earn an interest in your retirement accounts during the marriage. State law allows for family courts to divide these assets based upon a domestic relations order. (That usually becomes a QDRO when the plan qualifies it.) In this case, state law provides the method to divide the accounts. The law states that employment income earned during a marriage is joint marital property. Because retirement savings are part of that income, the spouse has an entitlement...