PLAN SPONSOR RETIREMENT PLAN UPDATE

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1 PLAN SPONSOR RETIREMENT PLAN UPDATE Quarter 4, 2013 Did you know? We were the top scoring small business for the 2013 NorthCoast 99 awards, an award given to businesses that represent the best places to work in Northeast Ohio. Inside this issue: Help on Completing W-2 Forms Importance of Beneficiary Designation Forms New Limits for 2014 Getting To Know Us What Can We Do For You? Required Minimum Distributions Repeal of the Defense of Marriage Act Mark Your Calendar What s Ahead? Thankfully, there have not been a lot of game-changing new developments in retirement plans this year. However, there are a few changes to think about as we enter the year ahead. Repeal of the Defense of Marriage Act (DOMA) DOMA stated that the definition of marriage is a union between a man and a woman. The Supreme Court recently ruled that DOMA was unconstitutional. With this change, retirement plans must now treat the relationship of samesex married couples as a marriage and each party to that marriage as a spouse. See page 5 of this newsletter for an entire article on this subject. In-Plan Roth Rollovers/Transfers For several years, participants have been permitted to move account balances that were eligible for distribution to a Roth source (if a plan allowed this change). Recent legislation has opened up that rule to allow for Roth conversion of any amount held for the benefit of the employee, whether or not that amount is eligible for distribution. Safe Harbor Plans In the past, a safe harbor match plan could re- duce or suspend their contributions mid-year regardless of the employer s financial health whereas a safe harbor QNEC plan had to show a substantial hardship before they could reduce or suspend their safe harbor contribution. The new law allows that safe harbor QNEC plans can now suspend or reduce their contribution if the business is operating at a economic loss (or if the safe harbor notice indicates the plan may suspend or reduce contributions.) This law goes into effect January 1, Budget Proposals continue to contain provisions that could impact tax incentives for retirement plans While still in proposal stages, there are several suggestions that could seriously impact retirement plans. To learn more about the proposals and be able to congress about the matter with a simplified procedure that only takes 20 seconds, log onto savemy401k.com There is even a game to play where you are a piggy bank trying to collect coins while you are chased by angry elephants and donkeys.

2 Help on Completing W-2 Forms PAGE 2 January 31, 2014 is the deadline for issuing employee W-2 forms. The following may be helpful when preparing W-2 forms for a participant in a Defined Contribution plan. Form W-2 Completion Box 12 if any employee contributes (defers) pre-tax dollars, place a D in this box with the amount of their pre-tax deferral. Use code AA for any designated Roth deferrals. Box 13 place an X in the box for Retirement Plan if the employee is an Active Participant as defined below. Active Participant A person who actually contributes (defers) pre-tax dollars to a 401(k) plan A person who actually contributes post-tax dollars to a retirement plan A person who received an employer contribution or reallocated forfeiture during the 2013 tax year Importance of Beneficiary Forms Why do we have beneficiary designation forms? The simple answer is so that we know what to do with a participant s account balance in the event of their death. It seems easy enough, but things can get complicated in a hurry. Unlike most other plan transactions, beneficiary designations are likely to remain in effect for long periods of time without being reviewed or updated. Many life events can happen over time the named beneficiary could pass away, the participant could get a divorce or have additional children. Payments have been made to ex-spouses because the beneficiary form was never updated after the divorce. Balances that were meant to be split among all of the children might only go to the oldest child because the other children were born after the beneficiary form was completed. Even new law can effect the way a beneficiary form should be completed (see the Repeal of DO- MA article on how recent law changes affect the beneficiary forms for same sex couples). For clients where we produce participants statements, we do list the beneficiary on the last page of their statement but who knows how closely the participant is looking? If you want to make sure you have valid, up-to-date forms, it is probably a good idea to send reminders or new forms to your participants every so often (depending on your workforce). We can help!

3 Limits for 2014 PAGE 3 Retirement Plan Limit Dollar Amount Change 401(k) Deferral Contributions $17,500 Same as (k) Catch Up Contributions $5,500 Same as 2013 Maximum Defined Contribution Limit (415) $52,000 Up $1,000 from 2013 Maximum Compensation $260,000 Up $5,000 from 2013 Highly Compensated Compensation $115,000 Same as 2013 Social Security Wage Base $117,000 Up $3,300 from 2013 SIMPLE Deferral Contributions $12,000 Same as 2013 SIMPLE/IRA Catch Up Contributions $2,500 Same as 2013 Getting to Know Us Introducing Carol A. Ausflug, CLU, ChFC, CRPC Carol joined our firm in the spring of 2013 and brings a broad range of retirement plan experience. She has worked extensively with small business owners and is sensitive to their retirement plan needs. With her strong marketing background, Carol will be working with our sales team to promote the unique Noble- Davis brand of plan administration services. She will also be providing support to our clients and prospects in the areas of plan design and document creation. Carol is a graduate of Capital University and John Carroll University. She lives in Aurora with her husband, one dog and two cats. She enjoys preparing food from local farmers markets and cycling.

4 What Can We Do For You? PAGE 4 Required Minimum Distributions The law requires that those participants who have attained age 70 1/2 and have stopped working must begin taking distributions from their retirement accounts. These distributions are called Required Minimum Distributions (RMDs) and they are calculated based on the life expectancy of the participant. These distributions must occur prior to the end of the calendar year (except for the very first RMD, which may be delayed until April 1st of the following year). We are constantly processing these distributions throughout the year, so it s likely that they have already been paid, but please let us know if you think someone in your plan might be required to take this distribution for The distribution must be paid to : A participant who is age 70 1/2 or older and who is a more than a 5% owner of the company, or As a plan sponsor, we know that you have options, and we thank you for continuing to choose us! You are probably getting calls on a regular basis from other providers who are promising you the sun, moon, and stars.all for the low, low price of practically free! We all know that things that sound too good to be true usually are, and have been able to prove that time and time again when our clients have come to us for an apples to apples comparison. It is important for you as a plan sponsor and fiduciary to do your due diligence and know what s out there, and we can help you with that. At Noble-Davis Consulting, our philosophy is to offer you peace of mind by providing exceptional service at a fair and reasonable price. We understand that you are busy running your business, and we really do try to wrap ourselves around whatever your need is. And if for some reason there is something we can t do for you, chances are we know someone who can and will work in partnership with us to get you what you need. For example, don t like your current investment platform? Let s work with your advisor and come up with some options. Did you know We offer our own in-house, open architecture daily platform. Participants have the ability to log-on to our website to view account balances, make investment changes and transfers, request loans, etc. They also have access to a new feature called MyRetirement to help them determine how much they need to save in order to retire comfortably. And you as the plan sponsor have access to our PlanSponsorWeb where you can view the plan in detail, as well as PlanSponsorLink, our secure client portal. We can work with many different recordkeepers such as John Hancock, American Funds, Transamerica, etc.-the choice is up to you with the help of your advisor, and we can certainly make recommendations too if you d like. We are still your TPA and consultant on these types of plans, making sure you are in compliance, filing your Form 5500 timely, etc. Often times, the asset custodian will pay us revenue sharing based on the plan investments. We pass all of that back to your plan to offset any administration or advisor fees. So, if at any time someone makes you an offer that you might not be able to refuse, please allow us the opportunity to take a look at it and give you a true apples to apples comparison to see how great that offer really is. Most of the time...it isn t. A participant who is age 70 1/2 or older and who has retired and still has money in the plan The penalty for not making these distributions is severe a 50% excise tax payable by the participant so we want to make sure we don t miss anyone!

5 Defense of Marriage Act Repealed PAGE 5 This past June the U.S. Supreme court struck down the Defense of Marriage Act s (DOMA) provision that defined marriage as between a man and a woman. Although the decision does not override state laws defining marriage, the subsequent IRS Revenue Ruling clarifies that legally married couples are treated as married for federal tax purposes regardless of residence or domicile. The result is recognition of same-sex marriages for IRS-qualified retirement plans 401(k), profit sharing and pension plans. The Department of Labor announced the same position for retirement plans covered under Employee Retirement Income Security Act (ERISA) purposes. As of the date of this publication the following states and District of Columbia recognize samesex marriage: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, Hawaii (12/2/13), New Jersey, New York, Rhode Island, Vermont and Washington and the District of Columbia. Illinois law is scheduled to take effect 6/1/14. If a participant is/was married in any of these states, they are married for plan purposes. Effective September 16, 2013 plans must treat legally married same-sex spouses as spouses for plan purposes regardless of how their current documents read. Going forward plan documents that define a spouse as husband/wife, male/ female will require amendment as will any benefit option definitions that reference the same. Areas regarding spousal protection and distribution rights should be reviewed to ensure the language meets the new requirements. If your plan document does not define spouse or is not gender specific there should be no plan amendment required. If your plan documents contain reference to DOMA or use gender-specific definitions of spouse, amendment will be required. Plan forms and processes should be reviewed and updated for information from participants or beneficiaries in a legal same-sex marriage. In general the policies and procedures than apply to opposite-sex spouse now apply to legally married same-sex spouses. Beneficiary designations: the beneficiary designation for a participant in a legal same-sex marriage should be the same-sex spouse. If the participant wishes to name a non-spouse beneficiary, the same-sex spouse must waive the spousal rights. Qualified domestic relations order (QDRO): a same-sex spouse is now entitled to seek a part of the participant s retirement benefit as part of the divorce process. Hardship distributions: a participant in a same-sex marriage can now request a hardship for a same-sex spouse (e.g.: medical, tuition, funeral expenses). Loans with spousal consent: if the plan requires spousal consent for a loan, consent is now needed from a same-sex spouse. Required minimum distributions (RMD): same-sex spouses will now benefit from the more favorable treatment under the IRS rules governing the age 70 ½ RMD. Eligible Rollover Distributions: a surviving same-sex spouse may now rollover a death benefit to their own IRA or another qualified plan. For clients using our Noble-Davis Consulting, Inc. plan document, no amendments will be necessary and forms and procedures are compliant. You will need to review your employment files for same-sex marriages and have those participants update their beneficiary forms. For our clients not on our document, please feel free contact us should you need assistance coordinating the changes in your plan. Noble-Davis Consulting, Inc. is continually updating our systems, processes and forms to meet the complexities of government compliance. Our staff is highly trained and up to date on current events and will be happy to help you through these changes.

6 Quarter 4, 2013 Happy Holidays! We hope you find time to rest, relax and recharge! Retirement Plan Administration and Consulting Noble-Davis Consulting, Inc Bainbridge Road, Building B Solon, OH Mail To: Phone: (440) Fax: (440) Toll-Free: (888) Participant Call In: (866) Stay on top of your retirement plan s mandatory deadlines! Here are some important dates in the upcoming months. (Please note that filing dates are for calendar year plans. Noncalendar year plans must adjust these dates.) Each Payroll: Remit deferral and loan repayments within 7 business days (small plans) or as soon as possible (large plans). December 31: Last day to self-correct significant qualification failures from the 2011 plan year or correct failed ADP/ACP test for 2012 Mark Your Calendar December 31: Required Minimum Distributions (RMD) due for participants who have already received their initial payment January 31: Participant data due to us for ADP and ACP testing in order to insure testing and refunds are timely January 31: 1099-R Forms must be sent to participants February 10: Form 945 are due (if no payment required) February 14: Fourth quarter PPA Statements due for participant directed plans February 28: Forms 1099-R are due to the IRS March 15: Corrective distributions due for failed ADP/ACP Testing (without employer 10% excise tax) March 15: Corporate Tax Return and contributions due (without extension) April 1: Initial Required Minimum Distribution (RMD) due to participant who turned 70 1/2 in 2013 (or retired after turning 70 1/2 in a prior year) April 15: Distributions of excess deferrals due to participants Noble-Davis Consulting, Inc.Helping Small Businesses Create and Maintain the Best Retirement Plans for Over 25 Years