Step to Success


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Step to Success

  1. 1. One of our main objectives is to design the right plan with the right provisions to meet the specific needs of our clients.
  2. 2. Step 1: Establishing A Meeting
  3. 3. LAR Pensions’ professional staff will help steer you in the right direction by: Analyzing your objectives and exploring existing retirement plans to determine if a new plan is warranted or if the existing plan should be refined Selecting plan provisions to meet your objectives such as:  Defining a plan type 401(k) Profit Sharing Defined Benefit  Selecting eligibility requirements  Designing employer and employee contribution requirements  Choosing vesting schedules  Defining distribution features/loan provisions
  4. 4. Step 2: Preparation of Documents
  5. 5. Drafting final Plan/Trust documentation outlining the specification and features of the Plan Preparing the Summary Plan Description (SPD) (an abbreviated version of the Plan document) for distribution to plan participants
  6. 6. Step 3: Financial Institution
  7. 7. It is important to choose a Financial Institution you are comfortable with to hold your Plan’s assets. Our office is not affiliated with any specific Financial or Accounting Institution; we can work with any provider as long as they are able to work with an outside TPA. As a result of this, LAR Pensions is enrolled with over twelve 401(k) vendors.
  8. 8. Step 4: Data Request
  9. 9. Towards the end of each plan year, you will receive a data request package requesting specific plan information for that time frame. This package can be completed by you (the employer), your CPA or Financial Advisor. The information in this package will provide your Plan Consultant with basic company information, an up to date census & current asset information. The table illustrates the deadline to return the data request package based on your plan type or company entity. January 30th All non Safe Harbor 401(k) Plans (or ASAP) March 10th Corporations not filing an extension (or ASAP) April 10th Non Incorporated businesses not filing an extension (or ASAP)
  10. 10. Step 5: Contribution Allocation and Discrimination Testing
  11. 11. Once we have received the completed data request package, your Plan Consultant will calculate the Plan contribution based on your contribution objective. Testing will also be performed during this time to ensure the plan is incompliance with the necessary coverage and discrimination tests.  A list and brief description of these tests can be found in the table provided under “Step 6: Valuation Report”.
  12. 12. Step 6: Valuation Report
  13. 13. After the contribution has been confirmed and/or deposited, LAR Pensions completes the Plan Trust Accounting to ensure all the activities that occurred during the plan year was done correctly and in accordance with the plan regulations.
  14. 14. The Valuation Report is then prepared based on the Trust Accounting and is comprised of the following exhibits: Plan Specifications Provides detailed information on the features of the Plan Employee Census Offers thorough information on the employees of the company. Contribution Report Provides detailed information per participant on contributions made for each source such as Employer Profit Sharing, Employer Match, Employee Salary Reduction (401(k)), etc. Limit on Deductible Contributions Illustrates the total Employer allocation as a percent of eligible compensation. The maximum Employer allocation cannot exceed 25% of eligible compensation. Account Balance Statement Provides a breakdown of account activity per person, per source and on a plan level. The information reflected on this Statement is taken directly from the Trust Accounting.
  15. 15. Valuation Report continued… Top Heavy Test Reflects the Plan’s Top Heavy status for the upcoming plan year. A plan is Top Heavy if 60% of its assets belong to Key Employees. If the plan is Top Heavy, a minimum Employer allocation of 3% must be made to all eligible employees. 401(k) and 401(m) Discrimination Tests Provides a breakdown of each participant’s 401(k) and Matching contributions as an Actual Deferral Percentage (ADP) and an Actual Contribution Percentage (ACP), respectively. The test is performed to ensure that the Highly Compensated Employees are not favored in regards to the amount they can defer or match. 410(b) Participation Test Assures that an adequate amount of employees are benefiting under the Plan. 401(a)(4) Benefit Percentages/General Test This test is used to determine whether or not that the allocation provided to the Highly Compensated employees is discriminatory based on the allocation offered to the Non-Highly compensated employees. Participant Account Statement An Account Statement is provided for each participant with a balance under the plan. The Statements includes basic census information, asset information and activity per source as well as the participant’s vested percent and balance.
  16. 16. Step 7: IRS 5500 Filing
  17. 17. A 5500 filing must be done for all qualified plans with a participant and assets above $250,000 (as indexed). The form must be filed 7 months after the end of each plan year or 9 months if on extension. Based on the demographics of your plan, one of three forms must be completed:  Form 5500-EZ  Form 5500-SF  Form 5500
  18. 18. Form 5500-EZ  Available for one participant Plans  Available for Foreign Plans that are required to file Form 5500-SF (Short Form Annual Return/Report of Small Employee Benefit Plan)  Available for Plans with 100 or fewer participants at the beginning of the plan year  The plan must satisfy the conditions necessary for exemption from an audited by an Independent Qualified Public Accountant  100% of the Plan assets must be invested in secure investments with an easily obtainable fair value  The Plan cannot be invested in Employer securities and cannot be considered a multiemployer plan Form 5500 (Annual Return/Report of Small Employee Benefit Plan)  Available for Plans with more than 100 participants at the beginning of the plan year  Required for Plans that are invested in non-qualified assets  Necessary for Plans that are not exempt from an audit by an Independent Qualified Public Accountant.
  19. 19. Step 8: Distributions
  20. 20. The final step in the annual administration process is preparation of Distribution packages for those employees who terminated prior to or during the plan year.
  21. 21. Any Questions? If you have any questions, please refer to our company website ( Or reach us at (203) 327-5275.