2017 Tax Filing Season to Begin January 29

The IRS announced that the 2017 tax filing season will begin on Monday, 1/29/18, which means that electronic and paper returns will be accepted beginning on that day. The IRS will begin processing paper returns in mid-February as its systems continue to update. Also, the IRS expects refunds on returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) to be available starting on 2/27/18 (if direct deposit is chosen and there are no other issues with the return).

Tax returns are due on April 17 because of a weekend and the Emancipation Day holiday.

(Source:  Thomson Reuters Checkpoint, “Five-Minute Tax Briefing”, 1/9/18)

Phishing Texts Appearing to be from Schwab

We have received reports of a recent SMS/text phishing campaign that impacts both Schwab and non-Schwab clients who are receiving text messages that purport to be from Charles Schwab. Recipients have been directed to click on a link that pulls up a faked Schwab website, prompting them to enter their credentials.  Schwab has contacted the site administrator and the site is being removed.

Please do not click on the link or provide any information.  Delete the text immediately.

RECENT Developments

Social Security Update

In its annual report on the financial well-being of the Social Security Trust Funds, the Social Security Board of Trustees stated that during 2016, an estimated 171 million people had earnings covered by Social Security and paid payroll taxes. Benefit payments were paid to 44 million retired workers and their dependents and 6 million survivors of deceased workers. Also in 2016, the asset reserves of the Old-Age and Survivors Insurance (OASI) Trust Fund grew by $21.1 billion to a total of $2.8 trillion. The asset reserves of the OASI Trust Funds are projected to be exhausted in 2035, the same year as projected in 2015, with sufficient income to pay 75% of scheduled benefits.


Putting Off Retirement

According to a recent Bureau of Labor Statistics (BLS) report, almost 19% of Americans age 65 or older were working at least part-time during the second quarter of 2017. More specifically, the percentages of those working within the overall group broke out as follows: 65 to 69: 31.4%; 70 to 74: 18.9%; 75 and older: 7.6%. The BLS has estimated that 36.2% of Americans between the ages of 65 and 69 will be working in 2024 (an increase from 21.9% in 1994), as will 22.8% of individuals between ages 70 and 74, compared to 11.8% 30 years prior.


Views on Retirement Plans

A study by the Investment Company Institute shows that, in the fall of 2016, 70% of U.S. households had very or somewhat favorable impressions of 401(k) and similar types of retirement accounts. Of households owning a defined contribution account, 90% stated that having an employer-sponsored retirement account helped them think about their long-term needs, and 44% stated they believed they probably would not save for retirement if they did not have a retirement plan at work.

Retaining Plan Records

As a plan sponsor, you know that you have significant reporting and disclosure responsibilities under the pension law (ERISA). Additionally, ERISA requires plan sponsors to retain broad categories of records related to meeting those responsibilities. To do so, a plan sponsor should understand the applicable rules and put in place a record retention policy governing how it periodically reviews, updates, preserves, and discards documents related to plan administration.


Six-year Requirement

ERISA Section 107 requires that any person required by ERISA to file any report (such as Form 5500) must maintain, generally, for a period of “not less than six years” after the document is filed, a copy of such report. Also required is retention of all records supporting information detailed in a plan’s Form 5500 and other reports and disclosures.

Supporting documents on this list include any records a government auditor might need to confirm the accuracy and completeness of any information in the original report or disclosure. These include, but are not limited to, service provider information, corporate income tax returns (for reconciling deductions), and the plan’s nondiscrimination and coverage test results.

Indefinite Period

Records that need to be kept for an indefinite period include those necessary to determine benefits and eligibility for plan participation. By necessity, such records would include any related to dates of service, eligibility, vesting, contributions, and more. These records must be maintained for as long as the possibility exists — whether through request or litigation — that they might be relevant to determine any benefits due (or which may become due) to employees and beneficiaries. In some cases, former employees may wait many years — possibly until retirement — to inquire about benefits.

Specific Information To Keep

Records that should be retained include:

  • The original signed and dated plan document
  • Plan documents and communications given to plan participants
  • The determination, advisory, or opinion letter for the plan
  • Any financial records
  • Copies of Form 5500
  • Payroll records used to determine eligibility and contribution
  • Proof of the plan’s fidelity bond
  • Documents relating to plan loans, withdrawals, and distributions
  • Nondiscrimination and coverage test results
  • Personal information of employees, including name, Social Security number, date of birth, and marital/family status
  • Employment history information
  • Officer and ownership history and familial relationships
  • Election forms for deferral amount, investment direction, beneficiary designation, and distribution requests
  • Listing of contribution and distribution transactions
  • Notarized spousal consents and waivers

Electronic Documentation

As long as the retention system meets ERISA requirements, records for the most part can be kept electronically. Generally, the retention process must:

  • Allow easy conversion to legible and readable paper copies to satisfy ERISA’s reporting and disclosure requirements
  • Have reasonable controls to ensure the accuracy, reliability, and authenticity of the records
  • Maintain records in reasonable order and in a safe and accessible place to allow indexing, retaining, preserving, retrieving, and reproducing
  • Not be subject to any agreements or restrictions that would compromise or limit compliance with ERISA’s reporting and disclosure requirements
  • Establish and implement adequate records management practices including, but not limited to, following procedures for labeling of electronic records and saving backup electronic copies

Generally, paper records can be disposed of any time after being transferred to a compliant electronic record system. However, the retention of an original paper record is required if the electronic record would not constitute a duplicate or substitute record under the terms of the plan and applicable federal or state law.

New Proposal for Employee Benefit Plan Audits

The Auditing Standards Board of the American Institute of Certified Public Accountants recently issued a proposed Statement on Auditing Standards (SAS) that, if adopted, would affect audits of employee benefit plans subject to the pension law (ERISA). Particularly affected would be limited-scope audits, for which DOL regulations allow auditors to rely on certain statements and information prepared by regulated banks or similar institutions or insurance carriers, provided that those entities certify the statements to be “complete and accurate.”

Key elements of the proposal include additional testing with respect to certain aspects of the plan document, changes in the auditor’s report for limited scope audits, expanded written representations by management, and considerations relating to the Form 5500 filing.

Plan sponsors should be aware of possible effects of the exposure draft, including the potential for increased auditing costs. In addition, sponsors should ensure that their own procedures and controls are well documented and followed and that any service agreements clearly delineate the respective responsibilities of each party.

The proposed SAS would be effective for audits of financial statements for periods ending on or after December 15, 2018.