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People's United: Retirement plan updates - WCAX.COM Local Vermont News, Weather and Sports-

People's United: Retirement plan updates

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SOUTH BURLINGTON, Vt. -

The Internal Revenue Service is requiring companies to update their retirement plan documents. This morning, we find out what this could mean for your retirement plan and your money.

Wayne Braun from People's United joins us to explain what that means for employers.

Q. The IRS is requiring an update of all retirement plan documents, for our viewers, what is a plan document?

A. The plan document is essentially the by-laws governing the operation of a retirement plan. It outlines who is eligible for the plan, how they earn benefits and when these benefits are paid along with several other provisions of the plan.

Q. Why is the IRS requiring an update?

A. The IRS requires that the plan document must be rewritten about every 6 years to ensure they don't get too out-of-date. This process ensures that new legislation, IRS regulations and changes made by the employer are properly incorporated and communicated to participants. The updates are called restatements and the current one is called the Pension Protection Act Restatement or PPA Restatement for short.

Q. What action do employers need to take?

A. Employers should be contacting their retirement plan service provider to see if they will be handling the restatement and the cost. This is also a good opportunity for employers to evaluate their plan and make any changes to ensure they have the best plan design for their company. Most service providers won't charge extra for incorporating changes as they are already rewriting the plan document.

Q. How long do employers have to update their plan document?

A. The PPA Restatement period is starting now and employers will have until the end of April 2016.

Q. What design changes would you recommend that employer consider?

A. I would suggest that employers consider adding Roth deferrals to their plan if they don't already have them. Roth deferrals allow employees to defer money on a post tax basis and avoid taxes on the gains assuming a qualified distribution.

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