New Cost of Living Adjustments for 2019

The new Cost-Of-Living Adjustment (COLA) increases have come out for the year 2019. In the link below we have comparison of the 2019 and 2018 COLA dollar limitations on benefits and contributions.

Notable Changes:

  • For 2019, you can contribute $500 more to your IRA and SIMPLE plans.
  • 401(k) deferral limits also increased by $500, while total defined contribution limits increased by $1000.
  • IRS taxable Wage Base increased from $128,400 to $132,900.


COLA increases 2019-2018

If you have any questions, please contact Lori Plescia, CFP®, CPA, PFS, QPFC at or 314-576-1350.

How to Avoid RMD’s of your Roth 401(k)

In a Qualified 401(k) plan, a participant must begin Required Minimum Distributions (RMD’s) in the year he or she reaches age 70 1/2. This rule also applies to Pre-tax IRA’s. However, there is an exception to this rule when it comes to Roth IRA’s. This provides for a tax planning opportunity for those who have Roth 401(k).

If you have Roth deferrals in your 401(k) plan, and you want to decrease the amount of your taxable RMD, you can do a direct rollover of your Roth funds from your 401(k) to a Roth IRA prior to the year you turn 70 1/2. By doing this, you decrease the balance in your 401(k) plan, which in effect decreases your RMD from the plan. The Roth funds are now in a Roth IRA, which does not require distributions at age 70 1/2.

As an example, Participant A has a balance in her 401(k) plan at December 31, 2017 of $150,000. Of that, $50,000 is Roth, $100,00 is pre-tax. If she turns 70 1/2 during 2018, her 2018 RMD will be calculated based on the balance of $150,000. If, on the other hand, she does a tax free direct rollover of $50,000 to a Roth IRA during 2017, then her 2018 RMD will be calculated based on the December 31, 2017 balance of $100,000. This will reduce her 2018 taxable income. The $50,000 Roth IRA does not have Required Minimum Distributions. This $50,000 will continue to grow tax free until she is ready to take distributions.

If you have questions about this strategy, please contact Anne Christian at

The Clock is Ticking!

Set up a New Safe Harbor 401(k) Plan by October 1!

Business owners and other Highly Compensated Employees (HCE’s) really benefit from a Safe Harbor 401(k) Plan. They can maximize their deferral contributions to the plan regardless of the level of participation by the Non-HCE’s. That maximum for 2018 is $18,500 plus a $6,000 catch up contribution if age 50 or older. The cost of this benefit is an employer contribution to the employees (HCE’s and Non-HCE’s). This safe harbor employer contribution can be done in one of two ways:

  1. 3% of compensation to ALL eligible employees OR
  2. A matching contribution calculated as:
    1. Matching contribution of 100% of the first 3% of an employee’s contribution, and 50% of the next 2% of an employee’s contribution. Thus, if an employee contributes the full 5%, it will cost the employer 4% OR
    2. Matching contribution of 100% of the first 4% of an employee’s contribution


If option 1 is used, this 3% safe harbor contribution can be used toward satisfying other discrimination tests within the plan, allowing for even more benefit for owners and HCE’s through a profit sharing contribution as well.

Tax Benefits: All employer contributions to the plan are deductible on the company return, thus lowering tax liability. In addition, an employer adopting a new 401(k) plan may qualify for an additional tax credit of up to $500 per year for the first three years.

If you are interested, have questions, or would like a free proposal, please contact Anne Christian, CPA at Remember, the plan needs to be set up by October 1, 2018 in order to take advantage of these benefits in 2018.

Is A Cash Balance Plan Right For You & Your Company

Do you own a business? Do you currently offer a 401(k) Profit Sharing Plan? Do you wish you could put away more tax deferred dollars for retirement? If your answer is “yes” to these questions, you may consider a Cash Balance Plan for your company.

The IRS limits the amount that can be contributed to a Defined Contribution Plan (i.e. 401(k) Plan) for any individual in a given year. That limit for 2018 is $55,000 (Plus $6,000 if over age 50).

By adding a Cash Balance Plan, which is a special type of Defined Benefit Plan, the potential for additional retirement plan funding can increase by a sizeable amount. This no only boosts retirement benefits, but also significantly reduces current taxable income.

As previously mentioned, a Cash Balance Plan is a defined benefit plan, but as opposed to a traditional defined benefit plan it, acts a bit like a defined contribution plan. Participants receive statements telling them exactly what their benefit is on a regular basis. A Cash Balance Plan offers portability when employees terminate their employment, allowing them to “cash out” or roll their funds to an IRA. The actual contribution to the plan each year is an actuarial calculation dependent on participants’ ages and the fund balance.

Examples of those who could benefit from adding a Cash Balance Plan to their retirement portfolio are the following:

  • Business owners with high cash flow
  • Medical practitioners
  • Older Business owners who delayed their retirement savings
  • Closely held / Family businesses
  • Employers who are already contributing 5% to their employees through a Profit Sharing Plan
  • Highly profitable businesses of all types
  • Companies wanting to attract high level employees


Please contact Anne Christian for more personalized details for your company. I’d be happy to do a projection to see how a Cash Balance Plan would work for you.

Tax Reform: Retirement Plan Provisions

The Tax Cuts and Jobs Act covers a wide variety of tax changes. In the retirement plan world, before the final bill was passed, there was a lot of talk about reducing contribution limits and/or requiring Roth Deferrals as opposed to pre-tax deferrals. Thankfully, neither of these proposals are in the final approved Act. There are however a few changes.

  1. Re-characterization of Roth IRA contributions:
    1. Traditional contributions can still be converted to Roth.
    2. Roth contributions can still be converted to traditional.
    3. New Rule: Once you convert traditional to Roth, you cannot then re-characterize back to traditional.
  2. If a plan provides for hardship distributions, there are two changes:
    1. Old Rule: Participant cannot defer for six months after taking a hardship distribution.
    2. New Rule: Participant can continue to defer.
    3. Old Rule: Hardship distributions can only come from amounts contributed by the employee.
    4. New Rule: Hardship distributions can also come from employer contributions and earnings from all sources of contributions.
  3. Extended period to rollover plan loan offset amounts for a participant who has a loan balance when the plan terminates or when the participant severs employment:
    1. Old Rule: The employee has 60 days to contribute the loan balance to an IRA or the loan is treated as a taxable distribution.
    2. New Rule: The employee has until the due date for filing their Federal Income Tax return for that year to contribute the loan balance to an IRA or the loan is treated as a taxable distribution.


If you have any questions on this topic, please contact Anne Christian, CPA at