The IRS issued a notice announcing relief for certain retirement plans that do not have a written plan in place by January 1, 2009. The new guidance is for retirement plans covering employees at public schools, colleges and universities, and other tax exempt organizations. These retirement plans are often referred to as 403(b) plans after the relevant section in the tax code.

The IRS is extending the deadline for plan sponsors to adopt new written plans or amend existing plans to satisfy the requirement of the final 403(b) regulations because of difficulties expressed by numerous plan administrators in meeting the current deadline of January 1, 2009. This extension will give plan sponsors additional time to put their plan documents in place.

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if:

• By December 31, 2009, the plan sponsor of the plan has adopted a written 403(b) plan that is intended to satisfy the requirements of 403(b) and the regulations.
• During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations.
• By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.

The IRS plans to issue further guidance on 403(b) plans, including a revenue procedure establishing programs for 403(b) plans to obtain IRS approval of the plan document and allowing these plans to make remedial amendments to retroactively fix plan provisions under rules that are similar to those that apply for 401(a) qualified plans.

Notice 2009-3 is available on IRS.gov.

Cowden Advisers, Inc. is an investment advisory group that focuses exclusively on the needs of retirement plan sponsors and participants by providing fiduciary guidance and investment advice for qualified and non-qualified plans.

Please contact Jere Cowden or Elliot Dinkin at 412-394-9330 to discuss how Cowden Advisers, Inc. can provide fiduciary guidance to you and your plan.

As a plan sponsor, you are aware that Section 401(a)(9) of the Internal Revenue Code (IRC) requires retirees over age 70½ to take minimum required distributions (MRDs) from their defined contribution retirement plans. If the retiree fails to take a required MRD, there is an excise tax of 50% on the amount that should have been withdrawn. A retiree over age 70½ is required to take the MRD out of the plan by December 31.

The Internal Revenue Service has indicated they intend to issue relief within the next few weeks which would allow retirees to withdraw the calculated required percentage of their current balance versus their December 31, 2007 balance to satisfy Section 401(a)(9) of the IRC relative to MRDs.

Why This Will Help?

With the severe hit to current 401(k) plan balances, a retiree’s account balance most likely is much less today than it was on December 31, 2007. This relief will change the effective date used to calculate the MRDs affording the retiree to only withdraw the required percentage based on their current balance versus their December 31, 2007 balance.

What Should You Do?

Currently, we do not know what relief will be available for 2008, so we recommend you hold off on MRDs until the last possible minute, or until MRD relief is published. We will make every attempt to keep you informed of any events that unfold.

Please don’t hesitate to contact Jere Cowden or Elliot Dinkin at 412-394-9330 should you have any questions.

The Canadian Government has implemented an ambitious agenda to reduce taxes and to create a Canadian Tax Advantage. Cuts to corporate taxes, personal income taxes and the Goods and Services Tax (GST) have improved competitiveness and Canadians’ standard of living. As noted in Advantage Canada, reducing taxes on savings promotes investment, jobs and economic growth and is one of the key remaining areas for action.

How the Tax-Free Savings Account Will Work

• Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
• Contributions will not be deductible.
• Capital gains and other investment income earned in a TFSA will not be taxed.
• Withdrawals will be tax-free.
• Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits.
• Withdrawals will create contribution room for future savings.
• Contributions to a spouse’s or common-law partner’s TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
• Qualified investments include all arm’s-length Registered Retirement Savings Plan (RRSP) qualified investments.
• The $5,000 annual contribution limit will be indexed to inflation in $500 increments.

Click here to read the entire article.

Elliot Dinkin, Executive Vice President of Cowden Associates, Inc. discussed the current economic recession and how employers in Pittsburgh can take action now to remain strong and ready for when the economy rebounds.

Click above to view Elliot's discussion with Bill Flanagan on "Our Region's Business.
(Courtesy of the Allegheny Conference on Community Development and WPXI-TV. Originally Aired on December 7, 2008)

The Internal Revenue Service (IRS) has announced cost-of-living adjustments (COLAs) applicable to dollar limitations for pension plans and other items for the 2009 tax year.

There are several web sites you can visit for specific information on the new COLAs.

IRS.gov offers
• a full summary of COLAs
• a comprehensive list of COLA increases dating back to 1989

401khelpcenter.com provides
• a full summary of the new adjustments

For further information, please contact Jere Cowden, President/CEO of Cowden Associates, or Jim Bartoszewicz, President/CEO of Cowden Advisers. They can be reached at 412-394-9330 or toll-free at 888-889-9432.

Amid an economic crisis affecting regions around the world, Time Magazine calls Pittsburgh “One Bright Spot on Main Street.” Click that headline to read the article, published this week, that looks at how the Pittsburgh region’s transformation over the last 25 years to a more diverse economy has enabled us to weather the storm of uncertainty better than many others – and how we are not only surviving but actually investing for our future prosperity.

In response to the credit market instability, the Treasury Department will make available certain funds from its Exchange Stabilization Fund, on a temporary basis, to enable money market funds to insure the amount of assets held in publicly offered money market mutual funds to maintain a stable $1.00 per share net asset value. This program will be voluntary and is a temporary program to last no more than one year (after one year, it will be evaluated to determine if an extension is warranted).

"This Notice provides administrative relief in furtherance of public policy to promote stability in the market for money market funds," the IRS wrote. "Except with respect to the administrative relief expressly provided in this Notice, no inference should be drawn from this Notice regarding any other federal tax issues affecting tax-exempt bonds, money market funds, or any other security."

Premiums for participating money market mutual funds will be assessed against the mutual fund and we understand that most, if not all, investment companies maintaining these funds are planning to participate. The amount insured will not be capped like FDIC insurance. Once a participating fund board determines the fund has "broken a buck" and decides to liquidate, any shortfall would be covered by the Treasury. The SEC has been given the responsibility of developing this program.

It is important to note that new money that comes into these funds after close of business on September 19, 2008, will NOT be covered by this program. Though details are still being worked on, it appears intermediaries and recordkeepers will find it necessary to keep data on money market mutual fund account values as of the close of business on September 19, 2008, in order to be in a position to properly allocate recoupment of Treasury insured amounts, if subsequently necessary.

For further information, please contact Jim Bartoszewicz, Executive Vice President, Cowden Advisers, Inc. Defined Contribution & Investment Advisory Services. Jim can be reached at 412-208-0481 or toll-free at 888-889-9432.
The IRS Notice is available here.

On August 22, 2008 The U. S. Department of Labor (DOL) released proposed regulations in the Federal Register, that if adopted make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs).

“These proposals would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts,” said U.S. Secretary of Labor Elaine L. Chao.

The Pension Protection Act of 2006 amended the Employee Retirement Income Security Act (ERISA) by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased, the other is through an adviser compensated on a “level-fee” basis.

Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.

In December 2006, the department solicited public comments to determine what expertise and procedures may be needed to certify a computer model under the exemption, and to assist in developing a model form for the exemption’s disclosure of adviser fees.

The proposed regulation provides general guidance on the exemption’s requirements, including computer model certification, and includes a non-mandatory model form that advisers may use to satisfy the exemption’s fee disclosure requirement. In addition, to further the availability of quality and professional investment advice, the department is proposing a class exemption that permits advisors to provide individualized advice to a worker after giving advice generated by use of a computer model.

Separately, the department also released its determination relating to the feasibility of using computer models for providing investment advice to participants of IRAs.

For further information, please contact Jere Cowden, President and CEO, or Jim Bartoszewicz, Executive Vice President, Cowden Advisers, Inc., Defined Contribution & Investment Advisory Services. They can be reached at 412-394-9330 or toll-free at 888-889-9432. Full Proposed Regulations can also be found at the DOL website.

The Department of Labor (DOL) released proposed regulations that if adopted impose new requirements for the disclosure of fee and expense information to participants in self-directed individual account plans (such as 401(k) plans). The proposed rule is expected to be effective for plan years beginning on or after January 1, 2009 and is part of an ongoing effort to ensure that participants receive sufficient information about plan fees and expenses so that they can make informed investment decisions. In the same notice, DOL proposed changes to the regulations under Section 404(c) of the Employee Retirement Income Security Act (ERISA) to integrate the disclosure requirements and to restate DOL’s position with respect to the scope of ERISA Section 404(c)’s protection.

CONTINUE READING

...in the Pittsburgh Business Times (full article requires a subscription):

Senior executives are taking a much more active role in administering 401(k) plans than in the past, according to a survey of more than 125 employers in the tri-state area around Pittsburgh.

Of the respondents in this year’s survey by Downtown Pittsburgh-based consultant Cowden Associates Inc., 94 percent said senior executives are involved in making decisions about investments, up from 30 percent in 2007.

...in the Pittsburgh Post-Gazette (full article):

The survey of 128 area employers also found that 25 percent of companies were automatically enrolling employees in 401(k) plans, up from 16 percent in 2007.

Cowden said the survey also identified a major deficiency among plan sponsors: One-quarter said they did not have an investment policy statement, which outlines the general investment goals and objectives of a retirement plan.

...in the Pittsburgh Tribune-Review (full article):

Employers in the Pittsburgh region are taking action to retain and attract top employee talent by increasing contributions to their workers' 401(k) and related retirement plans well above the standard 3 percent mark, a consultant's survey found.

Cowden Associates Inc.'s second annual survey of employers who sponsor defined-contribution plans released Thursday found a substantial year-over-year percentage increase in employer matching contributions.