May 2014 Fun Facts

  • Did you know… two trees can create enough oxygen for a family of four.
  •  Did you know… beavers have orange teeth.
  •  Did you know… you breathe in about 13 pints of air every minute.
  •  Did you know… the dot over the letter “i” is called a tittle.

Stay tuned for next month’s Fun Facts!

2014 401(k) Compliance Dates to Remember

SMA Services, Inc. has comprehensive solutions for your financial needs. We’ve been serving the needs of physicians for more than 28 years. We’ve done the due diligence and have selected partners that will work for you; plus, our on-staff experts are here for you.

For some time now we have found that for many people who have some level of responsibility for their company’s 401(k) plan, fiduciary responsibility seems to top their list of priorities. We can help you manage these concerns.

As a valued partner, Fidelity has developed a compliance calendar that highlights key dates for plan sponsors to be aware of and we are making this available to you. This calendar will help you stay on top of your fiduciary obligations throughout the year. Better yet, call us. We can help you stay on track!

We recognize that staying aware and current is important. A recent survey of plan sponsors indicated that “advisors should be proactive and consultative across many areas” and 56% of these respondents wanted their advisor to consult them on managing their fiduciary responsibilities and risks.*

Our goal is to provide retirement solutions designed with a client’s needs in mind. In an unbundled environment, TPA (what does TPA stand for?) services is our core competency. We provide a broad suite of retirement plan services — helping reduce your burden and potentially saving you money. Plan design is more than choosing from a list of features. It requires getting to know your organization and understanding the unique challenges your participants face. It also requires specialized expertise in managing the compliance testing, government filings, and other reporting requirements that you’ll face.


Employee Spotlight – Fadwa Shunnarah

Fadwa ShunnarahIf you have ever called SMA Tours to make travel arrangements, you have probably spoken with Fadwa Shunnarah. Fadwa, who has worked in the Tours department since 1987, is extremely knowledgeable when it comes to international travel and books airfare, hotels, and rental cars for trips abroad. In addition, she also arranges cruise travel and group travel escort groups. “I have worked with physicians for 25 years and try my best to provide prompt and friendly service,” Fadwa said. “I truly enjoy helping everyone and they have made me feel like part of the family.”

Although her job sometimes requires her to be available “24/7”, Fadwa doesn’t mind at all. “Sometimes travelers experience an emergency such as cancelled or delayed flight,” she said, “And I am here to help them in any way I can.”

Fadwa is very active in her church and in her spare time, she enjoys traveling, spending time with her family, and cooking Middle Eastern cuisine. Her favorite dish? “There are so many delicious things but Stuffed squash is top of the list.


Did you receive a refund (1099-R) from your 401(k) plan?

Financial advisors, like me have encouraged people who participate in their 401(k) plan to contribute as much as possible. In many cases, your retirement plan platform offers you online tools to assist in projecting how much you need to save to achieve your desired income replacement level when you get to retirement age. However, it may be surprising to find out that business owners and highly compensated employees (HCEs) are shocked to hear that they are not permitted to contribute as much as they wanted. Unfortunately many employees and business owners receive a refund otherwise known as a 1099-R for corrective distributions when their employer’s 401(k) plan fails the Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests. This often leaves the participant confused.

  • Actual Deferral Percentage Test (“ADP Test”).
    A 401(k) plan must perform an ADP test as of the last day of each plan year to confirm that the highly compensated employees do not contribute disproportionately more to the plan than the non-highly compensated employees. The other alternative to an ADP Test is for the plan to qualify as a safe-harbor plan by making a certain level of employer contribution to the participants.
  • Actual Contribution Percentage (ACP Test).
    Plans which accept employee post-tax contributions or employer matching contributions must perform an ACP test as of the last day of each plan year to confirm that the highly compensated employees do not disproportionately benefit from such contributions. A safe harbor plan may also avoid an ACP Test.

For 2014 a HCE is defined as earning compensation of $115,000 or having at least 5% ownership. The IRS wants to ensure that the contributions of non-highly compensated employees (NHCEs) are proportional to contributions made for HCEs. The nondiscrimination rules apply to the elective 401(k) deferrals that they contribute out of their own salary (ADP test) as well as to the match contributions they receive from the employer (ACP test).

As the NHCEs contribute more into the plan, the HCEs are allowed to contribute more into the plan, up to the legislative maximum limits. For example,

If the Average Deferral Percentage of NHCEs is:

Less than 2%, then the maximum average ADP of HCEs is 2 times the average for the NHCEs.

Between 2% and 8%, then the maximum average ADP of HCEs is the average for the NHCEs plus 2%.

More than 8%, then the maximum average ADP of HCEs is 1.25 times the average NHCEs ADP.

Discrimination Test Refunds

The plan distributes the excess contributions to HCEs, to lower their average percentage contribution until the ADP test is passed. The distributions are made first to HCEs who deferred the highest dollar amounts, not the highest percentage, and they must include earnings. If distributed within 2 ½ months of the end of the plan year, there is no tax penalty to the employer. If returned after 2 ½ months, the employer is subject to a 10% excise tax. HCEs report the distribution as taxable income in the year in which the excess is distributed. The recipients of the excess contributions receive a Form 1099-R to facilitate their tax reporting.

Plans can base the ADP and ACP percentages for NHCEs on either the current or the prior year contributions. A plan can change from prior year testing to current year testing during any plan year, but once current year testing is elected, the employer cannot change back to prior year testing except under limited circumstances.

Good news…it doesn’t end here. Corrections can be made and we can help. SMA Services, Inc. provides TPA services to plan sponsors who offer a 401(k) plan.

Our goal is to provide retirement solutions designed with a client’s needs in mind. In an unbundled environment TPA services is our core competency. We provide a broad suite of retirement plan services — helping reduce your burden and potentially saving you money. Plan design is more than choosing from a list of features. It requires getting to know your organization and understanding the unique challenges your participants face. It also requires specialized expertise in managing the compliance testing, government filings and other reporting requirements that you’ll face. Call us


Have you ever heard of BrightScope?

If you have a 401(k) plan then you may want to read on.

BrightScope is the leading independent provider of 401k ratings and financial intelligence, quickly becoming recognized as the industry standard in 401k analytics. Frequently featured in such publications as The Wall Street Journal, BusinessWeek, and CNNMoney, The BrightScope Rating comparatively rates the relative quality of a 401k plan, and provides rankings for each 401k plan across 6 critical metrics including total plan cost, investment menu quality and participation rate.

With the increased scrutiny on retirement savings and vehicles across the country, the Department of Labor has recently released its Final Rule on Participant Fee Transparency. This legislation has already gone into effect and will affect every 401k plan across the country – including yours.

The new regulations call for fully disclosed expense reporting to every single participant on a regular basis. As an acting fiduciary, you are then required to show that these expenses and fees are fair, prudent and reasonable as benchmarked against other options. This reporting requirement also applies to investment options and selections; again shown as benchmarked against other options. The DOL explicitly outlines its comparative format requirement within the rule.

BrightScope provides a rating for 401(k) plans. The BrightScope Rating snapshot gives you an idea of how your plan looks as compared to your peers and the industry on the whole. I can help you understand what your rating means and have exclusive access to the underlying data – as well as knowledge of how to improve your score. Now is the time to pay attention to the performance of your 401k and how it will look to your participants when they begin receiving their detailed statements, so that you have the knowledge and confidence to address your participants’ concerns.

We are expanding our 401(k) consulting group to help educate Plan Sponsors on the enhancements of 408(b)(2) regulations, IRS form 5500, and Schedule A & C relating to total plan cost. At SMA Services, Inc., we believe we can be more than one thing to our clients. We partner with you across all aspects of your retirement plan. Our focus is to provide plan sponsors with viable options that can help make their 401(k) plan a success. We never lose sight of the fact that our job is to help your employees plan for a better retirement and that takes a team of dedicated, knowledgeable, and resourceful people. Our retirement plan service model guides you through the process. Partnership is what makes your 401(k) plan a great benefit. Call Courtney Zanghi at 800.423.4992 x115 or


What is an ERISA Fidelity Bond and do you have one?

If you are acting in a fiduciary capacity with respect to your company’s 401(k) plan, you may be personally liable for any losses incurred by the plan due to a fiduciary breach. Consider the amount of assets in your plan and the degree of your personal liability. How do you protect yourself, as well as the plan participants, from losses due to fraud or dishonesty?

ERISA (Employee Retirement Income Security Act) requires 401(k) plans to have a fidelity bond covering “every person who handles funds or other property of such plan.”1 The purpose of ERISA requiring a bond is to protect the plan against loss due to fraud or dishonesty by plan fiduciaries and others who handle plan assets, whether directly or through others. The definition of a plan fiduciary is a person who is considered to “handle” plan assets. This person has physical contact with cash or checks and is able to secure physical possession of plan assets, or has the ability to transfer plan assets to themselves or a third party. The fidelity bond must cover all fiduciaries and anyone who has actual authority over plan assets. The responsibility for calculating contributions or working on the payroll does not rise to the level of “handling” plan assets unless the person has the authority to cut the check and remit it to the trust.2 1,

The amount of the fidelity bond coverage needed is determined by plan assets at the beginning of the year. The plan is required to have a bond for at least 10% of the amount of plan assets, but generally no less than $1,000 and no more than $500,000. The bond can be purchased from an approved corporate surety company. As a quick note, the bond cannot be obtained from a surety company in which the plan has any direct or indirect control or significant financial interest.

What does the bond get you…? If you have the maximum coverage, it provides insurance against $500,000 of losses caused by one of the fiduciaries due to fraud or dishonesty. The trick question is… what if your loss exceeds $500,000? If you are a fiduciary, you may be personally liable for all or part of that loss to plan participants!

Now what? Ever hear of fiduciary liability insurance? As we just discussed the ERISA fidelity bond protects the plan against certain losses, fiduciary liability insurance protects plan fiduciaries from losses incurred in their role as the fiduciary, but not from losses caused by fraud or dishonesty. The main purpose of the fiduciary liability coverage is to cover “innocent” fiduciaries that still may be liable to participants for plan losses. Fiduciary liability insurance is designed to cover claims for breaches of fiduciary duty.

Lastly, ERISA fidelity bond coverage is required to protect your plan. You may want to also consider some form of fiduciary liability insurance to protect your key executives who are acting in some sort of fiduciary capacity with respect to the 401(k) plan.

Did you know SMA Services, Inc. offers retirement plans? From your SIMPLE IRA to SEP IRA all the way to your traditional 401(k) plan SMAS offers retirement plan with your goals in minds. Our goal is to help you choose a retirement plan with long-term goals of retirement savings in mind. We take pride in providing personal service and attention to detail to our member and clients. By adhering to a structured retirement plan service model we work closely with you to make the job of providing a retirement plan easier and turn-key. 

408(b)(2)… Ever hear of it?

You should have if you have a 401(k) plan. What it is…it is the proposed regulation relating to service provider disclosures under the Employee Retirement Income Security Act (ERISA) Section 408(b)(2). In other words, plan sponsors must act prudently and know the fees of their retirement plan. ERISA requires plan fiduciaries, when selecting and monitoring service providers and plan investments, to act prudently and solely in the interest of the plan’s participants and beneficiaries. Responsible plan fiduciaries also must ensure that arrangements with their service providers are “reasonable” and that only “reasonable” compensation is paid for services.1

It’s now time to realize that YOU ARE A FIDUCIARY! Your company, as a 401(k) sponsor, as well as company-decision makers who direct plan operations (including trustees) are ERISA fiduciaries. Don’t fret; let’s take a step back and understand it.

Fiduciaries need to deliberate and make decisions regarding their company’s 401(k) plan. One of the best ways to demonstrate such deliberation is to document the decision-making process. Documentation can be in the form of meeting minutes, memos, or committee corporate resolutions. Unfortunately, there are no hard-and-fast rules to abide to. Working with a qualified 401(k) advisor can definitely help. The end result is that any written documentation of how and why the fiduciaries made their decision will work to protect them from breach of duty claims.

Section 408(b)(2) fee disclosure rules have been in place since August 2012. The particular matters that plan fiduciaries must consider have been expanded by the new fee disclosure rules. Plan fiduciaries can no longer claim ignorance. Responsible plan fiduciaries must evaluate each provider’s fee disclosure statement to determine:

(1)     The “reasonableness” of provider fees (what are you paying for?)

(2)     Does the provider’s fee disclosure document meet all of the requirements of the fee disclosure rules and have you reviewed these disclosures and understand them?

(3)     Do you have a well-documented record of the evaluation of the provider fee disclosures?

(4)     As a plan fiduciary (or should this say As plan fiduciaries,…) do you meet regularly to review the plan’s investment performance and provider fees?

A “no” answer to any of these questions may be a red flag.

What is the Department of Labor (DOL) really trying to accomplish
with 408(b)(2)? Read on…

 Disclosure of Services and Compensation


  • Information required to be disclosed by a CSP (covered service provider) must be furnished in writing to a responsible plan fiduciary for the covered plan. The rule does not require a formal written contract delineating the disclosure obligations.
  • CSPs must describe the services to be provided and all direct and indirect compensation to be received by a CSP, its affiliates, or subcontractors.
  • “Direct compensation” is compensation received directly from the covered plan. “Indirect compensation” generally is compensation received from any source other than the plan sponsor, the CSP, an affiliate, or subcontractor.
  • In order to enable a responsible plan fiduciary to assess potential conflicts of interest, CSPs who disclose “indirect compensation” also must describe the arrangement between the payer and CSP pursuant to which indirect compensation is paid. CSPs must identify the sources for indirect compensation, plus services to which such compensation relates.
  • Compensation disclosures by CSPs will include allocations of compensation made among related parties (i.e., among a CSP’s affiliates or subcontractors) when such allocations occur as a result of charges made against a plan’s investment or are set on a transaction basis.
  • CSPs must disclose whether they are providing recordkeeping services and the compensation attributable to such services, even when no explicit charge for recordkeeping is identified as part of the service “package” or contract.
  • Some CSPs must disclose an investment’s annual operating expenses (e.g., expense ratio) and any ongoing operating expenses in addition to annual operating expenses. For participant-directed individual account plans, such disclosures must include “total annual operating expenses” as required under the Department’s new participant-level disclosure regulation at 29 CFR §2550.404a-5.
  • The final rule contains a “pass-through” for investment-related disclosures furnished by recordkeepers or brokers. A CSP may provide current disclosure materials of an unaffiliated issuer of a designated investment alternative, or information replicated from such materials, provided that the issuer is a registered investment company (i.e., mutual fund), an insurance company qualified to do business in a State, an issuer of a publicly-traded security, or a financial institution supervised by a State or Federal agency.
  • Service providers may use electronic means to disclose information under the 408(b)(2) regulation to plan fiduciaries provided that the covered service provider’s disclosures on a website or other electronic medium are readily accessible to the responsible plan fiduciary, and the fiduciary has clear notification on how to access the information.

We know this is a lot to digest and we are here to help you understand your 408(b)(2) report. The SMA Services, Inc. team is here to educate, inform, and empower our clients by delivering the most accurate and timely information available and by providing the highest quality of products and services. Call us and learn more about our 401(k) consulting department.



401(k) Plan Sponsor Checklist: We Can Help!

You may be surprised but the DOL doesn’t want to keep it a secret, so it spells out exactly what it expects from the 401(k) plan sponsor and any other fiduciary. In a nutshell, here is what the DOL says about anyone acting in the capacity as a fiduciary for a 401(k) plan should do:

  • Act solely in the interest of the participants and their beneficiaries;
  • Act for the exclusive purpose of providing benefits to employees participating in the plan and their beneficiaries, and pay “reasonable expenses;
  • Carry out duties with the care, skill, prudence and diligence of a prudent person familiar with such matters;
  • Follow the plan documents; and
  • Diversify plan investments.

Being a 401(k) fiduciary is not as tough as you may think. Following a checklist may lead you in the right direction but can often leave you confused as to exactly what your fiduciary responsibilities may be. What matters most is that plan sponsors take the time to understand their responsibilities and know who to go to when questions arise.  Surprisingly, many companies do not know their fiduciary responsibilities under the law. To gain perspective they reach out to 401(k) advisors for help.

Staying Organized - A Fiduciary Checklist

By working with us, you can meet your fiduciary duty to monitor plan fees and make important plan provider decisions, while helping to ensure the best possible 401(k) plan at the most competitive cost for your participants. SMA Services, Inc. is here to provide you with highly personalized retirement plan service that is known for timely, accurate financial information that can help you effectively manage your plan and help you focus on reaching your retirement goals.

Contact Courtney Zanghi at 800.423.4992 x115 or



What would your 401(k)’s BrightScope rating be?

BrightScope®, Inc. is a financial information company that brings transparency to the retirement plan market. As the leading independent provider of retirement plan ratings and investment analytics to participants, plan sponsors, asset managers, and advisors in all 50 states. BrightScope also reviews more than 200 unique data inputs per plan and calculates a single numerical score which defines 401(k) and 403(b) plan quality at the company level.

As a value add,  BrightScope Advisor Pages offer the first comprehensive and publicly available directory of Financial Advisors.

BrightScore Example



TPA Services, Our Core Competency

SMA Services, Inc. provides TPA services to plan sponsors who offer a 401(k) plan.

Our goal is to provide retirement solutions designed with a client’s needs in mind. In an unbundled environment TPA services is our core competency. We provide a broad suite of retirement plan services — helping reduce your burden and potentially saving you money. Plan design is more than choosing from a list of features. It requires getting to know your organization and understanding the unique challenges your participants face. It also requires specialized expertise in managing the compliance testing, government filings and other reporting requirements that you’ll face.

Administrative Schedule of Fees
Effective January 1, 2014

Initial Set-Up Fee
Prototype plan: $350.00 per plan

Annual Administration FeeAll investments through bundled product: $850.00 per plan

The above fees cover the following:
1.  Prototype Documents (Adoption Agreement, Plan Document and Summary Plan Description)
2.  Annual Reports and Related Schedules
3.  Quarterly Reports (if not received by investment company)
4.  Testing
5.  Vesting Calculations
6.  Assistance with Eligibility and Contribution Calculations
7.  Distribution Calculations
8.  Toll Free Customer Assistance
Additional Fees
Independent Audit Prices vary per firm
Cross Tested Contribution Formula $500.00
Plan Amendments (voluntary) $150.00
Trust Reconciliation $100.00 per hour
Loan Origination Fee $75.00 paid by participant
Disbursement Fee $50.00 paid by participant
Plan Termination Fee (Form 5310) $1,500.00
Research $75.00 per hour
Overnight Mail Service (letter size AM Delivery) $25.00
Wire Transfer Fee $35.00 deducted from wire amount
5558 Extension of Time $200.00
Republish of 5500 $100.00
Recreate Year-end Work $425.00 minimum, $100.00 per hour
* The above fees are current but subject to change