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Benefit PlansHELPING DEALERS WITH BEST PRAC TICES TO ENSURE YOUR

EQUIPMENT IS PROTEC TED

www.equipmentdealer.org

Presenter

Bill Hill

President

Visor Benefits

P: 314.779.0140

E: [email protected]

AGENDA1. Welcome/Overview2. Definition of a Plan3. Liability4. Plan Management5. Required Notices6. Annual Reporting7. Event Filing8. 55009. Summary Plan Descriptions10. The Future11. Regulation Changes12. Questions

[email protected] N. Meramec Ave. STE 430St. Louis, MO 63105

GET IN TOUCH!
























DOL 2017 Budget Request




Questions?COMMIT TED TO BUILDING THE BEST BUSINESS ENVIRONMENT FOR

EQUIPMENT DEALERS.


Tax & Benefit UpdateHELPING DEALERS WITH BEST PRAC TICES TO ENSURE YOUR

EQUIPMENT IS PROTEC TED


Presenters

Dennis Ulrich, CPA

Managing Principal

Scheffel Boyle CPAs

618.656.1206

[email protected]

Mike Fitzgerald, CPA

Principal

Scheffel Boyle CPAs

618.465.4288

[email protected]

AGENDA1. Welcome/Overview2. Fringe Benefits

1. Health Benefits2. Retirement Plans3. Expense Reimbursement4. Achievement Awards

3. LIFO4. State and Local Tax5. 179 Deduction and Bonus Depreciation6. Proposals on Business Tax Changes7. Questions

[email protected] N. Meramec Ave. STE 430St. Louis, MO 63105

GET IN TOUCH!

Fringe Benefits


OR

Fringe BenefitsHealth Benefits

Retirement PlansExpense ReimbursementAchievement Awards


Fringe BenefitsCafeteria Plan Health Insurance Disability Insurance Unreimbursed Medical Expenses Use it or lose it

Now $500 carryforward

Dependent Daycare


Fringe BenefitsHealth BenefitsHealth Insurance Certain High-Deductible Plans – qualify for HSA Other health plans


Fringe BenefitsHealth BenefitsHSA Certain High-Deductible Plans qualify Plan that allows pre-tax contributions for qualified medical expense NOT a use it or lose it, it carries over each year According to the EDA Compensation and Benefits Report, only 23% of you utilize an HSA

HRA Employer funds Normally a portion of the deductible Small Business HRAs


Fringe BenefitsHealth BenefitsDisability Insurance If policy is employer-paid or premium is paid through a Cafeteria Plan, basically taxable

income from benefits If policy is employee-paid after tax, basically non-taxable income from benefits


Fringe BenefitsLimitationsHighly compensated employees exempt from certain fringe benefits

Partners and more than 2% shareholders of “S” Corps are prohibited from many fringe benefits


Fringe BenefitsRetirement PlansQualified Plans

Defined contribution plans

Defined benefit plans

Nonqualified Plans

Phantom Stock

Employment Agreements


Fringe BenefitsRetirement Plans Defined Contribution Plans

Simplified Employee Pension (SEP)

Savings Incentive Match Plan for Employees (SIMPLE)

401(k)

Profit-Sharing Plan


Fringe BenefitsRetirement PlansSEP-IRA

Establishment Model SEP (IRS Form 5305-SEP) Prototype or individually designed SEP Must be established by employer’s tax return due date, including extensions

Cost to establish a SEP-IRA


Fringe BenefitsRetirement PlansSEP-IRA, ContinuedEligible Employees All employees are eligible. But, can exclude: An employee that is not 21 years old during contribution year An employee who has not performed any service for the employer during at least 3 of the

5 years immediately preceding the contribution year An employee’s compensation for the year is less than $600 Union employees Non-resident aliens with no US source of income

Employers can always be more generous with eligibility, but cannot discriminate


Fringe BenefitsRetirement PlansSEP-IRA, Continued

Contributions Discretionary employer contribution only Up to 25% of compensation Maximum contribution can’t exceed $53,000 Generally must be a uniform allocation Contributions are 100% vested immediately


Fringe BenefitsRetirement PlansSEP-IRA, ContinuedAdvantages Easy and inexpensive to establish and maintain No annual filing (Form 5500) Contributions are discretionary

Disadvantages Easy eligibility makes it expensive for some employers Difficult to design around owners or other targeted groups Employer is funding 100% Employer contributions immediately 100% vested


Fringe BenefitsRetirement PlansSimple IRA

Establishment Model SIMPLE (IRS Form 5305-SIMPLE or 5304-SIMPLE) Prototype or individually designed SIMPLE Must be established no later than October 1 to be effective for that same calendar year Cost to establish a SIMPLE-IRA


Fringe BenefitsRetirement PlansSimple IRA, ContinuedEligible Employer Employed during preceding calendar year no more than 100 employees, and Does not maintain any other qualified plan, unless maintained solely for union employees

Eligible Employee Any employee who received at least $5,000 in compensation from the employer during any

two preceding years, and The employee is reasonably expected to receive at least $5,000 in compensation during the

year Employer can always be more generous with eligibility, but can’t discriminate Contributions made even if employee is 70.5 years old


Fringe BenefitsRetirement PlansSimple IRA: Contributions

Employee Contribution May defer up to $12,500 per year If age 50 or older, may defer an additional $3,000

Employer Contribution Non-elective contribution 2% employer contribution whether or not the employee defers To use non-elective contribution, must notify employees before annual deferral notice given Max employee compensation for 2% contribution is $265,000 Matching Contribution Dollar for dollar match up to 3% of employee’s compensation, not limited to $265,000


Fringe BenefitsRetirement PlansSimple IRA, Continued

Advantages Easy and inexpensive to establish and maintain No annual filing (Form 5500) Employees generally share in funding their retirement

Disadvantages Easy eligibility makes it expensive for some employers Employer contributions immediately 100% vested Limits on amounts that can be contributed when compared to other plans


Fringe BenefitsRetirement Plans401(k) Plan

Establishment Prototype or individually designed plan

Cost to establish plan

Reporting to IRS, DOL, and employees Summary Plan Description Summary of Material Modifications Summary Annual Report Form 5500


Fringe BenefitsRetirement Plans401(k) Plan, ContinuedEligible Employer

Eligible Employee, can restrict to… 21 years old and 1 year of service (generally 1,000 hours)

Employee Deferral May defer up to $18,000 per year If age 50 or older, may defer an additional $6,000

Discrimination Testing

Vesting Schedule


Fringe BenefitsRetirement PlansSafe Harbor 401(k) Plan

Employer contribution requirement Non-elective – 3% contribution Basic matching 100% match from 0% - 3% deferral 50% match on next 2% deferral Enhanced matching Must be at least equal to basic match at all points Contributions are 100% vested immediately

Annual notice requirement Employer must notify employees of contribution type Must provide annually at least 30, but no more than 90 days before the first day of the plan year


Fringe BenefitsRetirement PlansSafe Harbor 401(k) Plan, Continued

Advantages Avoid discrimination test for deferral, which allows owners and other HCE’s to maximize

deferrals Can exclude part-time, seasonal employees Higher deferral limits vs. SIMPLE-IRA Employees fund most of the contribution vs. PS Plan

Disadvantages More costly to maintain than a SIMPLE-IRA or SEP


Fringe BenefitsRetirement PlansSafe Harbor 401(k)/Profit-Sharing Combo Plan

Most efficient way for employer to maximize contributions ($53,000 for 2016)

Combines advantages of each plan type

Can be part of a single document and single annual reporting requirements


Fringe BenefitsRetirement PlansProfit-Sharing PlanEstablishment Prototype or individually designed plan Must be established no later than last day of plan year

Cost to establish plan

Reporting to IRS, DOL, and employees Summary Plan Description Summary of Material Modifications Summary Annual Report Form 5500


Fringe BenefitsRetirement PlansProfit-Sharing Plan, Continued

Eligible Employer

Eligible Employee – can restrict to… 21 years old and 1 year of service (generally 1,000 hours)

Contributions Discretionary, similar to SEP-IRA contributions May provide for a non-uniform allocation Allows employer to target certain employees or other classes (divisions, locations, etc.) Must pass certain coverage tests to do this Employer can subject contributions to a vesting schedule


Fringe BenefitsRetirement PlansProfit-Sharing Plan, ContinuedNon-Uniform Allocations Integration with Social Security (Permitted Disparity) Integration with 100% of wage base ($127,200 in 2017) allows additional contribution for excess wages of 5.7% Integration at less than 100% of wage base allows for additional contributions between 4.3% and 5.4% New Comparability Plan (Cross-Tested Plan) Discrimination is tested on the basis of benefits, not contributions Employer defines groups [for example, highly compensated employees (HCEs), non-highly compensated employees

(non-HCEs), owners, non-owners, managers, salesmen, officers, etc.] Projected benefit rate is determined, which is based on age, compensation, and a growth factor The benefit rate of each group is compared to each benefit rate for HCEs. If benefits are within a permitted range (generally 70%), then the

contributions are non-discriminatory This can allow for contributions for certain targeted or preferred groups to exceed those of other groups As an example, you may be able to contribute 15% for HCEs and 5% for Non-HCEs provided the above testing is passed


Fringe BenefitsRetirement PlansProfit-Sharing Plan, Continued

Advantages Can target certain groups (owners, etc.) Can exclude part-time, seasonal employees Can reward loyalty through vesting

Disadvantages More costly to maintain than a SEP-IRA, SIMPLE Employees don’t contribute to their own retirement


Fringe BenefitsRetirement PlansDeciding Which Plan is Right For You

Employer’s Goal Maximize for owners/key employees Target certain divisions, classed of employees, etc. Allow employees to save for their retirement Reward employees as company performs well Budget considerations

Flexibility = ComplexityComplexity = Cost


Fringe BenefitsExpense ReimbursementAccountable Plan Excluded from wages Must provide support Business-related Turned in within reasonable time frame Excess reimbursements must be returned

Employer Benefit: potentially less payroll taxes, workman’s compensation insurance, and retirement benefits

Non-Accountable Plan Included in wages No receipts/expenses turned in


Fringe BenefitsAchievement AwardsPotentially exclude gifts and awards up to $1,600 if made through a qualified plan Length of service awards Safety awards


LIFOLast in, first out inventory method

Defers taxes


1 2 31 2 3

3 2 1

INVENTORY FIFO

LIFO

LIFOExampleInflation is 2.5%/yearInterest cost for money is 3.5%/yearYour combined Federal and State Income Tax rate is 35%Your starting inventory is $10,000,000

Do you realize that in 20 years your $10,000,000 in inventory would have a cost of approximately $16,400,000? If you were on LIFO, your tax deferred and interest savings could be:

Federal and State Tax $2,240,000

Interest 757,000

$2,997,000


LIFOAdvantages: Defer taxes Save interest cost on borrowed money

Disadvantages: Use for financial statements if used for tax No lower of market value adjustment Somewhat more complicated


LIFOFAQ’s Do I physically have to sell the last piece of inventory first? How do I do this and keep track of it?

Can I combine LIFO with writing down to market certain items?

Can I use LIFO for tax and cost for financial statements?


State & Local Tax (SALT)Payroll Taxes Where does the employee live? Where does the employee work?

Sales Tax Nexus Where is the sale made?

Income Tax Nexus Different apportionment factors


179 & Bonus DepreciationBonus Depreciation 50% for 2015 – 2017 40% for 2018 30% for 2019 After 2019 – Expired


179 & Bonus Depreciation179 Expensing Election Permanently extended $500,000 and $2 million indexed


Proposals on Business Tax ChangesTax Rates on C Corps


CURRENT LAW TRUMP PROPOSAL GOP PROPOSALGraduated rates from 15% - 35%

At $75,000 of taxable income, rate is 34%

15% flat rate on income retained within the business


Proposals on Business Tax ChangesTax Rates on Flow-Through Entities


CURRENT LAW TRUMP PROPOSAL GOP PROPOSALIncome flows through S-Corps and Partnerships to individual returns and taxed as ordinary income


Max rate of 25% on income from pass-through entities

Proposals on Business Tax ChangesBusiness Deductions


CURRENT LAW TRUMP PROPOSAL GOP PROPOSALBusiness can deduct all ordinary and necessary business expenses

Eliminates some business deductions and credits.

Full write-off of business investment (no more depreciation)

Allows interest expense against interest income. Eliminates domestic production deduction.

Proposals on Business Tax ChangesNet Operating Losses


CURRENT LAW TRUMP PROPOSAL GOP PROPOSALCarryback of 2 years and carryforward up to 20 years

No mention No carryback but indefinite carryforward increased by an interest factor for time value of loss.

Current year use of NOL limited of 90% of net taxable income before the NOL

Questions?COMMIT TED TO BUILDING THE BEST BUSINESS ENVIRONMENT FOR

EQUIPMENT DEALERS.


For information about our other webinars please visit:http://www.equipmentdealer.org/educational-webinars

[email protected]

Date post:	22-Jan-2021
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