Was reading some interesting stats the other day.
According to the DOL, there are, like, 650,000 retirement accounts in the U.S…. 80% of which are 401(k) plans.
When these plans were audited by the Employee Benefits Security Administration (EBSA) (which is the regulatory body that enforces the Employee Retirement Income Security Act which governs retirement plans), about 75% of all plans (logically, most of them being 401(k)s) were found to have an ERISA violation and were out of compliance with the tax laws.
Is that serious?
When I read about these stats several years ago, only maybe 40% or 50% were out of compliance, so… it’s going in the wrong direction.
The IRS is playin catchup with these violations but… when they finally do get around to them, it means mucho fines.
It also means potentially the plan can be dissolved if the violation is serious enough or there is clear evidence that there’s no practical way to fix the mistake.
What does that mean for you?
It means that, at minimum, someone’s going to be paying some fines and employees are going to take it on the chin.
Worst case scenario is your 401(k) plan is totally dissolved and you immediately pay tax on everything in there and you lose your retirement plan.
How long till they get all the out-of-compliance plans?
No idea. No one knows. Maybe 5 years? Maybe 20 years.
It’s a risk lots of people are willing to take for the tax gimmick of a retirement plan.
Of course, not everyone plays that game.
Some people don’t save money at all.
Not a good option either, but of course I’m biased.
And if neither of those options sounds appealing to you?
Possibly life insurance is your ticket.
Life insurance as a savings plan is a private contract, is simple to maintain, and only in very unusual circumstances are they ever out of compliance with state laws or IRS regulations.
Mostly, it’s a “set and forget” kind of deal and mostly it’s because the contract terms are set in advance and do not change for the life of the contract, which… is forever… or rather, until you die.
Anywho, if you want to know what an insurance policy can potentially do for you, join my email list today and learn how we do things round these parts.
Also published on Medium.