Monthly Archives: January 2018

Should You Contribute to Your Company’s 401(k) Plan?

7027595775_3738f2757e_bMost private companies offer a 401(k) retirement plan. When you begin a new job after graduating from college, you will be asked if you would like to contribute to the company’s 401(k) plan. Recent college graduates just starting their careers are usually not focusing on retirement.

Should you be thinking about retirement this early in your career? The answer is YES. You should take advantage of your employer’s 401(k) as soon as you are eligible. Here are some of the reasons:

  • It is a painless way to save money for your future. Your company automatically deducts your contributions every time you are paid. You can contribute a specific dollar amount or as a percentage of your wages from each pay check. After a while, most people don’t even realize  this money is coming out of their pay check. The maximum amount you can contribute to your 401(k) plan in 2018 is $18,500 if you are under 50 years of age.
  • You can get additional money from your company. Most companies offer some kind of employer match to encourage workers to participate. At the least, contribute the minimum dollar amount necessary to max out your company’s to 401(k) match into your retirement account.
  • You can get tax breaks when you contribute to a 401(k) plan. The money you contribute from your salary is pre-tax so all of the dolars are being invested. Also, the money in your 401(k) account increases tax-deferred. The earnings in your account are re-invested into your plan.  The interest and dividends are not taxable on your tax return until you withdraw the money from your account. Your retirement account can grow faster because these earnings are re-invested.
  • The money is portable so you can take your money from your account if you change jobs. Your best option at that time is to roll the balance over into your new employer’s plan or another type of retirement plan, such as an IRA. This is a simple procedure and will still keep your retirement account balance tax-deferred.
  • Loans and hardship withdrawals may let you take money out of your account in an emergency.  Most plans offer loans (which you have to repay) or hardship withdrawals (which you don’t, but is taxable) as a way of taking money out of your 401(k) plan in an emergency. But, taking money out of your plan early comes with strings attached. It is recommended to explore other options before you withdraw your money before age 59 ½ to avoid penalties.

The road to retirement is a long one and the sooner you start the more you will accumulate in your retirement plans. There are other financial goals that you will also want to save money for such as a buying a home or starting a family, just don’t ignore your retirement and the benefits of contributing to your company’s 401(k) plan. If you need further advice on contributing to your employer’s 401(k)  plan, contact our office with any questions.

Brian Reilly, Manager


Best Practices for Business and Travel Expense Policies

iuTime for Travel and Entertainment
It’s that time of year when there is lots of travel and entertaining taking place. Probably more personal travel than business but certainly business entertaining is happening. Businesses need to establish, monitor and enforce employee travel and entertainment guidelines. Some employers think that controlling expenses, too much, can risk talent recruitment so finding the optimal balance is key.

Is the misuse of Company funds by employees a widespread issue? Various estimates put the average of travel and entertainment expenses between 6% and 12% of an organization’s expenses. Employee abuse of travel and entertainment expenses appear to remain an issue for many organizations. A 2016 report by the Association of Certified Fraud Examiners estimated that employee fraud in this area accounted for 15% of all the misuse of corporate assets in the United States.

While there may be no perfect solution for preventing this misuse, it can hopefully be mitigated by establishing some best practices.

Policy: Establish a formal policy and training process. Provide a copy of the policy to all employees. The policy should include a section on how to handle instances of noncompliance and the measures to be taken in the case of fraud.

Train employees on how to conserve expenses. Review with the employees the travel and entertainment policy on a point-by-point basis, as opposed to, handing them a wordy policy for them to follow.

There should be continuous discussions with employees about the purposes of the organization’s travel and entertainment policy. Communicate the organizations expense management goals and the employee’s role in helping meet those objectives.

Approvals: Approvers need to be cognizant of the policy and which details they are required to verify and why.

Immediate managers should oversee the expenses charged by the employees under their supervision. Managers have an immediate impact on controlling employee expenses and keeping them within budget. It is also an easier process for an employee to explain a particular expense to someone who is already familiar with their specific job responsibilities.

Monitoring: Establish two controls at different stages of the expense reimbursement process. First control, at time of receipt submission and the second control could be performed during month end closing and analysis.

In addition, technology can also aid in creating a balance between monitoring and trust. Data management tools are available to detect possible fraudulent activity. This can be utilized for overall expenses or for established thresholds, as many organizations may not require receipts for expense under an established threshold. These tools usually apply Benford’s Law which analyses the frequency of digits to determine possible abuse. To prevent fraud and the appearance that noncompliance is accepted, policies should be firmly and consistently enforced.

Terry Ann Wheeler, CPA