Qualified Plan Update 4th Quarter 2017 The laws and regulations affecting retirement plans are constantly changing. It can be a challenge for you as a plan sponsor to sift through all the news to determine which proposals or new rules might impact your business’s retirement plan. Over the next 15-20 minutes, I’ll highlight the most significant legislative and regulatory developments that occurred during the fourth quarter of 2017. I will also describe how some of these developments could affect you and your plan. Presented By: Stanley Morrical Morrical Financial Services “Stanley Morrical is a registered representative with and securities offered through LPL Financial, Member FINRA/SIPC.  Investment advisory services offered through Global Retirement Partners, LLC, a registered investment advisor.  LPL Financial, Global Retirement Parters, LLC and Morrical Financial Services are separate and non-affiliated companies.” For Plan Sponsor Use Only – Not for Use with Participants or the General Public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation. ©2017 Integrated Retirement Initiatives, LLC. All rights reserved.

Agenda Legislative activity IRS update Upcoming compliance deadlines This quarter, we’ll recap the activities of two entities that drive retirement plan rule changes: Congress; and the Treasury Department, primarily through the IRS. First, I’ll review recent activity on Capitol Hill affecting retirement savings. Then I’ll recap the IRS’s current activities. We’ll finish up by looking at the upcoming compliance deadlines to help prepare you for first quarter 2018.

Disaster Tax Relief & Airport and Airway Extension Act of 2017 Legislative Activity Tax Cuts and Jobs Act Disaster Tax Relief & Airport and Airway Extension Act of 2017 Retirement Plan Modernization Act Let’s begin with a review of what’s happening on Capitol Hill. Congress passed tax reform during 4th quarter and continues to introduce stand-alone legislation that affects retirement plans.

Tax Cuts and Jobs Act House & Senate passed revised bill December 20 President Trump signed into law December 22 Reduces individual & business income tax rates Republican legislators kept tax reform a high priority during fourth quarter and passed the Tax Cuts and Jobs Act on December 20 after reconciling the differences between the House and Senate’s separate versions of tax reform bills. The President signed the bill into law on December 22. In addition to making big changes to personal income taxes, such as reducing tax rates, increasing the standard deduction and eliminating or capping many itemized deductions, the law reduces the corporate tax rate and provides a new deduction for pass-through income entitles, such as partnerships. 4

Tax Cuts and Jobs Act – Retirement Plans Retirement plan provisions Extend rollover period for plan loan offsets If participant terminates service with an outstanding loan Has until tax return due date to roll over outstanding loan balance to another plan or IRA to avoid taxation For the retirement plan industry, the biggest concern was the potential loss of tax benefits for retirement savings. “Rothification” of retirement savings, which had been much speculated as a potential revenue raising provision, is not included in the new law. Retirement plan contribution limits and tax incentives were also not affected. The primary change that will affect retirement plans will help plan participants retain the tax-deferred status of their savings if they leave an employer with an outstanding 401(k) loan. Currently, if a plan participant leaves employment with an outstanding loan, the employer typically offsets the remaining account balance by the outstanding loan amount, creating a taxable event for the participant. The participant has 60 days to roll over the outstanding loan amount to another plan or IRA to avoid taxation, and additional 10% tax if they are younger than age 59½. The new law extends this rollover period until the participant’s tax return deadline for the year in which the loan offset occurs. This extended period is effective in cases where the employee terminates employment or the plan is terminated and the loan offset occurs in 2018 or later.

Disaster Tax Relief & Airport and Airway Extension Act of 2017 Individuals who live in an area affected by Hurricane Harvey, Irma, or Maria “Qualified Hurricane Distribution” Up to $100,000 Taken before January 1, 2019 No 20% withholding No 10% early distribution tax Taxable in year of distribution or over 3-year period May repay to an IRA or plan within 3 years to avoid taxation Plan loan relief Increases limits to lesser of $100,000 or 100% of balance Extends repayment period by 1 year Earlier this fall, Congress passed legislation that provides retirement plan-related relief to victims of the hurricanes that occurred this year. Retirement plan participants who live in an area affected by Hurricane Harvey, Irma, or Maria and who sustained an economic loss may take a “qualified hurricane distribution” of up to $100,000 without needing to satisfy any other distribution triggering event. This relief is available until January 1, 2019. These distributions are not subject to the mandatory 20% withholding rule or the 10% early distribution tax. Individuals may spread the tax liability for these distributions over three years or re-contribute these amounts to an eligible retirement plan over a three-year period. This legislation also increases the plan loan limits for those affected by the hurricanes to the lesser of $100,000 or 100% of a participant’s plan balance. Qualified participants may also extend their loan repayment periods for up to one year. If you or your employees are located in a hurricane disaster area, I can help you work with your plan recordkeeper and third party administrator to understand the process for making these distributions available to your participants.

Retirement Plan Modernization Act Proposes to Increase the involuntary cashout limit from $5,000 to $7,600 Add inflation adjustments in future years Congress has recently introduced another bill that would affect retirement plans. The Retirement Plan Modernization Act would increase the amount that plan sponsors can cash out of their plans without the consent of the account owner, for individuals who no longer work for the company sponsoring the plan. Currently, the law allows plan documents to include an involuntary cashout provision. This provision allows plan sponsors to force small balances out of the plan if a former employee is unresponsive to plan communications about distributing their plan balance. Balances up to $5,000 may be cashed out of the plan. However, balances between $1,000 and $5,000 must be rolled over to an IRA on behalf of the participant rather than being distributed as a check payable to the participant. This legislation proposes to raise the cashout limit to $7,600 and add the potential for increasing the amount for inflation in future years. This bill is in the earliest stages of the legislative process right now. I will let you know if it gains any traction.

Upcoming compliance deadlines IRS Update COLAs Disaster relief RMD guidance Upcoming compliance deadlines Let’s move on now to retirement plan topics that are the responsibility of the Treasury Department and Internal Revenue Service. The Treasury and IRS have responsibility both for providing regulatory guidance and enforcing the tax-related laws for retirement plans. We’ll look first at the increased limits for 2018, then we’ll look at some additional disaster relief the IRS has provided for retirement plans. We’ll also review new IRS guidance on locating missing plan participants who are in RMD status. We’ll finish up by reviewing the upcoming compliance deadlines for first quarter 2018.

Cost-of-Living Adjustments Limit 2018 2017 Overall Contribution Limit (415 limit) $55,000 $54,000 Annual Compensation Limit (Compensation cap) $275,000 $270,000 402(g) Elective Deferral Limit $18,500 $18,000 Catch-Up Limit $6,000 HCE Compensation Threshold $120,000 Key Employee Compensation Threshold $175,000 Taxable Wage Base $128,400 $127,200 As you wrap up the 2017 plan year, one of the aspects of plan operations you and your service providers will check is that none of the statutory plan limits were exceeded. Each year in October, the IRS announces the cost-of-living adjustments (COLAs) that will affect the dollar limitations and thresholds for retirement plans in the coming year. Sometimes, the change in the cost-of-living index does not meet the statutory thresholds necessary to trigger an increase for all the limits and thresholds. For 2018, a few of the retirement plan limits will increase. These include the: Overall contribution limit that determines the maximum amount of contributions and forfeitures that can be allocated to a plan participant’s account for the year – known as the 415 limit The limit on compensation that can be considered for determining benefits – known as the compensation cap and The elective deferral amount In a separate pronouncement, the Social Security Administration announced that the taxable wage base, or the maximum amount of earnings subject to Social Security tax, will increase for 2018. In addition to affecting payroll taxes, this limit affects retirement plans that use the permitted disparity contribution allocation method (also known as Social Security integration).

Disaster Relief – Postponed Tax-Related Deadlines IRS postpones tax & retirement plan- related deadlines until January 31, 2018 Taxpayers who live in or have business in disaster area Hurricane Harvey, Irma or Maria California wildfires Applies to deadlines between date of disaster & January 31, 2018 Includes filing tax returns & Form 5500, completing rollovers & RMDs The IRS has also provided relief to individuals affected by hurricane Harvey, Irma or Maria, as well as the California wildfires. This relief is in addition to the new law we discussed earlier that allows individuals to take out up to $100,000 as a qualified hurricane distribution. You may remember from our 3rd quarter discussion that the IRS granted relief to plans, employers, and participants who live or work in areas affected by Hurricane Harvey. These folks are granted extensions for tax-related deadlines from the date they were affected by Hurricane Harvey through January 31, 2018. This same relief is now also available for those who live or work in a disaster area caused by Hurricane Irma or Maria or the California wildfires. This relief includes deadlines for filing individual and business tax returns and the annual Form 5500 series. The deadlines for certain retirement plan-related acts are also extended, such as for completing rollovers within 60 days and making a required minimum distribution.

Disaster Relief – Relaxed Rules for Hardship Distributions & Loans Applies to participants living in or working in disaster areas or who had a spouse, child or parent who did Plan may allow a hardship distribution or loan without obtaining normal documentation required, even if plan does not currently allow loans or hardships Loan or hardship must be made on or after the date of the hurricane & not later than January 31, 2018, for Hurricane Harvey or Irma March 15, 2018, for Hurricane Maria or California wildfires The IRS has also relaxed the rules for taking hardship distributions or loans for participants who have a home or worked in one of the FEMA-identified disaster areas, or had a spouse, child or parent who lived or worked in one of the disaster areas. If a participant or one of their family members has an emergency need related to Hurricane Harvey, Irma, or Maria, or the California wildfires, the plan may allow a hardship distribution or loan without obtaining the typical documentation required. A plan may grant disaster-related hardship distributions and loans even if the plan does not otherwise include these plan features. To qualify for the relief for Hurricane Harvey or Irma, the hardship distribution or loan must be made on or after the date the Hurricane hit the affected area, and no later than January 31, 2018. For Hurricane Maria and the California wildfires, hardships and loans granted under this guidance must be taken by March 15, 2018.

Disaster Relief – Relaxed Rules for Hardship Distributions & Loans Plan can rely on representations made by participant as to their need & the dollar amount requested Plan must make reasonable efforts to obtain documentation as soon as practicable Normal tax & withholding rules apply If plan document does not currently permit loans &/or hardships Must be amended by end of first plan year beginning after December 31, 2017 Plan sponsors may rely on participants’ representations as to their need for the distribution and the dollar amount needed. Plans must make reasonable attempts as soon as practical to obtain documentation that would otherwise be required for the loan or hardship distribution. If a plan allows disaster-related hardship distributions or loans to participants, but doesn’t otherwise allow for hardships or loans, the plan must be amended to add these plan features no later than the end of the first plan year beginning after December 31, 2017.

Compliance Calendar – Required Minimum Distributions (RMDs) 2017 Su Mo Tu We Th Fr Sa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 DECEMBER Moving on now, let’s talk about the compliance deadline for distributing RMDs. Federal tax law requires anyone who participates in a qualified retirement plan, such as a 401(k) plan, to begin taking required minimum distributions (or RMDs) when they reach age 70½. December 31 is the deadline by which RMDs must be paid out each year, except for the first year’s RMD which may be delayed until April 1 of the following year. To enforce this annual distribution rule, the IRS assesses a 50% excess accumulation tax on participants who fail to distribute the required amount. The IRS also has the authority to disqualify a plan if the plan sponsor does not make certain that RMDs are distributed. Because failure to distribute RMDs could result in a loss of the tax benefits to the plan sponsor and all of the participants, a plan sponsor has the authority to initiate an RMD payment if a participant does not provide RMD payment instructions. But what if you don’t know where to send the RMD check? December 31 – RMDs due for participants age 70½ & older Participants who miss RMDs are subject to 50% tax IRS may disqualify plans for failure to distribute RMDs

IRS Guidance for Missing Participants in RMD Status IRS examiners will not challenge a plan for failing to pay out RMDs to a missing participant if plan sponsor has Searched records of the plan, related plans, & the plan sponsor Searched publicly-available records or directories Used a commercial locator service, a credit reporting agency, or a proprietary internet search tool for locating individuals Sent certified mail to last known mailing address & attempted contact through appropriate means for any other contact information obtained (e.g., email or telephone) The IRS has provided guidance to help plan sponsors understand their options in situations where they do not have a valid address for a plan participant in RMD status or the participant is not responsive to communications about their RMDs. In a recent memorandum to its Employee Plans examiners, the IRS instructed examiners to not challenge a plan for failing to pay out RMDs to a participant (or a beneficiary if a payment is required) if they are unable to locate a participant, provided they have taken the following steps: Searched the plan records, records of any related plans, and other records of the plan sponsor to find alternative contact information Searched publicly-available records or directories to find alternative contact information Used a commercial locator service, a credit reporting agency, or a proprietary internet search tool for locating individuals Attempted contact through the United States Postal Service by sending certified mail to the last known mailing address, and attempted contact through the appropriate means for any other address or contact information that has been obtained (for example an email address or a telephone number) If a plan has not completed these steps, the IRS examiner may challenge the plan for failure to satisfy the RMD requirements. Your recordkeeper should provide a report to you each year to help you identify which of your plan participants are required to take an RMD for the year. I can help you work with your recordkeeper if you have questions about this report or need more information regarding the scope of RMD support your recordkeeper provides which often includes calculating RMD amounts, sending notifications to participants, and processing RMD payments.

Upcoming Compliance Deadlines January 2018 Su Mo Tu We Th Fr Sa 1 2 3 4 6 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Let’s finish out today’s presentation with some upcoming plan compliance deadlines you’ll want to be aware of for next quarter. Forms 1099-R, reporting plan distributions taken during 2017, must be sent by January 31, 2018, to individuals who received distributions from the plan. Your recordkeeper or other service provider will generate this reporting for you, but you may receive questions from participants who do not understand why they received the form or who question the distribution codes used on the form that indicate they are subject to a penalty or taxation. I can help you field these questions. January 31, 2018 IRS Form 1099-R to participants

Upcoming Compliance Deadlines February 2018 Su Mo Tu We Th Fr Sa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Fourth quarter 2017 account statements must be sent to participants by February 14, 2018, for 401(k) plans and other “individual account” plans that allow participants to direct their own investments. This is another statement that is generally produced by your service provider. Most plans use the quarterly account statements to list the administration and individual fees actually charged against a participant’s account for the quarter, including an explanation of any revenue sharing arrangement, as required by the Department of Labor’s participant fee disclosure regulations. Again, I can help you field any participant questions that may come up as a result of this disclosure. February 14, 2018 4th quarter 2017 benefit statements

Upcoming Compliance Deadlines March 2018 Su Mo Tu We Th Fr Sa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Provide accurate payroll & census information to service providers Review testing results carefully Take action promptly to correct failures And finally, March 15, 2018, is the deadline to distribute ADP or ACP testing excesses for a 2017 calendar year plan if you want to avoid paying the 10% excise tax. Most service providers begin collecting information from plan sponsors this time of year to enable them to perform the nondiscrimination tests including the ADP and ACP tests. Providing complete and accurate information to your service providers is one of the most important steps you can take to keep your plan in compliance with the DOL and IRS rules. Once you receive the testing results, be sure to review your reports carefully. If you have testing failures, you will want to act promptly to discuss correction options with your service provider. I would be happy to review your testing results with you and to facilitate meetings with your service provider, if needed. This concludes today’s presentation. I hope you found today’s overview helpful, and I look forward to continuing this conversation next quarter. March 15, 2018 ADP/ACP excess correction Tracking No: 1-678273