As my final week draws to a close, I am wrapping up my research with one final post to summarize what I have learned.
I came in thinking that there was a quantifiable percentage of time dedicated to both serving the government and serving the client. I thought that around 75% of the time would go to filing government forms and making sure plans are in compliance, and the other time would be spent talking to clients and administrating each plan.
However, my research has showed me that there actually is not a quantifiable amount of time being spent on each thing; in fact, much of the government-related and the client-related work overlaps. Filling out Account Reconcile and Balance and Income sheets helps the client know what is going on in their plan and the financial state of their plan as a whole, but it is also important to helping us with compliance testing for the government.
Also, not everybody does the same thing; some don't ever talk to clients, and some don't fill out Account Reconcile and Balance and Income sheets. As a result, you can't quantify allocation of time, because everybody's allocation is different.
I really enjoyed my time as an intern for MGKS. All of my co-workers were very nice, and I got a lot of experience in the workplace. I am happy that I enjoy accounting, and am very excited to study it in college. I hope you liked reading my blog, and I hope you learned a lot too!
-Alexandra Cvancara
Thursday, April 28, 2016
Efficiency In The Workplace
Included in the survey were also questions regarding what helps you work, such as listening to music and snacking.
Most of my coworkers seem to enjoy a tasty snack while they work (same goes for me). They also all said that snacking helps keep them focused on work.
Also, most listen to music. The music they listen to varies widely- from Disney music to country to classical to rap, and more. They said that listening to music helps filter out the outside noise, so they can focus on the work that they are doing.
Most of my coworkers seem to enjoy a tasty snack while they work (same goes for me). They also all said that snacking helps keep them focused on work.
Also, most listen to music. The music they listen to varies widely- from Disney music to country to classical to rap, and more. They said that listening to music helps filter out the outside noise, so they can focus on the work that they are doing.
Time Spent On Government Comlpience
This survey also included questions about how much time they spent filling out government forms, like the 5500 and the 5330.
Like the previous graphs, the answers here were also very spread out. This is because there are many different forms, and everyone fulls out different amounts of these forms.
In general, the 5500 Short Form takes about 10-20 minutes to complete, while the long 5500 form can take anywhere from an hour to an entire day, depending on the plan.
The 8955 is one of the shortest, taking around 10 minutes to complete, sometimes less. The same goes for the 1099 R forms.
In general, the 5500 Short Form takes about 10-20 minutes to complete, while the long 5500 form can take anywhere from an hour to an entire day, depending on the plan.
The 8955 is one of the shortest, taking around 10 minutes to complete, sometimes less. The same goes for the 1099 R forms.
Time Spent Serving The Client
I handed out a survey to my co-workers that asked them to detail how much time they spent answering emails, talking on the phone and filling out Accounts Reconcile and Balance and Income statements. Here are the results:
As you can see, there are many different answers for each of these questions. This is because everybody's job is different; some people administrate many small plans, while others administrate a few very large plans, and in between.
Monday, April 25, 2016
Filing a Tax Return
While my work doesn't deal with filing tax returns, I have learned what not to do with taxes from the people around me (many of them are CPAs).
You see people all over the internet that received their tax refund, and go buy a video game console or a tiger or something, and you think, I want that! Well, here's why you don't:
That money is not free money that the government is giving you out of the goodness of their heart; it's YOUR money that YOU overpaid. No big deal though, they're giving it back to me, right? Wrong. It's always better to owe money, because someone could easily steal your identity and file a tax return in your name
(this has happened to my parents both the last 2 years). If you are getting a refund and someone files a tax return in your name, they now have your money, and you're fresh out of luck. But if you owe money, then the identity thief doesn't get anything (what're they gonna do, pay your taxes for you?). The money you would have gotten back as a refund, you already have, and you just owe some money to the government.
This is the one time I would say that owing money is a good thing. Your money is safe from identity thieves who file a tax return in your name.
You see people all over the internet that received their tax refund, and go buy a video game console or a tiger or something, and you think, I want that! Well, here's why you don't:
That money is not free money that the government is giving you out of the goodness of their heart; it's YOUR money that YOU overpaid. No big deal though, they're giving it back to me, right? Wrong. It's always better to owe money, because someone could easily steal your identity and file a tax return in your name
(this has happened to my parents both the last 2 years). If you are getting a refund and someone files a tax return in your name, they now have your money, and you're fresh out of luck. But if you owe money, then the identity thief doesn't get anything (what're they gonna do, pay your taxes for you?). The money you would have gotten back as a refund, you already have, and you just owe some money to the government.
This is the one time I would say that owing money is a good thing. Your money is safe from identity thieves who file a tax return in your name.
Type Of Investments
There are 3 typed of investments: Safe, medium, and aggressive.
Safe investments will get you small, steady growth in your retirement account. An example of this would be government bonds and money market funds.
Medium investments can increase or decrease, but the fluctuations are not by a huge amount. An example of this would be buying a stock in google or apple, companies that may fluctuate, but in general are stable and aren't a risk of going out of business. When invested smartly, these investments will get you more back than a safe investment, but there is always a risk that you will lose money.
Aggressive investments are high risk, high return investments. These can fluctuate a lot, and you can either lose a lot or gain a lot. I've seen a plan with risky investments that started off with around $500k in the plan, and by the end of the year had $1.5 million. To put that in perspective, your money is said to double every 7 years, and his tripled in just 1. However, I've also seen plans with risky investments that lost $100k in a year. If you're someone that really likes to take risks and is willing to spend a long time researching the best risky investments, by all means invest here, but if you're just a regular person, stay away from these.
Safe investments will get you small, steady growth in your retirement account. An example of this would be government bonds and money market funds.
Medium investments can increase or decrease, but the fluctuations are not by a huge amount. An example of this would be buying a stock in google or apple, companies that may fluctuate, but in general are stable and aren't a risk of going out of business. When invested smartly, these investments will get you more back than a safe investment, but there is always a risk that you will lose money.
Aggressive investments are high risk, high return investments. These can fluctuate a lot, and you can either lose a lot or gain a lot. I've seen a plan with risky investments that started off with around $500k in the plan, and by the end of the year had $1.5 million. To put that in perspective, your money is said to double every 7 years, and his tripled in just 1. However, I've also seen plans with risky investments that lost $100k in a year. If you're someone that really likes to take risks and is willing to spend a long time researching the best risky investments, by all means invest here, but if you're just a regular person, stay away from these.
How Should I Save My Money?
Remember, all the money you save won't be all you have. You'll receive interest payments on the money you deposit. Also, your employer will deposit some money to your account, depending on the kind of plan you have with them (as discussed in previous posts). But the real bucks comes in when you start to invest.
Investment dividends can get you a couple hundred bucks a month for your retirement. Also, the stocks you hold in your account can change value, which adds value to your retirement account (and if they go down, it can subtract value). So while you could have $300k in your account, only a couple thousand of that would be cash, and the rest would be the value of stocks that you buy. Depending on the economy, you can gain or lose, so you should always talk to your financial adviser about what type of investments you can make (more on investments in the next post).
But you should be smart with your investments; I've seen plans with steady growth, and I've seen plans with massive increases and decreases per month. I've seen doctors that throw money into their account like it's going out of style, just to lose $60k in one month due to over-investment. Be smart, this is your hard earned money, and if it looks like the economy is going downhill, invest in something safe.
Investment dividends can get you a couple hundred bucks a month for your retirement. Also, the stocks you hold in your account can change value, which adds value to your retirement account (and if they go down, it can subtract value). So while you could have $300k in your account, only a couple thousand of that would be cash, and the rest would be the value of stocks that you buy. Depending on the economy, you can gain or lose, so you should always talk to your financial adviser about what type of investments you can make (more on investments in the next post).
But you should be smart with your investments; I've seen plans with steady growth, and I've seen plans with massive increases and decreases per month. I've seen doctors that throw money into their account like it's going out of style, just to lose $60k in one month due to over-investment. Be smart, this is your hard earned money, and if it looks like the economy is going downhill, invest in something safe.
How Much Should I Save?
Hopefully, you'll live a nice, long life after you hit 65. But those social security checks from the government aren't going to be enough to live off of (and let's face it, social security probably won't even be around by the time we hit retirement).
So how much should you save? I'd say the golden number for how much to save is anywhere from 15-20% of your total income, the higher the better (at least, when you're young). Also, if you work at a job that gives you a pension after you retire (like a government job), then you don't have to save as much. You should consider this when choosing your first job.
So how much should you save? I'd say the golden number for how much to save is anywhere from 15-20% of your total income, the higher the better (at least, when you're young). Also, if you work at a job that gives you a pension after you retire (like a government job), then you don't have to save as much. You should consider this when choosing your first job.
When to Start Saving for Retirement
There are a lot of misconceptions about saving for retirement. One of them is that you start saving for retirement when you're around middle age, and you're salary is high (or at least, higher than when you started working). But this is not the case.
Through my work, I have come to learn that the opposite is true: you need to start saving NOW. When you've just started working, you should have a strict budget; instead of buying the new PlayStation or going on that trip with all your friends, you should save that money for retirement. When you're young, you don't have kids to pay for or, and you may not even have a mortgage or a car loan yet. This is when you need to start saving.
I know it's exciting to have your first professional job, now you have money and can buy the things you want, but what you really need is to save, save, save. Your future self will thank you. Because once you hit the age where you want to get married and have kids, you can cut back on the saving, because the dividend and interest money you get off the money you saved when you were young will make it so you don't have to save as much in the future.
Bottom line, SAVE NOW! This is something you can't put off.
Through my work, I have come to learn that the opposite is true: you need to start saving NOW. When you've just started working, you should have a strict budget; instead of buying the new PlayStation or going on that trip with all your friends, you should save that money for retirement. When you're young, you don't have kids to pay for or, and you may not even have a mortgage or a car loan yet. This is when you need to start saving.
I know it's exciting to have your first professional job, now you have money and can buy the things you want, but what you really need is to save, save, save. Your future self will thank you. Because once you hit the age where you want to get married and have kids, you can cut back on the saving, because the dividend and interest money you get off the money you saved when you were young will make it so you don't have to save as much in the future.
Bottom line, SAVE NOW! This is something you can't put off.
Sunday, April 24, 2016
Online Statements
Some of our statements we get online. While it would seem like it would be much easier to do things online, it is actually a huge pain.
Because of all the security on these sites, in order to access the online statements, we have to have an account set up for us. To get this account, we have to ask the plan administrator to ask the statements company, Like Morgan Stanley, to set it up. All this can take days to set up, which means we have to put work for that plan aside for a while.
Once we have an account, a password must then be created for us. The company gives the password to the plan administrator, then the administrator gives the password to us. However, these passwords expire within a few hours of being created if they are not used to log in. The first 3 times we got passwords, too much time must have passed, because we were unable to log in with it. By the time we finally got the password to work, we hours had passed.
And when we finally did log in, there was a SECURITY QUESTION! So we had to email the plan administrator to find out what town she was born in so we could finally access these plans and get going with the work we had to do.
All in all, I much prefer having physical statements to online statements. It takes a long time to sort them all, but it's much less frustrating than dealing with all the excess security. Sorry trees. You lose this round.
Because of all the security on these sites, in order to access the online statements, we have to have an account set up for us. To get this account, we have to ask the plan administrator to ask the statements company, Like Morgan Stanley, to set it up. All this can take days to set up, which means we have to put work for that plan aside for a while.
Once we have an account, a password must then be created for us. The company gives the password to the plan administrator, then the administrator gives the password to us. However, these passwords expire within a few hours of being created if they are not used to log in. The first 3 times we got passwords, too much time must have passed, because we were unable to log in with it. By the time we finally got the password to work, we hours had passed.
And when we finally did log in, there was a SECURITY QUESTION! So we had to email the plan administrator to find out what town she was born in so we could finally access these plans and get going with the work we had to do.
All in all, I much prefer having physical statements to online statements. It takes a long time to sort them all, but it's much less frustrating than dealing with all the excess security. Sorry trees. You lose this round.
What I'm Currently Doing
This month, we just got 3 huge bins of account statements. I'm opening them and sorting them to DC and DB plans. DB goes upstairs and I don't deal with them. As for DC plans, I alphabetize them and file them away in the file cabinet, where we use them later for our beloved excel documents.
Form 5500
The IRS Form 5500 is for reporting a retirement plan's financial condition, investments and operations. This is so the government can make sure that nothing iffy is going on with the plan. (for example, there was a series of unusually large deposits into an account, suggesting potentially illegal activity). It is filed annually, depending on a date set by the plan.
The main part of the Form 5500 is two pages long and requests certain information about the plan, including its name, the date it first became effective, plan sponsor information, information about the plan administrator, a breakout of the number of participants in the plan at the end of the plan year, how the plan is funded or benefits are provided, the schedules that are attached to the Form, and specific characteristics of the plan (for example, if it provides matching contributions).
The main part of the Form 5500 is two pages long and requests certain information about the plan, including its name, the date it first became effective, plan sponsor information, information about the plan administrator, a breakout of the number of participants in the plan at the end of the plan year, how the plan is funded or benefits are provided, the schedules that are attached to the Form, and specific characteristics of the plan (for example, if it provides matching contributions).
Depending on how big the plan is, we either file a 5500 short form (for plans with 100 or less participants) or a 5500-EZ form (for plans with greater than 100 participants). Here is an example of a form:
Monday, April 18, 2016
Everything Hangs In The Balance
One of the most annoying things about accounting is having to make sure everything balances. Whether it's $50,000 or a few cents, it all has to be accounted for.
While entering data from my spreadsheets into other spreadsheets, I encountered this problem: there was an entire 12 cents missing. 12 whole cents! It might not seem important, but if you're being paid to keep track of someone's money, you better be keeping track of it. It took me over an hour to figure out where this 12 cents was and why it wasn't balancing out. I had to re-check all the numbers I entered into the spreadsheet, which is difficult when you have to keep switching between tabs (which is why most of the people I work with have 2 screens).
Eventually I was able to find the 12 cents: there was a plan for an employee within the company that was with a different financial institution, so his account wasn't in my first spreadsheet with all the account data, but it was already accounted for in the balance sheet. This account earned, wait for it, a whopping 12 cents in dividends the entire year! This just goes to show how time consuming it can be to account for money that really doesn't even matter and nobody cares about (sorry penny, but let's face it, all you're good for is scraping the silver stuff off a lottery ticket).
While entering data from my spreadsheets into other spreadsheets, I encountered this problem: there was an entire 12 cents missing. 12 whole cents! It might not seem important, but if you're being paid to keep track of someone's money, you better be keeping track of it. It took me over an hour to figure out where this 12 cents was and why it wasn't balancing out. I had to re-check all the numbers I entered into the spreadsheet, which is difficult when you have to keep switching between tabs (which is why most of the people I work with have 2 screens).
Eventually I was able to find the 12 cents: there was a plan for an employee within the company that was with a different financial institution, so his account wasn't in my first spreadsheet with all the account data, but it was already accounted for in the balance sheet. This account earned, wait for it, a whopping 12 cents in dividends the entire year! This just goes to show how time consuming it can be to account for money that really doesn't even matter and nobody cares about (sorry penny, but let's face it, all you're good for is scraping the silver stuff off a lottery ticket).
Safe Harbors
As I mentioned before, employers deposit what is called a "safe harbor" into their employees' retirement accounts. These contributions are calculated by us and deposited by the employer. But what happens when our dear employer doesn't pay the amount that we told him to? Well, we get to fill out what's called an IRS Government Form 5530.
If an employer deposits too much into an employee's account, that means that they didn't pay taxes on all the money that they should have. The IRS has strict regulations on the amount of money employers can deposit, because they don't want to be cheated out of tax revenues.
Sometimes it's a big amount that the employer was off by, but oftentimes it's a relatively small number. Even if they overpay by 20 cents, we have to file the 5530 form so they pay taxes on the 20 cents. This form takes a few hours to fill out, and, as all IRS forms are, is a pain in the neck. You can see for yourself how much jargon is in these forms and how much you have to type into these reports here: https://www.irs.gov/pub/irs-pdf/f5330.pdf
If an employer deposits too much into an employee's account, that means that they didn't pay taxes on all the money that they should have. The IRS has strict regulations on the amount of money employers can deposit, because they don't want to be cheated out of tax revenues.
Sometimes it's a big amount that the employer was off by, but oftentimes it's a relatively small number. Even if they overpay by 20 cents, we have to file the 5530 form so they pay taxes on the 20 cents. This form takes a few hours to fill out, and, as all IRS forms are, is a pain in the neck. You can see for yourself how much jargon is in these forms and how much you have to type into these reports here: https://www.irs.gov/pub/irs-pdf/f5330.pdf
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