New Law Means More Business

Many times when we report news out of Washington, DC to you, it's bad news-or at the very least-it's news that's going to make more work and headaches for you.

We're delighted to bring you news in this issue of the Bankers' Hotline that may indeed make more work for you-but certainly will cause less headaches!

Minimum Wage Law Signed
When President Clinton signed the minimum wage law in August, bankers actually cheered!

Included in the legislation are certain added-on sections, approved as part of the law, regarding provisions expanding tax-deductible retirement plans, tax free conversions of common trusts into mutual funds, expanding of Individual Retirement Account (IRA) contribution limits, the ability of non-profits to open 401(k) retirement benefit plans, and other portions that are advantageous to financial institutions. All this means expanded customer areas.

New IRA Business
New Accounts people will be interested to know that one of the most important changes that will affect bank promotions and marketing is the raising of IRA contribution limits for non-working spouses from $250 to $2,000. Advertising is already being written for this feature, which is a welcome one for financial institutions. We should be writing many new IRA accounts for those stay-at-homes who were previously not eligible for the larger amount. Look for an extremely busy week during tax time next April!

"SIMPLE"
Another important provision is the Saving Incentive Match PLan for Employees (SIMPLE-you'll hear that term a lot in the days to come!) that caps worker contributions at $6,000 a year, mandating employer matching funds for up to 3% of compensation.

This retirement benefit plan, usable on January 1, 1997 by small companies with less than 100 employees, means much less paperwork and much easier compliance than conventional retirement plans. Banks will be eager to work with these small businesses.

New 401(k) Business
The opening of a whole new area for 401(k) business will keep bankers on the go soliciting agreements for newly eligible non-profit groups. In the past, they could only participate in 403(b) type retirement plans. However, with the signing of the new law, non-profit groups, including foundations, can now participate in 401(k) retirement plans, and through them also in the mutual funds area. Many of those organizations which already have 403(b) plans, that are much more restrictive, may now wish to replace those with the 401(k) plans.

It's a pleasure to be able to report such good news for a change!

Enjoy!

Copyright © 1996 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 6, No. 10, 8/96