Unum Retained Asset Accounts (Raas): Employer-Sponsored Retirement Benefits With Tax Advantages, Risks, And Reporting Requirements

A Unum Retained Asset Account (RAA) is an employer-sponsored retirement plan that allows participants to retain investment assets within the company. RAAs offer potential tax advantages, retirement income, and legacy building opportunities. However, they also carry investment risks, fees, and contribution limits. Unum RAAs are subject to Form 5500 and summary annual report disclosure requirements, and their tax treatment differs from other retirement accounts. Additionally, FASB and GASB accounting standards govern the recording and reporting of RAAs.

Understanding Unum Retained Asset Accounts (RAAs)

In the world of retirement planning, there’s a secret weapon that’s often overlooked: the Unum Retained Asset Account (RAA). Picture it as your very own retirement savings vault, offering a unique combination of tax advantages and flexibility.

So, what exactly is a Unum RAA?

Simply put, it’s an employer-sponsored retirement plan that allows you to retain certain assets in your employer’s plan after you retire or terminate employment. Think of it as keeping a piece of the pie when the time comes to go your separate ways.

These assets could be anything from stocks and bonds to real estate or even cash, giving you the freedom to tailor your retirement portfolio to your specific needs and objectives.

Types of Unum Retained Asset Accounts (RAAs)

Unum RAAs are designed to provide retirement income and offer a variety of plan options to suit different needs and financial goals. Understanding the types of RAAs available can help you make an informed decision about the best option for you.

Defined Benefit RAAs

• What it is: A defined benefit RAA guarantees a fixed retirement income amount, regardless of investment performance or account balance.
• Pros: Predictable income, no investment risk
• Cons: Employer assumes all the investment risk, potential for lower returns

Defined Contribution RAAs

• What it is: A defined contribution RAA is similar to a 401(k) plan. Employees contribute a fixed amount or percentage of their salary, and the employer may also make contributions.
• Pros: Employee retains investment control, potential for higher returns
• Cons: Income is not guaranteed, investment risk

Target Benefit RAAs

• What it is: A target benefit RAA falls between a defined benefit and a defined contribution plan. It sets a target retirement income amount, but the actual income received may vary depending on investment performance.
• Pros: Partial income guarantee, potential for higher returns
• Cons: Income is not fully guaranteed, investment risk

Other types

In addition to the three main types, there are also several other types of RAAs, including:

• Floor-Offset RAAs: Combine a defined benefit plan with a defined contribution plan, ensuring a minimum level of retirement income.
• Cash Balance RAAs: Provide a hypothetical account balance that grows at a fixed rate, similar to a defined benefit plan, but with more flexibility.
• Market-Indexed RAAs: Link retirement benefits to a market index, such as the Consumer Price Index, to ensure purchasing power is maintained.

When choosing a Unum RAA, it’s important to consider your retirement income goals, risk tolerance, and financial situation. A financial advisor can help you determine which type of RAA is most appropriate for you.

Unum Retained Asset Accounts (RAAs): A Path to Retirement Security and Legacy Building

Unlock the Tax Advantages of RAAs

One of the key benefits of a Unum Retained Asset Account is its tax-advantaged status. Contributions to a RAA are made with pre-tax dollars, reducing your current taxable income. Earnings within the account grow tax-deferred, meaning you won’t owe taxes on them until you withdraw them in retirement. This tax-free compounding effect can significantly boost your retirement savings.

Secure a Stable Retirement Income

RAAs offer a reliable source of income during your retirement years. You can choose to receive payments in the form of a guaranteed annuity, which provides a fixed income stream that helps ensure financial stability. This guaranteed income can give you peace of mind and protect you from market fluctuations.

Build Your Legacy

Unum RAAs facilitate legacy building by allowing you to pass on wealth to your beneficiaries in a tax-efficient manner. You can designate beneficiaries to receive the remaining balance of your RAA upon your passing. The funds will be distributed tax-free, providing financial security for your loved ones long after you’re gone.

Considerations When Exploring Unum Retained Asset Accounts

Unum Retained Asset Accounts (RAAs) offer a plethora of benefits, but it’s crucial to delve into the potential risks and limitations before diving in.

Investment Risks and Returns:

Like any investment, RAAs carry inherent risks that could affect your retirement nest egg. The type of RAA you choose will determine the specific investments and risk tolerance level. Be mindful of potential market fluctuations, investment performance, and the long-term nature of these accounts.

Fees and Expenses:

RAAs may involve various fees and expenses, including administrative fees, investment management fees, and processing fees. Understanding these costs upfront can help you make informed decisions about your contributions and overall financial strategy.

Contribution Limits:

Unum RAAs are subject to contribution limits, which may restrict the amount you can set aside each year. These limits vary depending on your age, employment status, and the specific RAA plan. Maximizing your contributions while adhering to these limits is key to building a substantial retirement fund.

Investment Choices:

While RAAs provide some flexibility in investment choices, it’s important to consider the options available and align them with your risk tolerance and financial goals. Understand the underlying investments and ensure they complement your overall portfolio strategy.

Liquidity and Withdrawals:

RAAs typically offer limited liquidity compared to other retirement accounts. Early withdrawals may trigger penalties or taxes, and accessing your funds before retirement age can hinder your long-term financial security. Plan carefully for your retirement income needs to avoid premature withdrawals.

Disclosure Requirements for Unum RAAs:

• Explain the Form 5500 and summary annual report requirements for RAAs.

Disclosure Requirements for Unum Retained Asset Accounts (RAAs)

Unveiling the Reporting Obligations

In the world of retirement savings, transparency is paramount. Enter Unum Retained Asset Accounts (RAAs), a unique retirement vehicle that requires specific disclosure requirements to ensure accountability and keep stakeholders informed.

Form 5500: The Key Report

The Form 5500 is the cornerstone of Unum RAA disclosure. It’s a comprehensive report that provides a wealth of information about the account, including:

• Assets and liabilities
• Participant data
• Investment performance
• Funding status

By filing Form 5500 annually, plan administrators ensure that all parties with a stake in the RAA, from participants to regulators, have access to this crucial financial information.

Summary Annual Report: A Simplified Guide

To make RAA disclosures more accessible, Unum plan administrators must also provide a summary annual report (SAR) to participants. This simplified document condenses the key information from Form 5500 into a user-friendly format.

The SAR includes:

• Plan performance highlights
• Investment options
• Contribution limits
• Important tax and distribution rules

By receiving the SAR, participants can easily understand the status of their RAA and make informed decisions about their retirement savings.

Compliance is Key

Meeting the disclosure requirements for Unum RAAs is not just a legal obligation; it’s also a demonstration of transparency and accountability. By adhering to these reporting standards, plan administrators build trust with participants and ensure that their retirement savings are being managed responsibly.

Remember, disclosure is essential for maintaining the integrity and stability of the retirement system. By fulfilling these reporting requirements, Unum plan administrators are safeguarding the future of their participants and upholding the highest standards of financial management.

Tax Implications of Unum Retained Asset Accounts (RAAs)

Understanding the tax implications of Unum RAAs is crucial for making informed financial decisions. Let’s delve into the nuances of how these accounts are treated under the Internal Revenue Code.

Qualified Distributions

Like other retirement accounts, qualified distributions from Unum RAAs, taken after age 59½, are generally taxed as ordinary income. However, distributions that exceed the basis (employee contributions) may be subject to additional income tax.

Early Withdrawal Penalties

Withdrawing funds from a Unum RAA before age 59½ typically incurs a 10% early withdrawal penalty, in addition to the regular income tax. Exceptions apply for certain qualifying reasons, such as disability or qualified higher education expenses.

Other Tax Considerations

• Required Minimum Distributions (RMDs): Starting at age 72, RMDs must be taken annually from Unum RAAs. Failure to take RMDs can result in a significant tax penalty.
• Tax-Free Rollover: Distributions from Unum RAAs can be rolled over into other qualified retirement accounts, such as 401(k) plans or IRAs, to defer taxes.
• Beneficiary Treatment: Upon the account holder’s death, beneficiaries may inherit the RAA. Distributions to beneficiaries are generally taxed as income to the beneficiary.

It’s important to consult with a qualified tax professional to determine how the tax implications of Unum RAAs will impact your specific situation and financial goals.

Accounting Treatment of Unum Retained Asset Accounts (RAAs)

Navigating the FASB and GASB Standards

When it comes to accounting for Unum Retained Asset Accounts (RAAs), you’ll need to familiarize yourself with the crucial accounting standards set by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).

FASB’s Comprehensive Framework

For businesses, FASB’s Accounting Standards Codification (ASC) provides the roadmap for accounting for RAAs. ASC Topic 960, “Defined Benefit Pension and Other Postretirement Plans,” outlines the principles and procedures companies must follow. Under this standard, RAAs are categorized as “other postretirement plans.”

GASB’s Specialized Guidance

Governmental entities, on the other hand, refer to GASB Statement No. 68, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.” This statement provides specific accounting guidance for RAAs, ensuring that governments accurately report their liabilities and assets related to these accounts.

Key Accounting Principles

Both FASB and GASB emphasize the importance of reflecting the fair value of RAA assets and liabilities on an entity’s financial statements. This means that accountants must regularly assess the market value of the investments held within RAAs and adjust the account balances accordingly.

Additionally, these standards require entities to disclose comprehensive information about RAAs in their financial reports. This includes details about the plan’s assets, liabilities, contributions, and benefit payments. By providing this transparency, investors and other stakeholders can make informed decisions about the financial health of the entity.

Differences from Other Retirement Accounts

Navigating the world of retirement savings can be overwhelming with the myriad of options available. Let’s delve into the unique characteristics of Unum Retained Asset Accounts (RAAs) and explore how they stack up against other popular retirement savings vehicles.

401(k) Plans

• Contribution Limits: RAAs typically offer higher contribution limits compared to 401(k) plans, allowing you to save more for retirement.
• Employer Contributions: Unlike 401(k) plans, RAAs do not require employer contributions, providing you with greater control over your investments.
• Investment Options: RAAs generally offer a wider range of investment options compared to 401(k) plans, giving you more flexibility in tailoring your portfolio to your needs.

IRAs

• Eligibility: RAAs come with no eligibility restrictions, unlike IRAs, which have income limits for contributions.
• Contribution Limits: While RAAs offer higher contribution limits than traditional IRAs, they fall short of Roth IRAs, which have higher annual limits.
• Tax Treatment: Traditional IRAs offer tax-deferred growth, while Roth IRAs favor tax-free withdrawals, making them a preferred choice for those seeking tax-efficient retirement planning.

Annuities

• Guaranteed Income: Annuities provide a guaranteed stream of income for life, offering peace of mind during retirement. However, unlike RAAs, annuities do not allow for direct access to your savings.
• Investment Flexibility: RAAs provide greater investment flexibility than annuities, allowing you to tailor your portfolio to your risk tolerance and financial goals.
• Fees: Annuities typically come with higher fees compared to RAAs, potentially eating into your retirement savings over time.