Regularly reviewing finances is essential. As a retirement plan sponsor, encourage your employees to use an annual financial checklist. Get their families involved for added benefits. Making small adjustments yearly can boost confidence and financial well-being.
Empower your employees to take small steps that can make a huge impact, reinforcing that proactive annual adjustments promote confidence and well-being for their financial futures.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements; you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
The new Retirement Plan Contribution Limits are official!
The following limits are going up for 2025:
- Maximum contributions for 401(k), 403(b) and 457 increases to $23,500
- Maximum contributions for highly compensated employees increased to $160,000
- Maximum contributions for SIMPLE retirement accounts increased to $16,500
- Maximum contributions for Defined Contribution Limit increased to $70,000
- NEW Super Catch-up for Age 60-63 is $11,250
Review the full list of contribution limit changes below and share with your plan participants!
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
Mistakes happen–Here’s how to correct common retirement plan errors.
Navigating the intricate rules and regulations that govern employer-sponsored retirement plans may seem overwhelming at times. Even the most diligent plan sponsors encounter retirement plan errors. In fact, it’s not unusual to discover a plan failure or error, especially after the retirement plan testing season is over.
The costly impact of retirement plan errors
Plan sponsor compliance errors can be costly. The Employee Benefits Security Administration (EBSA) restored over $1.4 billion to employee benefit plans, participants, and beneficiaries in FY 2023.[1] A majority of the investigations resulted from self-reported administrative errors and oversights made by unknowing plan sponsors. It can be stressful to discover retirement plan errors or failures. The good news is that plan sponsors can fix many mistakes themselves, often without fines or penalties.
This guide includes some of the most common retirement plan errors, their remedies, and valuable resources to help retirement plan sponsors manage their responsibilities effectively.
Avoid and address costly mistakes
Plan sponsor responsibilities include ensuring the retirement plan complies with regulatory requirements related to the plan’s design and administration. Noncompliance can lead to personal liability, tax penalties, or even disqualification, which means that the plan could lose its tax-deferred status.
Most retirement plan errors are caused by operational or administrative oversight. Fortunately, the IRS and Department of Labor (DOL), the agencies that govern employer-sponsored retirement plans, offer several ways for plan sponsors to self-correct retirement plan errors. A good place to start is the IRS’ 401(k) Plan Fix-It Guide that provides tips on finding, fixing, and avoiding the 12 common mistakes.
Five common retirement plan errors and remedies
Below are five common plan sponsor compliance errors and remedies covered in the guide:
1. Error: Not updating the plan every few years to reflect changes in the law.
Remedy: Adopt plan amendments for missed law changes. Plan sponsors who miss plan amendment adoption deadlines can use the IRS correction program.
2. Error: Failing to operate the plan according to the plan document.
Remedy: Apply a correction that puts affected participants in the same position they would have been had the operational oversight not occurred.
3. Error: Not using the plan’s definition of compensation correctly for all deferrals and allocations.
Remedy: Make corrective contributions, reallocations, or distributions.
4. Error: Retirement plan testing failures (ADP and ACP nondiscrimination tests).
Remedy: Make qualified nonelective contributions for non-highly compensated employees.
5. Error: Employer matching contributions weren’t made to all appropriate employees.
Remedy: Apply a correction that puts employees in the same position they would have been in if matching contributions had been made to all eligible employees according to the plan’s terms.
This handy retirement plan checklist from the IRS can help remind plan sponsors of their fiduciary responsibilities and keep their plan in compliance. Keep in mind that this list should only serve as a guide—it isn’t a substitute for a complete plan review.
How to correct retirement plan errors
Plan sponsors can fix retirement plan errors using the IRS Employer Plans Compliance Resolution System (EPCRS). There are three ways to fix mistakes under EPCRS:
- Self-Correction Program (SCP) | Plan sponsors can correct certain plan mistakes without notifying the IRS or paying fees.
- Voluntary Correction Program (VCP) | Any time before an audit, a plan sponsor may pay a fee and secure IRS approval to fix retirement plan errors.
- Audit Closing Agreement Program (Audit CAP) | Plan sponsors can pay a fine and correct mistakes during a plan audit.
New rules under SECURE 2.0
SECURE 2.0 introduced some new rules pertaining to retirement plan errors associated with overpayments to participants or beneficiaries. The law also contains enhancements to the retirement plan error self-correction program under the IRS’s Employee Plans Compliance Resolution System (EPCRS). These provisions went into effect when the law was passed in December of 2022.
Prompt resolution and assistance
Addressing plan errors promptly is critical to fulfilling plan sponsor responsibilities and ensuring that participants’ retirement savings stay on track. By following best practices and taking advantage of available retirement plan error resolution resources, plan sponsors can navigate their operational and administrative responsibilities, avoid costly plan compliance errors, and help improve retirement security for participants.
Review your retirement plan regularly to spot errors and avoid costly remedies. We can help you identify and fix retirement plan mistakes while implementing strategies that aim to avoid them in the future.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
[1] Employee Benefits Security Administration. “EBSA Restores Over $1.4 Billion to Employee Benefit Plans, Participants, and Beneficiaries.” October 2022.
Gain actionable insights for optimizing efficiency and compliance through strategic plan analysis.
It’s no secret that when you conduct a retirement plan review, you have a chance to understand the data and trends, which can help your plan be efficient and compliant. To set your plan up for success and see if changes are needed, it’s important to make the most of this analysis. Here are some key components to focus on.
Your plan’s current participation rate
One piece of the plan health puzzle is your current retirement plan’s participation rate as it is a key signal of the retirement plan’s effectiveness. When paying attention to these metrics, you may gain insights into the level of employee engagement and identify opportunities, especially when you consider the possibilities of implementing automatic features, while making other plan design changes and thinking about how employees engage with their retirement plan.
- Aim for 90% or greater
Deferral rate statistics
Equally significant are your retirement plan data trends, especially deferral rates, which are crucial for optimizing the financial well-being of plan participants. Understanding deferral rate data helps you know if employees are making informed decisions about their contributions. It also reveals opportunities for more effective education and communication. Much like participation rates, deferral rates can highlight opportunities for plan design modifications.
- Aim for 10% or greater
Effective asset allocation and potential for re-enrollment
Effective asset allocation is another key statistic that plays a pivotal role in the performance of retirement portfolios. By evaluating the asset allocations across participating employees, you can identify opportunities to align strategies with investment goals, risk tolerance profiles, and market conditions. Analyzing the asset allocation data can reveal opportunities like re-enrollment, which can be a valuable endeavor long-term.
- Aim for 90% or greater
Re-enrollment allows employees to reselect their investment options or be enrolled in a Qualified Default Investment Alternative (QDIA). This process offers participating employees a fresh chance to look at how they are allocated and consider a more suitable investment strategy.
Auto-enrollment and auto-escalation
Auto-enrollment can be a great streamlining tool to help savers achieve retirement readiness and increase participation in your plan, especially if encouraging employees to take positive actions has traditionally been a challenge. Aside from other benefits to the employee population, auto-enrollment can be an effective tool to improve recruitment and retention, unlock tax credits, and help with compliance testing.
Auto-escalation is an effective feature that incrementally raises plan contributions over time (e.g., increasing by 1% annually up to a maximum of 15% annual deferral). This approach not only has the potential to lower payroll taxes, but also, akin to auto-enrollment, facilitates employee retention by overcoming the usual roadblocks of getting employees to take positive action.
SECURE 2.0 2025 amendments
SECURE 2.0 legislation and the amendments going into effect in 2025 are shining a brighter spotlight on the already-prevalent auto features. Your retirement plan review is a good time to discuss options and consider implementation. The regulatory implications of the 2025 SECURE 2.0 amendments are significant. Mandated automatic enrollment is bound to have an effect on plan health, as will the ability of part-time employees to qualify for participation after 500 hours in two years as opposed to the previous three. For more SECURE 2.0 updates, contact us to discuss your plan.
Important deadlines
If you are considering making plan design changes, it is crucial to discuss implementation dates and deadlines. Keep in mind that amending your plan and communicating changes to participants takes a proactive approach. For example, take the deadline of October 1 to establish a new Safe Harbor 401(k). Note that the plan must have deferrals for at least three months to be considered Safe Harbor for the current year. On the other hand, a 2025 Safe Harbor implementation requires that a 30-day notice to employees goes out by December 1st.
The retirement plan review is your time
Reviewing your retirement plan data empowers you to make informed decisions and adjustments for the coming year, thereby fostering confidence in your plan’s health. By evaluating current metrics and seizing opportunities, you can enhance efficiency, boost employee participation and satisfaction, and help future-proof your offering.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
Recent provisions and how to best adapt your retirement plan.
Some provisions of SECURE 2.0 have already taken effect, and more will become effective soon. For plan sponsors, preparation is the key. Starting early allows for a thorough consideration of how SECURE 2.0 provisions may impact enrollment, contributions, and other aspects of your retirement plan. This will help you align your plan with regulatory requirements while continuing to meet both employer and employee needs.
Here are a few of the provisions that could affect your plan:
Long-term part-time worker eligibility
Effective January 1, 2025, employees who have at least 500 hours of service each year for two consecutive years are eligible to participate in the plan. This adjustment signifies a shift from last year’s eligibility criteria, which required three consecutive years of service, thereby reducing the length of service needed for part-time employees to qualify for the employer’s retirement plan. Given the complexities involved in implementing this provision, some plans are evaluating the advantages and disadvantages of granting immediate eligibility to all employees.
Automatic enrollment and escalation
New 401(k) or 403(b) plans established after December 29, 2022, must automatically enroll eligible employees, beginning with the first plan year starting January 1, 2025, at a contribution rate between 3% and 10%. The plan must include automatic escalation at a pace of 1% a year until contributions reach 10% to 15%.
This regulation has implications for company mergers and acquisitions that involve multiple retirement plans, as well as those that join multi-employer plans.
If your plan does not currently include automatic enrollment, you may be eligible for a $500 tax credit for the first three years it is adopted.
Super catch-up contributions
Most plan sponsors currently offer employees aged 50 or older the opportunity to make catch-up contributions, which has been set at $7,500 for 2024. A significant update arriving in 2025 is the introduction of super catch-up contributions under SECURE 2.0 legislation. This provision allows plan sponsors the option to enable employees who reach the ages of 60, 61, 62, or 63 within a particular year to make enhanced catch-up contributions. The limit is determined as the greater of:
- $10,000, or
- 150% of the age 50 catch-up contribution limit for 2024.
For successful implementation, plans and recordkeepers are required to precisely track participants’ ages, apply the appropriate contribution limits, and communicate clearly about this option to eligible participants.
Roth matching and non-elective contributions
Since 2022, plan sponsors have been presented with the opportunity to allow participants to choose how they receive employer matching or non-elective contributions: as traditional pre-tax contributions or fully vested Roth contributions. This option is designed to give participants enhanced control over the tax treatment of their retirement savings, potentially offering the benefit of tax diversification.
Initially, there was hesitancy among plan sponsors to embrace this provision due to uncertainties surrounding taxation, reporting, and administrative processes. However, recent IRS guidance has clarified several of these issues. In light of the new information, plan sponsors might now want to reevaluate whether incorporating this option aligns with their overall plan objectives.
Force-out provisions and auto portability
The Safe Harbor IRA, a well-established provision, has recently captured significant attention. This provision enables plan sponsors to remove small account balances ranging from $1,000 to $7,000. By taking this step, employers can decrease the number of small, inactive accounts, thus reducing administrative tasks and possibly sidestepping stricter reporting obligations.
Another noteworthy development is the launch of the auto-portability network. This innovative network streamlines the transfer of small account balances when employees switch jobs, promoting the continuous growth of retirement savings, and reducing the likelihood of early withdrawals. These enhancements not only make plan management more straightforward, but they also bolster employees’ efforts to build a more robust retirement nest egg.
Student loan payments matching
Employers are allowed to make matching contributions to a retirement plan based on an employee’s qualified student loan payments. Essentially, if an employee is paying off a student loan and therefore not contributing to their retirement plan, the employer can still make a match to the plan as if these were retirement plan contributions. This provision aims to help employees saddled with student debt to save for retirement.
This is by no means an exhaustive list. Other key topics deserve consideration, including SIMPLE IRA conversions, incentives for participation, a “Lost and Found” database, new exceptions for early withdrawals, RMDs, and emergency savings accounts linked to retirement plans.
Get ahead of the curve
Together we can proactively explore how SECURE 2.0 provisions might impact your plan, allowing us to plan strategically and you to be well-prepared. If you have any questions, please get in touch.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
Ready to elevate your workplace retirement plan strategy? Discover strategies that can take your plan beyond a financial obligation to become a catalyst for fostering a motivated, loyal team. Consider implementing features like auto-enrollment and auto-escalation to improve savings and participation rates and position your plan to boost retention and encourage on-time retirements.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements; you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
This quarter’s employee education offers practical tips and strategies to help manage debt effectively, distinguishing between “good” and “bad” debt, accompanied by practical exercises for budgeting and debt management. Understanding these concepts is helpful to achieving financial freedom and stability; we believe your employees will greatly benefit from this knowledge.
We encourage you to share this newsletter with your organization. It’s an excellent way for your team to access valuable information that can aid their progress while on their savings journey.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements; you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
Let’s explore some of the critical elements of workplace retirement plans.
Our goal is to equip you with the knowledge you need to evaluate your current retirement plan with clarity and confidence, helping you make the best choices for your business and employees. We’ll guide you through pro tips for identifying a healthy plan, discuss recent legislative changes, and introduce fresh innovations.
Whether you are evaluating your current plan or just curious about how to improve your retirement plan experience, we’re here to help.
1. Do any aspects of your company’s retirement plan cause frustration?
When frustration arises, pause and reflect on the cause. Employers often have trouble logging into recordkeeper portals, uploading payroll information, downloading census data, and finding the form to make investment changes, or they struggle with over-contributions. Whatever the issue, take a step back to look for a partner that can offer straightforward, easy-to-understand options, and timely resources to address any challenges.
2. If you are considering RFP, what questions should you ask?
Here are a few must-asks:
- How do you support the ongoing education of our employees regarding their retirement planning?
- What technology and tools do you offer to make plan management easier for both employers and employees?
- Can you detail your fee structure transparently?
- Describe your investment options and how they cater to our diverse employee needs.
- How do you ensure compliance with the latest regulations and laws?
3. How can you create a better employee experience?
Focus on communication, education, and support. Ensure that your service providers offer ongoing employee education, user-friendly digital platforms, and responsive customer service. Also, regularly solicit feedback from your employees to identify areas for improvement. Here’s a quick question to get started: when was your last employee education meeting?
4. If your current plan feels outdated, what innovative features should you consider?
Start by evaluating your current plan’s design. Here are few enhancements you may want to consider, some of which are now standard requirements under the SECURE Act:
- Auto enrollment | Get everyone saving for retirement. (Mandatory for new plans established after December 29, 2022 under SECURE 2.0).
- Auto escalation | Help participants reach savings goals. (Mandatory for new plans established after December 29, 2022 under SECURE 2.0).
- Re-enrollment | Rebalance participants accounts onto an appropriate glidepath.
- Backsweeping | Engage participants who haven’t joined.
- Guaranteed income solutions | Think about how older employees will replace their paycheck.
- Financial wellness | Give access to quality financial education.
- Profit sharing | Reward loyal employees.
- Roth contributions | Offer more ways to save.
- Safe Harbor IRA Force-out | Remove former employees from the plan.
5. How can we encourage more active participation and savings?
Engagement starts with education. Provide regular workshops, one-on-one consultations, and clear, concise materials about the benefits of participating.
Another very effective strategy is implementing automatic enrollment, which has a significant, direct impact on plan participation. To make this feature even more effective, consider setting the automatic enrollment savings rate between 8% and 10%. This higher starting point can help employees build substantial savings more quickly, without requiring them to take initial action to opt into the plan or select their contribution rate.
Remember, the goal of a retirement plan is not just to offer a retirement saving vehicle but to provide a path toward financial security. By asking the right questions and prioritizing the needs of your team, you can create a more rewarding and engaging retirement plan experience for everyone involved.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
To help prevent potential retirement delays, consider retirement income solutions to boost participants’ confidence in their future financial security.
Both employers and employees have a growing interest in in-plan retirement income solutions. With 66% of participants concerned about creating an income stream in retirement, this shows a signification interest in retirement planning tools that can convert savings into lifetime income.[1]
Offering in-plan retirement income solutions is one way to help participants plan for financial stability in retirement in order to retire on time. Why focus on in-plan retirement income solutions, and why now? Here’s what you need to know.
The growing need for retirement income
With the decline of pension plans and the rise of DC plans like 401(k)s, the responsibility to create retirement security has shifted from employers to employees. However, for many participants, saving is a challenge. If they manage to save enough for retirement, participants aren’t confident in converting their assets to a steady stream of retirement income they won’t outlive. Eighty-seven (87%) of participants expressed a desire for an in-plan retirement income solution to help them achieve their goals.[2] Moreover, today’s workforce is aging, requiring solutions that help provide a sustainable retirement income for as long as they live.
In an effort to boost retirement income success, there is an opportunity to support participants with income planning for the decumulation stage. Education is critical to improving retirement readiness: participants need to understand how retirement income solutions work and how to use them appropriately. Employers can leverage plan features like in-plan retirement income solutions to make their retirement benefits more competitive, increase employee engagement, and retain valuable talent. Few organizations currently offer this option, making it an opportunity to stand out as an employer of choice.
Plan design plays a pivotal role
Thoughtful plan design can significantly impact participants’ retirement income. Features such as default deferral rates, employer matching contributions, and professionally managed investment solutions all play a pivotal role:
- Default deferral rates often steer participant contributions. Many plans automatically enroll employees at the deferral rate of 3% of their salary, but most employees choose to “set it and forget it” and never increase their contributions beyond that amount. Plans with higher default deferral rate and auto-escalation, where contributions are increased at set intervals until a preset maximum is reached, promote saving more over time. This approach potentially boosts their retirement income.
- Matching contributions can substantially boost participants’ retirement savings. Encourage participants to contribute at least enough to receive the full employer match and maximize this benefit.
- Professionally managed investment solutions alleviate the burden of establishing a personal asset allocation strategy, constructing a portfolio of equities and fixed income, and then monitoring and updating it on an ongoing basis. The most common retirement plan default investment solutions are target date funds and managed accounts.
PENSION PLAN SPECIALISTS, PC
805 Broadway, Suite 600
Vancouver, WA 98660
360-694-8409
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.
[1] Voice of the American Worker 2024. Franklin Templeton. 2024.
[2] Voice of the American Worker 2024. Franklin Templeton. 2024.
Cigna Transparency In Coverage