Leadership's Role in Benchmarking Retirement and Health Insurance Benefits

Stay competitive, compliant, and cost-effective

Providing competitive benefits is key to building a strong, successful team. Benchmarking is an important tool because it helps you get the data and insights needed to make smart decisions for your benefit plans. It’s also important for meeting rules, avoiding legal trouble, keeping up with industry standards, and supporting your employees.

Here’s why benchmarking should be a priority for your company and how you can use it to improve your plans.

What is ERISA and why it matters

The Employee Retirement Income Security Act (ERISA) sets rules for how employee benefits—like retirement and health plans—are managed. This law requires employers act in the best interests of their employees. Not following ERISA rules can lead to serious legal and financial problems.

With rising healthcare costs putting increased pressure on both employers and employees, managing benefits effectively is more important than ever.

ERISA covers both health and retirement plans, so leaders need to manage both types of benefits responsibly. While health and retirement plans require different reports and documents, the same careful process applies to both. Reviewing plans regularly, getting outside advice, and taking action can help reduce risks, cut costs, and protect employees and your company.

Why benchmarking is important

Benchmarking is the process of comparing your benefits against other companies to see how you measure up.

1. Stay competitive: Benchmarking helps you keep your benefits in line with what other
companies offer, so you can attract and keep top workers.

2. Save money: Studies show that reviewing retirement and health plans can uncover ways to cut
costs, like lowering fees or improving plan designs.

3. Make employees happy: Employees who see real value in their benefits are more loyal and
engaged.

What to look at when benchmarking

To get the most out of benchmarking, you need to look at the right things:

   •  Retirement plans: Check contribution rates, fees, and how investments are performing. Fixing      high fees or replacing poorly performing funds can save money while improving quality.

   •  Health insurance: The average cost for health insurance is over $25,000 per family each year. 1      Reviewing your options can help lower costs without compromising coverage quality. Given the      often-confusing nature of health plan options, benchmarking can help employers navigate      complex choices, streamline benefits, and reduce costs significantly.

Craig Rosenthal, CEO and co-founder of HealthPlanIQ, a thought leader in health insurance benchmarking shares, “Healthcare is too important to myopically focus on fees. Employers and employees need to know that they are getting quality care and achieving positive outcomes for what is by far their largest benefit outlay.”

Keeping plans fair and competitive

Your employee benefits say a lot about your company’s values. Benchmarking helps you balance what employees need with what the company can afford. It leads to better hiring, lower turnover, and a more engaged workforce.

Following your fiduciary duties

ERISA requires employers to act in the best interest of their employees. This means reviewing benefits regularly to catch high costs, outdated options, or other problems. Benchmarking shows you’re serious about following the rules and supporting your employees.

Steps to get started:

1. Get expert help: Work with professionals who know how to benchmark benefits.

2. Compare plans: Use reports to see how your benefits stack up against others.

3. Review regularly: Make benchmarking an annual part of your process.

4. Ask for feedback: Talk to employees about what they like and don’t like about their benefits.

5. Review options: Look for ways to save money without lowering the quality of benefits.

6. Set up a committee: Create a team that meets regularly, takes notes, and makes decisions
based on findings.

Competitive, compliant, and cost-effective employee benefit plans don’t happen by accident: they require thoughtful review and updates. We specialize in helping leaders like you benchmark and optimize 401(k) plans for better outcomes. Let us help you create a retirement plan that works for your employees and your business.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com



ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

7 Tips to Help Participants with Long-Term Saving

Improving retirement outcomes means keeping participants focused on the long-term.

Helping employees focus on long-term savings is not easy, especially during uncertain times. Still, employers have seen success. Despite stubborn inflation, a recent survey reports that plan participation and saving rates have reached all-time highs. 1

This is great news, but it’s only part of the solution. Many employees join a retirement plan without fully understanding its purpose. Without such an understanding, they may struggle to stay on track during market volatility, save less than they need, or even cash out early. On the other hand, employees who feel financially secure are 74% more likely to stay with their employer and tend to be more productive. 2

To get the most out of your benefits package, regular communication and targeted education are key. After all, your retirement plan should inspire a loyal and engaged workforce.

Raise awareness about the benefits of long-term savings

Sharing the value of long-term saving is a game changer. Regular communication helps employees feel informed. This can lead to higher participation and greater satisfaction with their benefits. 3

Want to boost awareness? Try these simple strategies:

• Hosting education sessions. In-person or virtual sessions are a great way to engage employees.
Use these sessions to explain the benefits of saving through the plan. Highlight features like tax
savings, compound interest, and building a more secure financial future. Also, address common
concerns like investment risks, market volatility, and setting retirement goals.

• Workplace communications. Regular communication helps keep savings top of mind. Effective
communications may include monthly emails, articles in a company newsletter, or posters in public
areas. Adding charts, pictures, or videos can make the message clearer and more engaging.

Retirement saving topics that resonate

No matter how you choose to communicate with employees, the message matters most. Think carefully about the information you’ll share. Every plan has distinct demographics, and each group has specific interests. A few education and communications themes to consider this year include:

• Start saving early. One of the most important ways employees can improve their retirement
readiness is by saving enough along the way. That means starting early. Charts are a great way
to show just how big a difference it can make.

• Make the most of your peak earnings years. For many employees, peak earning years (usually,
ages 40 to 60) are an ideal time to focus on retirement savings. With higher incomes, they have
the opportunity to save more and work toward their financial goals. They might consider
increasing plan deferrals, making after-tax contributions (if available), or saving in taxable
accounts. Taking steps during this time can help them better prepare for the future.

• Put the power of compound interest to work. Compounding happens when the interest you
earn starts earning interest too. It can be a powerful tool for participants who may not be able
to save as much as they would like to save in the plan.

   •  Stay calm when markets are volatile. Keeping a long-term perspective when markets are volatile      is not easy. Trading activity in retirement plans tends to rise when markets fall. For example, in     August 2024, U.S. stocks experienced a brief downturn, including the worst performance day in     nearly two years.4 Trading activity in 401(k) plans rose to eight times its normal level. Participants     fled to safety, pulling money from stock funds and moving it into stable value bonds, and money     market funds.5 Remind plan participants that stock market volatility is normal. Stocks move higher     and lower; however, over the long term, historically, they have trended higher.

   •  Boost savings with catch-up contributions. Make sure employees understand how much they can      save in your workplace retirement plan. In 2025, the limit for traditional and Roth contributions to      401(k) plans is $23,500. However, older participants who save the maximum amount can make      additional catch-up contributions. In 2025, catch-up contributions are $7,500 for participants      who are ages 50 to 59 or 64 or older. Participants ages 60 to 63 can make “super” catch-up      contributions this year of $11,250. 6

Looking for resources to support employee education and communication? Contact us—we’re here to help! We can help you create campaigns that support long-term success for your workforce.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Employee Education: Budgeting and Saving

Take Control of Your Finances with Our On-Demand Webinar and Budgeting Worksheet

Managing money can feel overwhelming, but it doesn’t have to be. This on-demand webinar and budgeting worksheet are here to help! This educational toolkit is designed to give you the confidence to budget, save, and plan for the future.

CTA: Watch the Video

What the webinar covers

• Why budgeting matters: Discover where your money is going and take charge of your finances.

• Debt strategies: Find out how to pay down debt while still saving for what’s important.

• Goal setting made simple: Plan for emergencies, vacations, and retirement with ease.

To support what you learn in the webinar, our budgeting worksheet uses the popular 50/30/20 rule. It’s a simple way to organize your income and prioritize your spending.

Here’s how the worksheet helps:

• Review your finances: Track your income, review expenses, and visualize your spending with
easy-to-read graphs.

• Organize your money: Sort your spending into categories like Needs, Wants, and Savings.

• Track your progress: See how your spending compares to the 50/30/20 rule.

• Get helpful tips: See suggestions to help you stay on track and adjust your budget.

Paired with our webinar, it’s a great way to build smart money habits.

CTA: Download the Worksheet

Benefits of Financial Education

• For employees: Better planning leads to less stress, more focus, and increased financial
confidence.

• For employers: Financially-educated teams are happier, more engaged, and better prepared
for the future.

Supporting teams with ongoing education builds morale and engagement. Contact us to explore ways to keep employees connected with valuable resources

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.

Plan Sponsor Newsletter: Retirement Leadership Insights

Wondering how to help your 401(k) plan and committee succeed? Explore our Retirement Leadership Insights newsletter: it covers simple ways to keep your plan on track.

What does a 401(k) committee do?
A committee’s work shapes the success of your plan! Read about what they focus on.

Tips for smooth committee transitions
New members on the committee? Keep things running smoothly with these tips.

Should you consider auto-features?
Auto-enrollment and auto-escalation help employees save—automatically! But they’re not for everyone.

Read the Full Newsletter

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Should You Consider Auto-Features for Your Retirement Plan?

Auto-enrollment and auto-escalation are now standard for new plans. But how can you know if these “table-stakes” are a good option for your plan?

Studies have shown that auto-features, such as auto-enrollment and auto-escalation,

help boost participation and savings rates. However, not all plans offer these plan design features, and existing plans aren’t obligated to adopt them. Under the SECURE Act 2.0, new 401(k) and 403(b) plans must include auto-enrollment and auto-escalation, beginning in 2025. Choosing to include automatic features in your retirement plan design is an important and potentially complex decision.

Here are some key factors to consider.

Auto-features explained
Auto-enrollment as a retirement plan design feature automatically enrolls eligible employees to contribute a predetermined percentage of their salary to the plan unless they opt out. Auto-escalation refers to a plan feature that automatically increases an employee's contribution rate at regular intervals (typically annually) by a preset percentage, unless the employee actively chooses otherwise.

Document, document, document
Retirement plan committees should carefully weigh the decision to adopt or not adopt automatic features. It can be invaluable to have a structured process and thoroughly document all discussions, the data considered, and the rationale for specific decisions (i.e., in meeting minutes) for future reference. Documentation provides evidence of prudent decision-making and demonstrates compliance with ERISA standards. Specifically, in case of an audit or legal challenge, documentation can be used to prove that the committee made decisions thoughtfully and in the participants’ best interest, potentially helping shield plan sponsors from fiduciary liability.

Evaluating auto-enrollment for your plan
Although automatic enrollment may be a good fit for many plans, they aren’t always the best option. Here are some scenarios where auto-enrollment can be highly effective.

When auto-enrollment works well
1. Organized HR teams: Generally, companies with well-structured human resources departments can more easily manage the implementation and ongoing administration of auto-enrollment.

2. Stable employee populations: Organizations with low turnover rates often benefit from the consistency that auto-enrollment provides. This stability allows for more predictable long-term planning, reduces administrative workload, and helps foster a company culture that encourages retirement saving.

3. Integrated payroll: Integration between payroll and the plan's recordkeeping system is crucial to achieve the success of auto-enrollment. Real-time data exchange reduces errors, automates updates, and minimizes manual work, which can support operational efficiency and compliance efforts.

When auto-enrollment may not be ideal
1. High-turnover environments: Companies with frequent employee churn may find auto-enrollment administratively challenging and less effective.

2. Manual payroll processes: The administrative complexities auto-enrollment introduces may be a challenge for employers relying on manual payroll systems.

3. Hourly employees/variable pay structures: Auto-enrollment may not be ideal for organizations with a significant number of hourly workers or frequently-changing pay structures.

4. Outdated HR technology: Companies lacking modern, integrated HR systems may find it more difficult to effectively implement and manage auto-enrollment.

When auto-escalation works well
1. Stable workforces: Organizations with low turnover and predictable salary structures may benefit from auto-escalation.

2. Predictable salaries: Employees with regular, predictable pay increases are more likely to adapt well to gradual increases in their retirement contributions.

3. Integrated technology: Integrated payroll and recordkeeping systems are essential to keeping up with the administrative demands auto-escalation requires.

Downsides of auto-escalation
1. High turnover: Low employee retention can complicate the administration of a plan with auto-escalation features.

2. Frequently adjusted compensation: In organizations with variable pay structures or frequent compensation changes, deferral percentages may require constant adjustment. This can potentially lead to over- or under-contributions and increased administrative complexity, making auto-escalation challenging to manage.

3. Lack of integrated technology: Without seamless integration between payroll and recordkeeping systems, implementing auto-escalation can be error-prone and resource-intensive.

Making the choice for your plan
Implementing auto-features in your retirement plan is a significant decision that requires careful consideration. While these features can dramatically improve participation and savings rates, they may not be suitable for every plan.

When evaluating whether to implement auto-enrollment or auto-escalation, consider the following:

1. Your workforce demographics and turnover rates

2. The sophistication of your HR and payroll systems

3. Your ability to manage the additional administrative requirements

4. The potential impact on employee satisfaction and financial well-being

Thinking about auto-features for your retirement plan? Let us help you decide. Our team can guide you through the evaluation process, helping you design a retirement plan that serves your organization and employees.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

401(k) Playbook for Company Leadership

Your workforce is your greatest asset. A well-managed 401(k) plan can help you attract, retain, and engage top talent.

Are you getting the most out of your 401(k) plan? Ask yourself:

• Is your plan helping to improve employee retention?

• Are you offering benefits that today’s employees want?

• Is your 401(k) designed for long-term success?

If you answered "no" to any of these questions, it’s time for a change. Let’s talk about how to enhance your 401(k) and keep your team happy without a drastic cost increase.

CTA: Download Your 401(k) Playbook

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

401(k) Committee Changes and Tips to Help New Members

As senior leaders start to retire, learn best practices for smooth committee transitions.

Change is upon us. The Silver Tsunami is lifting the baby boom generation into retirement. For many companies, this means shifts in 401(k) committee leadership. As with all committee processes, having a clear plan is essential. A well-documented transition process can help new and existing members understand their roles, and smooth and consistent transitions will keep plans operating seamlessly.

Develop a consistent onboarding process

A thorough and repeatable process for onboarding new committee members is essential. In many cases, the process begins with an orientation program that includes:

• ERISA regulations and compliance best practices.

• Fiduciary education and oversight responsibilities.

• Previous and current plan design.

• Plan operations, administration, costs, and other key issues.

• Key plan documents, including the plan document, investment policy, criteria for hiring outside
consultants, and other pertinent information.

• The committee’s history, governance structure, composition, meeting minutes, and operations.

Depending on the size of the committee, it may be beneficial to assign a mentor to each new appointee. These mentors can help less-experienced individuals understand their roles and responsibilities and provide ongoing guidance.

Passing down essential knowledge

Stepping into a new role on the 401(k) Committee can feel like drinking from a fire hose. Here are a few ways to make sure that important knowledge is passed down smoothly:

• Share exit insights: Gather insights from departing members through exit surveys. Ask them to
share challenges, solutions, and best practices. This helps new members learn from previous
problems and avoid the same mistakes.

• Create advisory roles for retiring members: It may be a sound idea to have retiring members
serve in advisory roles for a period of time.

• Ease into new roles: When committee members step into leadership roles, consider offering
transition support. The outgoing leader can serve as a mentor by sharing knowledge and
easing the shift. By co-leading a couple of meetings, it allows for a smooth transition and helps
the incoming committee leader establish relationships.

• Highlight the importance of documentation: To remain in compliance with ERISA, retirement
plan committees must maintain meticulous records. This is a great time to review your
documentation practices and identify any gaps. Best practices suggest that all plan processes,
decisions, and non-decisions be thoroughly documented.

Tips for new 401(k) Committee members

Communication is one of the keys to smooth transitions. It is important for new members to review plan documents and meeting minutes. This is a first step in understanding the current structure of the plan and the benefits it offers to participants. Keep a list of any questions that arise and add them to the next meeting agenda.

Consider scheduling a few brief meetings to help new members understand fiduciary and plan basics. These discussions may cover features the committee has chosen to adopt or exclude. Informal discussions like these often reveal insights not found in formal plan documents. Here are a few other topics to discuss:

• The history of the plan

• The roles of various committee members

• Committee best practices

• Significant challenges the committee has encountered

• Current and future challenges

Your plan advisor is a valuable resource for both rookie and veteran committee members. It’s a good idea to include an experienced advisor in the transition process to provide guidance on compliance, fiduciary duties, and overall plan health.

When your committee is experiencing personnel changes, get in touch. We can help support a smooth transition.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Designing Your Future Employee Education Presentation & Worksheet

Employee Education: Designing Your Future

Financial education makes a big difference. That’s why the Designing Your Future on-demand webinar is now available! This easy-to-follow video and worksheet provide guidance on setting smart money goals and building a secure future. It’s simple, free, and available anytime.

Watch the Video

What the webinar covers

• Short-term goals: Tips on essentials like building an emergency fund and managing debt.

• Mid-term goals: Strategies for saving for big purchases or career growth.

• Long-term goals: Insights for retirement planning.

Download the Worksheet

Benefits of a Financial Education

• For employees: Better planning leads to less stress, more focus, and increased financial
confidence.

• For employers: Financially educated teams are happier, more engaged, and prepared for the
future.

Looking for More Employee Education?

Supporting teams with ongoing education builds morale and engagement. Contact us to explore ways to keep employees connected with valuable resources.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

What Does a 401(k) Committee Do?

How a 401(k) committee can support with plan success.

Who is making sure that your retirement plan works for you, your company, and your employees? That’s the job of your 401(k) committee! From compliance to employee education, the committee helps tailor the plan to fit your team’s needs. Let’s explore the essential tasks and responsibilities your 401(k) committee will focus on to help maintain an effective, compliant, and competitive plan.

Who should be on the 401(k) committee?

Typically, a 401(k) committee includes leaders from HR, finance, and upper management. These members act as fiduciaries, meaning they are legally required to act in the best interest of the employees. Failing to meet fiduciary responsibilities can lead to penalties or lawsuits, so it’s essential to have knowledgeable and dedicated members on the committee.

Why regular meetings matter

Committees need to meet regularly to review the plan’s performance, help ensure compliance with evolving laws, and address any potential issues. Laws like the SECURE Act can impact plan requirements, such that staying up-to-date is key to adapting innovations and staying an employer of choice.

Making sure the plan works for employees

The primary role of the committee is to ensure the 401(k) plan serves employees well. This includes checking investment options, making sure that fees are reasonable, and regularly comparing the plan to industry benchmarks. Keeping fees in check could mean more money in employees’ retirement accounts, which can significantly impact their long-term savings.

Motivating employees to participate and save

Beyond compliance and investment oversight, the committee’s most important task is motivating employees to participate and save for retirement. Tools like auto-enrollment and auto-escalation automatically enroll employees in the plan and gradually increase their savings rates. Aiming for 10-15% savings is typically appropriate for achieving long-term financial security. In fact, it is the recommended annual savings amount by industry experts.

The importance of outside help

Many businesses work with a professional advisor and third-party administrator (TPA) to manage employee 401(k) plans. Advisors can help with documentation, market updates, selecting appropriate investment options, and employee education. They also keep the committee updated on legal and regulatory changes.

Customizing the plan design

The 401(k) committee also has the flexibility to adjust the plan’s design to meet employees’ needs better. This might include adding Roth options, changing the employer match, or introducing profit-sharing features. A customized plan can make a big difference in employee satisfaction and savings outcomes.

Benchmarking for success

To help ensure that your 401(k) plan stays competitive, the committee should regularly compare it to similar plans in your industry. This includes evaluating fees, participation rates, and investment choices. By benchmarking, you can help ensure your plan is not only compliant but also an attractive benefit for your employees, helping you attract and retain top talent.

Educating employees about the plan

Effective communication is crucial. The committee should take steps to regularly educate employees about the plan’s features and encourage them to save intentionally. This may include workshops, emails, and one-on-one meetings. When employees understand the plan, they’re more likely to take full advantage of it.

Helping employees retire successfully

Ultimately, the committee’s goal is to help employees retire with confidence. By monitoring plan performance, ensuring fair fees, and promoting higher savings, the committee plays a vital role in setting employees up for a successful financial future.

Managing a 401(k) plan can be complex, but with a well-run committee, it can be a valuable benefit for both your company and your employees. By focusing on compliance, cost control, and encouraging participation, the committee can work to meet everyone’s needs.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Compliance Deadlines and Reminders: Q1 2025

Stay ahead of deadlines with help from our annual Compliance Calendar. If you have any questions about deadlines or information requested, please contact us to review today!

Download the Calendar

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Understanding the Investment Menu in Your Company's 401(k) Plan

As a business leader overseeing your company's 401(k) plan and understanding the investment menu's intricacies can play a significant role in shaping your employees' retirement outcomes.

In our comprehensive guide, we explore different ways to evaluate and improve your current offerings. We discuss innovative ideas for assessing your plan’s asset allocation strategies and provide recommendations for creating an effective investment line-up.

CTA: Download the 401(k) Investment Menu Guide

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

The new Retirement Plan Contribution Limits are official!

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!

CTA: 2025 Contribution Limits

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Securing Retirement Futures: Strategies to Address Delayed Retirement

Does your 401(k) plan design support “on time” retirement?

 Delayed retirement is becoming increasingly common among Americans, impacting employers’ bottom lines, talent acquisition cycles, and overall productivity. A recent survey found that one in four employees anticipate working beyond their initially planned retirement age, and 9% fear they may never be able to retire.[1] This data supports a longer-term trend: since the early 1990s, rising labor force participation among older workers has lifted the average retirement age in the United States by three years.[2]

Impact of delayed retirement on employers

These findings have important implications for employers. While retaining seasoned, skilled employees with institutional knowledge and strong customer relationships has significant benefits, it also exacts a price that may affect management strategies, employee morale, and operational expenses. A recent study quantified the cost of delayed retirement on employers and found:[3]

· A one-year delay in an employee’s retirement had an incremental cost of about $50,000,
assuming one employee’s retirement resulted in other employees advancing up the corporate
ladder and an entry level employee being hired.

 · A one-year increase in average retirement age across a company’s workforce resulted in an
average incremental cost of 1% to 1.5% of aggregate annual workforce expenses. For an
employer with 100 employees and workforce costs of $10 million, a one-year delay in retirement
age could cost from $100,000 to $150,000.

It’s important to note that this analysis might understate the true cost of delayed retirement because of qualitative effects, such as the impact of delayed promotion, and limited advancement opportunities on employee morale, productivity, and turnover.

Strategic plan design supports “on time” retirement 

Over the last decade or so, automatic enrollment, automatic escalation, and managed account advice have significantly improved retirement plan participation and savings rates.[4] Now, employers are emphasizing the importance of additional features that can help employees save enough to retire on time, at full retirement age. These include:

· Health Savings Accounts (HSAs) offer employees at companies with high deductible health
plans (HDHPs) an additional tax-advantaged way to save. Any money not spent on healthcare
can rollover and accumulate for future use. Building savings in HSAs can help near-retirees feel
more confident about meeting healthcare expenses in retirement. In addition, after the age of 65,
HSA funds can be used to pay non-healthcare expenses without a penalty. Distributions applied
to qualified healthcare costs are tax-free, while those used for other expenses are taxed as
ordinary income.

· Retirement income funds are designed to provide a steady stream of income during retirement.
They often include target date strategies that gradually shift allocations to more conservative
investments, such as annuities, as retirement approaches. Some retirement income funds focus
on generating a stable income through investments in financial markets, aiming for annual
returns sufficient to support retirement needs.

·    In-plan annuity options give plan participants the opportunity to save and invest in guaranteed
     retirement income through their workplace retirement plans. Investing a portion of retirement
     savings in an annuity that will generate income for life can give near-retirees more confidence to
     retire. Income from an annuity can be augmented with income from other investments.

The SECURE Act made it easier to add a lifetime income investment to a workplace retirement plan by eliminating a key obstacle—portability. Annuities can now be directly rolled over into IRAs, converted to individually owned certificates or moved to new employers’ retirement plans, if the plan accepts annuities.

Strategic plan design can support employees, so they feel more confident about retiring on their own timeline, while also assisting employers overcome the costs and challenges related to delayed retirement. We are here to help if you have questions about optimizing your retirement plan strategies to promote on-time retirement and maintain a healthy workforce.

[1] Nationwide. “In-Plan Guarantees Survey Report.” Sep. 2023.

[2] Munnell, Alicia. “How To Think About Recent Trends In The Average Retirement Age?” Jul. 2022.

[3] Prudential. “Why Employers Should Care About The Cost Of Delayed Retirements.” 2019.

[4] Vanguard. “How America Saves.” Jun. 2024.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Employee Newsletter: Complete Financial Checklist

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.

CTA: Download Employee Education

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Plan Design & Administration Edition

As we approach the end of the year, consider these important topics regarding your retirement plan. The newsletter covers information that can help the efficiency and compliance of your plan. Here's a brief overview:

·         Retirement plan reviews

·         Addressing retirement plan errors

·         Strategies to address delayed retirement

CTA: Read the full newsletter

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

5 Common Retirement Plan Errors and Tips to Fix

Mistakes happen–Here’s how to correct common 401(k) 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 401(k) 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 401(k) 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 401(k) 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: 401(k) 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 401(k) 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 401(k) 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.

[1] Employee Benefits Security Administration. “EBSA Restores Over $1.4 Billion to Employee Benefit Plans, Participants, and Beneficiaries.” October 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

What's Going On in Washington?

Exploring current ERISA and DOL areas of interest

In a significant move by the Department of Labor (DOL), new regulations are being rolled out that may impact your ERISA compliance and retirement plan administration. Learn how these changes could influence your retirement plan, discover Washington's initiatives, and prepare your company effectively.

Retirement Security Rule expands fiduciary definition

Effective September 23, 2024, a new DOL regulation, the “Retirement Security Rule,” redefines when a person is a fiduciary under ERISA and the Internal Revenue Code. This rule replaces the DOL’s five-part test that has been in place since 1975. The new fiduciary definition focuses on whether a communication with a retirement investor could reasonably be viewed as an individualized recommendation intended to advance the investor’s interests.

Under the Retirement Security Rule, a person will be an investment advice fiduciary for purposes of ERISA if:

·         the provider makes an investment recommendation to a retirement investor;

·         the recommendation is provided for a fee or other compensation, such as commissions; and

·         the financial services provider holds itself out as a trusted adviser by:

o    specifically stating that it is acting as a fiduciary under Title I or II of ERISA; or

o    making the recommendation in a way that would indicate to a reasonable investor that it
is acting as a trusted adviser making individualized recommendations based on the
investor's best interest.

The Retirement Security Rule will close the loophole for one-time advice. A financial services provider will be a fiduciary with respect to a recommendation to roll over assets from a workplace retirement plan to an IRA if every element of the fiduciary definition is satisfied.

New and expanded exemptions

The Retirement Security Rule package from the DOL also finalized amendments to several existing exemptions, most notably PTE 2020-02 and PTE 84-24, which also apply to the management of conflicts of interest with respect to advice.

·         PTE 2020-02 is broadly available for advice concerning the wide universe of investments
recommended to retirement investors.

·         PTE 84-24 is tailored for use by independent insurance agents. It is intended to facilitate their
ability to make best interest recommendations under their business model.

More entities will likely be fiduciaries and must update disclosures, policies, and procedures to comply with PTEs. Transitional relief is available in the first year. The Retirement Security Rule remains controversial and is expected to face various legal challenges.

IRS Notice 2024-02

Dubbed the “Grab Bag” notice, the IRS released a Q&A style notice to provide additional guidance on 12 of the 90 new provisions added by SECURE 2.0 of 2022.

Notable provisions affecting section 401(k) and section 403(b) retirement plans include:

·         expanding automatic enrollment and auto-escalation features

·         credit for small employer startup costs

·         de minimis financial incentives for contributing to a plan

·         terminally ill distributions exception

·         changes in accrual rule compliance for cash balance plans

·         treatment of employer matching or nonelective contributions as Roth contributions

Notice 2024-02 clarifies the requirements for each provision, including the effective date, limitations, and exceptions.

ERISA class actions - Group Health Plans

Fiduciary governance for health and welfare benefit plans has not always been a focus of plan sponsors, despite ERISA's fiduciary standards applying equally. However, a recent court case, known as the Lewandowski v. Johnson & Johnson case, highlights alleged breaches of fiduciary duties for high fees paid to service providers.

To provide fee transparency, the Consolidated Appropriations Act of 2021 amended ERISA to require certain service providers to disclose fees to employer-sponsored group health plans, similar to retirement plans. Though the Lewandowski case is still early, it reminds employers to review their ERISA duties and ensure strong processes and procedures.

Cybersecurity

Cybersecurity remains a top priority for DOL. In a recent speech at the National Association of Plan Advisors summit, Employee Benefits Security Administration’s (EBSA) Assistant Secretary, Lisa Gomez emphasized the need for better protection of retirement plan data. Safeguarding assets and participant information is a fiduciary duty under ERISA, requiring compliance with the "prudent expert" standard. This includes staying updated on cybersecurity practices, training personnel, and monitoring operations. EBSA’s guidance, "Cybersecurity Program Best Practices," highlights the importance of addressing cybersecurity risks in plan administration.

The landscape of retirement plan regulation and ERISA compliance is undergoing significant changes. These updates aim to enhance fiduciary responsibilities, expand exemptions, and clarify requirements affecting retirement plans. While these changes bring forth new challenges, they also offer opportunities for plan sponsors to work alongside a trusted retirement plan advisor to improve and ensure the security and efficacy of retirement savings.

 This is a special edition written by The Wagner Law Group.

Established in 1996, the attorneys at The Wagner Law Group provide boutique-style services in ERISA, PBGC, employment law, and more for clients nationwide. www.wagnerlawgroup.com

This article is intended for general informational purposes only, and it does not constitute legal, tax, or investment advice from The Wagner Law Group.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 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.

Retirement Plan Review: From Participation Rates to SECURE 2.0

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 401(k)’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 401(k)s.

 -          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.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 

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.

Plan Sponsor Newsletter: Innovative Plan Strategies

We are excited to share the Q3 Newsletter, focused on innovative strategies for plan sponsors and workplace retirement plans. Download the newsletter to learn how you can elevate your company retirement plan and stay ahead with the latest industry updates.

Let’s work together to enhance your retirement plan offering and help your employees save for a secure future.

CTA: Download the Newsletter

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 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.

SECURE 2.0 Update: Looking Ahead

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 401(k) 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.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC. 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.