Category: 401(k) Resources

How to Choose the Right 401(k) Plan

Andrew Meadows / 9 May 2023 / 401(k) Resources

So you’re ready to offer a 401(k) plan to the employees at your small business. But where do you go from here? With so many small business 401(k) options available, it can feel overwhelming when it comes to actually picking one to meet your small business’s unique needs.

Here’s how to take the guesswork out of getting a plan that works for your small business, your employees, and you.

6 Steps to Create a 401(k) Plan That’s Right for You

Some of these steps may be simple, and some may feel like they’re easier said than done, but these are foolproof ways you can take to create a 401(k) plan that meets your small business’s (and employee’s) needs.

Step 1: Determine Your Small Business’s Goals

The first step in creating a 401(k) plan is to identify both short and long term goals you have for your small business. Some questions to consider include:

• Will my staff be growing (or shrinking) in the coming year?
• What is my budget for offering a 401(k) plan?
• What are my goals for offering a 401(k) plan (e.g., attract and retain top talent, demonstrate a commitment to employee financial well-being)?

Step 2: Select a Plan Provider

Selecting a 401(k) plan provider can seem daunting when you’re busy and there are so many providers out there to choose from. Doing your homework on them and matching their offerings with your goals can help streamline your choices quickly. Some factors to consider when selecting a provider include:

• The provider’s fees and costs
• The provider’s investment options
• The provider’s level of customer service and support
• The product’s ease of use

Step 3: Choose Your Plan

After you’ve chosen a plan provider, the next step is to choose your 401(k) plan. This includes deciding on:

• Type of 401(k) plan you will offer
• Plan administration and compliance
• Match (if any) you’ll be offering
• Contribution options for your employees
• Vesting schedule (if any)
• Investment options
• Eligibility requirements

(Psst! If some of these terms are unfamiliar to you, check out our glossary, which we created for small business owners and plan participants – or anyone who doesn’t have a Ph.D. in retirement lingo!)

Step 4: Communicate the 401(k) Plan to Employees

Once you have chosen your 401(k) plan, it’s important to communicate the plan to your employees and get them enrolled. This includes providing information on:

• The plan’s features and benefits
• How to enroll
• Who’s eligible to participate in the plan
• How much you’ll be matching
• The vesting schedule, if any
• How to change contribution amounts or investment options
• How to access and manage their 401(k) account
• The plan’s rules and regulations, including any fees and penalties for early withdrawals

It’s important to ensure that your employees understand the benefits of the plan and how to participate. This will help your small business’s employees make informed decisions about their retirement savings.

Plus, it’s been shown again and again that employees who are engaged in saving for their future are more engaged in their jobs. Get your employees excited about retirement saving (because what could be more exciting than that?) and you’ll have a workforce that’s more present – and likely more productive.

Be sure you’re also pointing them to resources like paycheck calculators so they can see in real-time how making contributions to a 401(k) will impact their take-home pay.

Step 5: Monitor and Evaluate the 401(k) Plan

After implementing your 401(k) plan, it’s important to monitor and evaluate the plan regularly to ensure it continues to meet your small business’s goals and your employees’ needs. This includes:

• Reviewing the plan’s fees and costs
• Evaluating the plan’s investment performance
• Reviewing the plan’s compliance with regulations
• Gathering employee feedback on the plan’s features and benefits

Step 6: Make Adjustments as Needed

Based on your monitoring and evaluation, you may need to make adjustments to your 401(k) plan over time. This could include:

• Changing investment options
• Adjusting contribution options
• Updating plan administration and compliance
• Changing plan providers if necessary

Ubiquity is not a registered investment advisor, and the information provided herein should not be considered legal or tax advice. We recommend consulting with your financial planner, attorney, and/or tax advisor for personalized advice.

Benefits of a New Comparability 401(k) Plan

Siân Killingsworth / 28 Apr 2023 / 401(k) Resources

Although most people refer to this as a new comparability 401(k), it’s actually just an optional provision to a regular 401(k) plan. This provision is designed to enable employers to create customized retirement plan contributions for different groups of employees. This allows them you reward select groups with higher contributions while still offering employer contributions to others.

Known as a qualified defined contribution plan, the profit-sharing formula works by projecting out an employee’s current contribution to a future retirement-age benefit.

How Do New Comparability Plans Work?

New comparability profit sharing plans offer compliance with 401(k) nondiscrimination laws, while allowing larger contributions on average to older participants — particularly owners and highly compensated employees.

• Employees are divided into groups
• Each group can receive a different level of profit share contribution, determined annually
• Non-HCEs receive a minimum gateway contribution (generally 1/3 the highest rate or 5% of their pay)
• One of the nondiscrimination tests looks at the value of contributions at retirement age
• In essence, 15% to a 55-year-old can be as valuable as 5% to a 30-year-old

New comparability plans can be combined with Safe Harbor plans, but the gateway minimum contribution must still apply, even if your company makes a 3% non-elective contribution already. The 3% Safe Harbor nonelective is used towards the nondiscrimination testing, whereas Safe Harbor match does not.

New Comparability Plan Benefits for Small Businesses

Maximum HCE Retirement Savings:

If your small business has a disproportionate number of owners and key employees, it can be difficult to reach the combined limit for 401(k) plan contributions. Small businesses may delay or decline profit sharing contributions due to the financial burden of pro-rata allocations that are seemingly costly. This option also allows the employer to refrain from contributing so some HCEs if they choose to.

However, by giving different rates to different employee groups, business owners can be sure everyone gets their fair share. Small business owners can contribute to their own small business 401(k) accounts as both employer and employee. The maximum any employer can put away for 2023 is $66,000 ($22,500 as an employee + $43,500 as the employer), PLUS $7,500 for those age 50 or older.

Plan Flexibility:

With a flexible new comparability plan, small business owners can opt to offer a discretionary profit share on a good year and forego or reduce it during years of lower return or heavy investment. The contributions may also increase or decrease from year to year, at your discretion and depending on your business situation and goals.

Tax Deductibility:

Employer contributions are not subject to payroll tax and are generally tax deductible. This helps to lower the company’s overall tax burden for the year, as well as the business owner’s personal income tax rate.

Rewards for Employees Nearing Retirement:

As a small business owner, you may closer to retirement than most of your workforce and earn a higher salary. Choosing a new comparability plan may make sense for your personal finances. This choice of plan also rewards an experienced executive team.

Rewarding loyalty and longevity is another main reason small business owners offer 401(k)s, particularly these days when job-hopping is the norm and talent retention can be such a challenge. As key employees get get closer to retirement, they will no doubt be thinking about how they might grow their assets at a quicker pace.

Is a New Comparability Plan Right for Your Small Business?

Small businesses can benefit from a new comparability plan, though they may not be ideal for outfits with a highly fluctuating workforce. Changes in enrollment numbers could impact funding costs. Also, keep in mind these plans must pass special IRS nondiscrimination tests. These tests ensure that highly compensated employees aren’t being treated overly favorably in the retirement plan setup — as opposed to a Safe Harbor plan, which generally satisfies most nondiscrimination testing.

Questions? Contact Ubiquity to explore all of your small business retirement plan options.

How to Choose the Right 401(k) Plan Provider

Mike Cohen, AIF® / 5 Apr 2023 / 401(k) Resources

Your perfect match is out there – and we’re not talking about love; we’re talking about money. Specifically, we’re talking about finding the right 401(k) provider for your small business.

If you’re tired of sneaky fees or customer service that leaves you with more questions than answers, it might be time to break up with your current provider. Or if you have yet to find the 401(k) that will complete you, it may be time to start searching. But how to begin?

There are many factors to consider when evaluating different small business 401(k) plan providers, so we’re breaking it down here to simplify it for you.

Step 1: Determine Your Business Needs

Think about the size of your small business, your budget, and your employees. Do you want to manage the plan yourself or choose a low-maintenance plan that is ready to go “out of the box?” Consider:

• How many employees do you have?
• Do you have any plans to expand or shrink that number in the future?
• What is your budget for a 401(k) plan?
• Do you want a simple, no-frills plan or something more robust?
• Do you want to offer matching or profit-sharing contributions?
• What investment options do you want to offer?
• Do you have time to manage a plan? Or would you look for a full-service solution?

Answering these questions will help you narrow your options and choose a plan provider that meets your needs.

Step 2: Research Providers

Once you’ve determined your business needs, it’s time to research 401(k) plan providers. There are many providers to choose from (and yes, some of them are robots). When researching providers, consider:

• What are the fees associated with the plan?
• What investment options does the plan offer?
• What kind of customer service does the provider offer?
• Will I be able to speak with a human if and when I need help?
• What is the provider’s reputation in the industry?
• What kind of technology does the provider offer?

Be sure you know your budget by this point, so you don’t end up with sticker shock at the end.

Step 3: Evaluate Provider Experience and Expertise

When evaluating plan providers, it’s important to consider their experience and expertise. Look for a provider with a strong track record of success and experience working with small businesses. Look at:

• How long has the provider been in business?
• Does the provider work with other businesses in your industry?
• Does the provider have expertise in retirement plan administration?
• Does the provider have experience with small businesses?
• What, if any, are the provider’s ratings? Check Google Reviews, the Better Business Bureau, and other review sites.

Step 4: Review Plan Features

Once you’ve narrowed your options to a few providers, it’s time to review the plan types they offer. You want to make sure you choose a provider that offers the type of plan that is best suited to your small business. Be sure to note:

• The plan design. Is it a traditional 401(k)? A solo 401(k)? A Roth 401(k)?
• Whether or not the plan offers the opportunity for matching contributions.
• What the vesting schedule for employer contributions is.
• What investment options are available.

By reviewing plan features, you can choose a plan that meets the needs of your employees and helps them save for their futures.

Step 5: Monitor and Evaluate the Plan

After implementing a 401(k) plan for your small business, it’s critical that you monitor its performance. This includes tracking employee participation and contributions, reviewing investment performance, and ensuring that the plan remains compliant with IRS regulations. Your plan provider should provide regular reports and support to help you evaluate the plan’s performance and make necessary adjustments.

What If You Contribute Too Much to Your 401(k)?

Siân Killingsworth / 3 Apr 2023 / 401(k) Resources, Personal Finance

Contact your plan sponsor right away if you think you have contributed too much to your 401(k) — or you’ll be taxed twice (in the year you contributed, and in the year you withdrew)! If you’re under 59.5 years old, your distributions could also be subject to the 10% early distribution tax and 20% withholding.

Can you contribute too much to a 401(k)?

The IRS limits the amount you can put into a tax-advantaged 401(k) account. For 2023, that amount is $22,500 for individuals under 50 and $30,000 for those age 50 and older. The employer contributions do not count toward that limit but instead count toward an overall limit of 100% of your salary or $66,000 — whichever is less.

Most plan participants never have to worry about over-contributing. The plan administrator tasked with account maintenance will likely keep you from putting too much money into the account each year.

However, you might run into a problem of over-contributing if:

• You switch jobs during the year and start a new 401(k) plan.
• You work multiple jobs with more than one 401(k).
• You received a pay raise or bonus, which included automatic 401(k) deductions.

How to avoid a 401(k) over-contribution

Juggling multiple 401(k)s is challenging. Communicating with your employers and plan administrators to stay on top of the issue is the best way to stay on top of the situation before it ends up costing you big-time.

How to fix a 401(k) over-contribution

The IRS allows until April 15 of the following year to correct an over-contribution error. They recommend contacting your plan administrator to fix the problem by paying out the difference as an excess deferral. The plan administrator will pay you that amount by April 15, which counts as part of your gross income for the year in which it was contributed. The interest earned on the amount is taxed when the money is withdrawn.

Ideally, you will check your distributions in January or February and initiate any withdrawals by March 1, so you’re not left scrambling after the deadline. Should you notice the error after April 15, the excess contribution will be taxed twice – tax on the excess the year it was contributed to the 401(k) and tax on whatever amount is withdrawn from the retirement account.

How to contribute more toward your retirement

If you’re looking to maximize your retirement savings, you are allowed to have multiple accounts. If you reach the contribution limits of your 401(k), for example, you can open a high-deductible health spending account, as well as a tax-deductible or Roth IRA.

Contact Ubiquity

As a small business 401(k) plan provider, Ubiquity is responsive to the needs of employers and employees, including concerns about juggling multiple small business 401(k) plans or over-contributing. We provide employees with financial wellness tools to help you reach your goals.

7 Top 401(k) Plan Features

Jay Jacob / 14 Mar 2023 / 401(k) Resources

When it comes to 401(k) plans, many options exist. You want a plan that will give you the flexibility and features to meet your needs while keeping costs low–and probably some other features, too. Here are our top features to look for when picking the small business 401(k) plan that’s right for you.

Low fees.

The best 401(k) plan providers offer low fees. At many 401(k) plan providers, fees are usually expressed as a percentage of assets under management (AUM), so looking at this metric is one way to compare plans from different providers. For example, if one company charges 0.5 percent in annual fees while another charges 1 percent per year, then the former will cost half as much over time–but only if you have enough money each year to cover those fees.

However, you should look for a provider that doesn’t charge AUM fees at all. Why? Because these fees will increase as your savings grows. And that, over time, will chip away at your savings. …which it likely will do, based on how the stock market has performed historically over a 20-30-40-year time period.

Instead, seek a 401(k) plan provider like Ubiquity that only charges a flat fee. This type of fee remains the same no matter how big your savings balance gets. Between the lower overall fee you’ll pay and the additional compounding interest you’ll earn on the money you’ll save with flat fees, you could end up with tend of thousands more in the bank when you finally retire.

A variety of investment options.

When you’re choosing a 401(k) provider for your small business, one of the most important features to look for is a wide variety of investment options. You want to offer enough investment types so your employees can choose an option that matches their risk tolerance and goals. This might include individual stocks, mutual funds, ETFs (exchange-traded funds), and bonds.

The ability to borrow from the account.

Although it is not recommended, sometimes borrowing from your 401(k) account is necessary. Interest on loans is paid back to the participant and the only time they will get taxed on it is if it goes into default when not making payments.

Flexibility.

Flexibility is a must-have for any 401(k) plan. It’s important to be able to make changes quickly, especially if your business or your employees’ needs change. You should be able to:

• Upgrade to a more robust plan (for example, when expanding your business from that of a sole proprietorship to one with multiple employees).
• Make changes to the contribution amount.
• Change beneficiaries at any time.

Automatic enrollment.

Automatic enrollment is a great way to get employees to participate in their 401(k) plan. If you’re looking for a way to get your staff members saving for retirement, automatic enrollment is one of the best ways to do so.Plus, when you set up your company’s 401(k) with automatic enrollment, the government will reward you with $500 in tax credits per year for the first three years.

By setting up automatic enrollment, you can help ensure that your employees are able to save money for retirement without any additional effort on their part, and you get a nice tax break!

Employer contributions.

Making contributions to your employees’ retirement accounts is a great way to help your employees save for retirement and is a prime way to maintain a competitive benefits package. This is helpful when you’re trying to attract new talent or want to reduce turnover.

Some small businesses choose a Safe Harbor 401(k) plan, which requires employer contributions, but the benefit to you as a small business owner is that this type of retirement plan exempts you from certain IRS tests. That can save time and prevent stress. And don’t forget — all employer contributions to employees are tax deductible.

Auto-escalation.

Auto-escalation is a feature that automatically increases your contribution rate every year. It’s worth noting that auto-escalation can be set to different rates, depending on the plan you choose. For example, some plans will increase your contribution by 1% each year until it reaches 6%. Others may have an initial default rate of 2% and then increase it by 1% per year until reaching 10%.

If you’re not sure how much money you can afford to contribute each year or if you want extra incentive to save more money into your 401(k), auto-escalation could be beneficial because it means there’s no need for guesswork on your part.

Your Small Business Can’t Afford to Ignore 401(k) Plans

Siân Killingsworth / 13 Mar 2023 / 401(k) Resources

Better retention. Wealth-building opportunities. Tax breaks. Need we say more? Okay, we will: An employer-sponsored small business 401(k) plan is easy to administer and affordable—and when it comes to offering them to your employees, it just makes sense for so many reasons:

Your employees need a savings plan.

The first step to helping your employees save for retirement is to understand why they need a 401(k) plan–and to do that, you need to know about employee retirement.

An employee retirement plan allows the workers at your small business to set aside money from their paycheck and invest it, which can help them build wealth and have more discretionary income in the future.

An investing team is an invested team.

A 401(k) plan is a way for individuals to save for retirement. Employees (and small business owners!) can contribute up to $22,500 in 2023, and those 50 or older can contribute an additional $7,500 per year.

Even if they can’t contribute up to the limit, the benefits of helping employees build wealth are many, including:

• Offering a 401(k) can help attract (and retain) top talent to your small business.
• Turnover rates may be lower because workers will feel more secure about their future if they’re invested in your small business’s success.
• Now more than ever, potential employees are looking for workplaces that offer competitive benefits packages. Don’t miss out on talent because they got better saving options elsewhere!

Small business 401(k)s are easy to administer and affordable.

The cost of offering a 401(k) plan is generally far lower than other types of retirement savings plans. Plus, many plans offer flat-fee options which include all expenses related to running the plan, from employee education costs to fees for preparing documents.

The good news doesn’t stop there: You don’t have to hire an outside administrator or service provider because many companies offer this service as part of their comprehensive offering. This means you’ll have one less thing on your plate as an owner, so you can spend more time running your business.

Hello, tax credits.

The tax breaks available to small business owners are pretty juicy: when you establish a new 401(k) plan, you may qualify for up to $15,000 in tax credits over three years. That’s $5,000 per year for the first three years of your plan. And if your plan offers automatic enrollment, you can qualify for another $1,500 for those first three years. That’s a significant savings that you can use to cover the cost of setting up the plan, and it may also help to reduce your taxable income.

A savings plan is good for your bottom line.

A 401(k) plan is good for both employees and small business owners. It allows tax advantages to employees who are saving for retirement, and gives tax deductions to employers when they contribute money into 401(k)s on behalf of their workers—saving both parties money in the long run.

Offering a retirement plan is also a great way to show employees you value their futures and understand that a 401(k) is a vital part of any compensation package. This helps to reduce employee turnover and is effective in helping potential new employees view your company as a competitive employer.

It may be required.

More than half of U.S. states have considered mandating that small businesses offer a retirement plan to their employees, and over a quarter have implemented such a mandate. This means that if you have employees (i.e., your business is not a sole proprietorship), you may have to choose between a state-sponsored plan and a private plan provider.

Most state sponsored plans are traditional IRAs, which enable savers to put away up to $6,500 annually, plus an additional $1,000 for those age 50 and older. But with a private 401(k) such as those offered by Ubiquity, you can save up to the maximum of $22,500 (or $30,000 for those age 50 and older). That’s nearly three times as much savings. Plus, you can contribute to your own 401(k) as both the employee AND the employer, enabling you to save up to a grand total of up to $66,000 (or $73,500) this year. Not too shabby!

How to Get Employees to Participate in Your 401(k) Plan

Siân Killingsworth / 13 Mar 2023 / 401(k) Resources

If you want to keep your small business employees happy and productive, a 401(k) retirement plan is one of the best things you can offer. An effective enrollment process that makes saving for retirement easy and affordable is the key to getting employees excited about participating in your company’s 401(k) plan.

Make your 401(k) plan simple to understand (and easy to access).

Make sure employees know how to enroll in the plan and make changes to their accounts. Employees should be able to access their information online, including:

• How much money is in their account
• How much they’ve contributed over time
• What investments are available for them to choose from (and how those investments have performed)

Offer automatic enrollment.

The best way to get employees to participate in a 401(k) plan? Make it easy.

Automatic enrollment is exactly what it sounds like: After meeting certain requirements, you can automatically set up small business 401(k)s for your employees.

This can be done by age or tenure, but it’s most effective if you use both (for example, you can automatically enroll employees who are 21 years old or older and have more than six months of service at your company).

You can also set up automatic escalation in which the amount of savings automatically increases after a set amount of time – such as annually.

Foster a culture of retirement savings.

Finally, to truly get your employees excited about participating in your 401(k) plan, you need to foster a culture of retirement savings. This means emphasizing the importance of retirement savings and encouraging employees to save for the future. This could look like financial wellness programs or access to retirement resources.

Encourage education.

One way to help employees understand how their contributions will help them reach their savings goals is by showing them how much they’ve put away over time. Ask these questions:

• How much have you saved?
• How much can you afford to contribute out of each paycheck? Use our Paycheck Calculator to find out.
• How much do you need to save each month in order for your money to grow into a comfortable nest egg by the time retirement rolls around? Use our 401(k) Calculator to help determine the amount you’ll need.
• What will be the total amount in your 401(k) account when it’s full, and how long do you need to contribute more funds to achieve that goal?

Offer a matching contribution.

If you can, a matching contribution is one of the best ways to increase employee participation rates and encourage workers to save money.

A matching contribution is your promise to match the amount that an employee contributes to their 401(k) plan. For example, offer a dollar-for-dollar match on up to 3% of eligible compensation plus an additional 50 cents per dollar for any amount over 3%. Employees will have an incentive to save up to 6% or 7% of their income through your plan.

How Much Do Companies Typically Match on 401(k) in 2023?

Siân Killingsworth / 28 Jan 2023 / 401(k) Resources, Personal Finance

Employer matching contributions are a common feature of many company 401(k) plans, with 98% of employers adding partial or full matching bonuses. The typical American company is matching 6% of employee contributions in 2023.

Employers are also increasingly recognizing the 401(k) employer match as a powerful incentive to encourage loyalty to the company; in 2022, 59% have vesting schedules ranging from one to six years before employees are entitled to walk away with the full amount of employer-matched funds.

If you own a small business or work for one, keeping tabs on what other companies are matching on their 401(k)s can help you gauge how competitive your own plan is and better adjust your contributions for the year.

Partial 401(k) Matches in 2023

In a partial match plan, the employer matches a smaller percentage of what employees contribute. A common partial match is 50 cents for every dollar of employee contribution, up to 6% of the employee’s salary. Even if employees opt to put in a greater amount – say 8% – the employer is still only responsible for putting in up to 6% in that case. So, for instance, a person earning $100,000 a year might contribute $6,000 and receive another $3,000 in partially matched funds.

Full 401(k) Matches in 2023

Full 401(k) matching means employers put in dollar-for-dollar what employees contribute, up to a set default rate or the IRS maximum. While 3% was the norm at one time, 65% of plans are now using a default rate higher than 3% in order to significantly boost savings for participants over time. In 2023, the most common default rate is now 6% of pay, according to the Plan Council Sponsor of America.

2023 Safe Harbor Matching Formulas

Safe Harbors are a popular type of 401(k) plan that allows businesses to bypass many of the annual IRS nondiscrimination testing requirements when they agree to a standard matching formula. Any employer contributions made in a Safe Harbor plan must be fully vested for all employees.

The most common Safe Harbor 401(k) matching formulas are:

• 100% match on the first 3% of employee contributions, plus 50% match on the next 3-5% (Basic match)
• 100% match on the first 4-6% of employee contributions (Enhanced match)
• At least 3% of employee pay, regardless of employee deferrals (Nonelective contribution)

401(k) Contribution Limits in 2023

Employees can put up to 100% of their compensation into a 401(k), up to the maximum limit. This year:

• Employees can contribute up to $22,500 (up $2,000 from 2022)
• Employees age 50 and older can add an additional $7,500 on top of this amount (up $1,000 from 2022)
• Employers can add $43,500 to their own 401(k), bringing the total balance up to $66,000 in 2022 (up $5,000 from 2021)

SIMPLE 401(k) Limits in 2023

Employers offering a SIMPLE 401(k) allow employees to save up to $15,000 in 2023, which is up by $500 from 2022. Those age 50 and older may contribute another $5,000 for a total of $19,000.

Employers can contribute dollar-for-dollar up to 3% of a worker’s pay or contribute a flat 2% of compensation regardless of the employee’s own contributions.

Employer 401(k) contributions are subject to an employee compensation cap of $330,000 for 2023.

Engage Employees and Encourage Them to Save With a 401(k) Match This Year

The employer match is an excellent incentive tool to encourage employees to participate in your small business 401(k) plan. Matching not only helps employees create better financial security, but allows you and higher-paid executives the opportunity to max out your retirement savings as well.

Ubiquity is a leading provider of 401(k) plans geared specifically to small businesses. We are happy to help you set up an easy and affordable small business retirement plan with matching and educate your workforce so they understand what a great and valuable benefit you’re offering. Contact us to learn more.

How to Save More in 2023 With a 401(k)

Siân Killingsworth / 18 Jan 2023 / 401(k) Resources, Business, Small Business 401k

Small business employers and employees with a 401(k) plan can save more in 2023 in more ways than one:

Increased Savings Opportunity: The IRS has increased annual contribution limits to help you can more. You may want to consider adjusting your paycheck deduction in accordance with the increased limit and to an amount that works for you.

Smart Savings Strategy: Ubiquity plans have defaults to include bonus pay in employee contributions because the bonus is included in compensation on W2 forms. Employers may make alternate arrangements in writing with employees who choose other options. Employees can also change their deduction online for a specific payroll.

Lower Your Taxes: Any money you contribute to a 401(k) has taxes deferred until withdrawal in retirement, so your taxable income is reduced by the amount you contribute to your 401(k)!

A small business 401(k) is the ideal way to generate considerable wealth for retirement using investment returns and compounding interest. The wise use of pre-tax dollars can ease your 2023 income tax burden as well.

How to save more for retirement with a 401(k) in 2023

The IRS 401(k) savings limit increased $2,000 in 2023 to $22,500. The catch-up contribution for those age 50 and over will increase by $1,000 in 2023, letting those who qualify add another $7,500 in savings. It’s important to note that 401(k) plan contributions can be made with pre-tax dollars, so the more you contribute, the lower your annual taxable income. Even $1,000 contributed can be enough to lower your tax bracket and the percentage of your income paid to the IRS.

Employers have the option to add a discretionary contribution of up to $43,500 to an employee’s account. Also, if you are a small business owner with a Solo 401(k), you’re able to contribute to your plan as both employee and employer – to a maximum amount of $66,000 in 2023. Your spouse may join the plan, potentially bringing your household maximum to $132,000. The $7,500 catch up contribution (for individuals age 50 or older) is allowed in addition to these maximum limits.

IRA limits are also increasing for 2023. The new maximum for savers age 49 and younger is $6,500. Those age 50 and older can put away an additional $1,000. Using a 401(k) instead of an IRA can help you save more and combat any inflation.

How much should I set aside to max out my 401(k) in 2023?

Investors under age 50 who are on a biweekly pay schedule will need to save approximately $845 per paycheck to reach the $22,500 retirement plan contribution limit in 2023.

Anyone 50 or older looking to capitalize on the catch-up bonus will need to save approximately $1,153 per paycheck.

What strategies do people use to maximize retirement savings?

There are numerous strategies that may help you save more for retirement in 2023, such as:

• Consider setting up an automatic deduction from your paycheck directly into your retirement account, so the savings happen without you even having to think about it.
• Set up an automatic transfer of profit shares and bonuses into your 401(k) through paycheck deduction
• Examine your monthly spending carefully and create a budget that helps you pay down any credit card debt so you can escape those pesky interest rates
• Cancel unnecessary or unused membership subscriptions
• Use shopping apps to take advantage of sales and promotions to save money on costs that have been hit by inflation (hello, $8 carton of eggs)

How can I change my 401(k) deferral elections in 2023?

Employees can log in to their Ubiquity account at any time modify their deferral election. Sponsors will receive notification or check their employer dashboard to review the respective updates so they can relay those changes to the payroll provider.

As a provider and administrator, Ubiquity offers 401(k) plans geared toward small businesses. Contact us to learn more about maximizing your 401(k) savings this year.