Category: Business

What If My Employer Doesn’t Offer a 401(K) Match?

Siân Killingsworth / 22 Dec 2022 / Business

If your employer does not offer a 401(k) match, you still have lots of options available to help you meet your retirement savings goals. For instance, you can invest more heavily in your future by contributing a higher percentage of your salary to your 401(k) plan or other tax-advantaged savings account. Continue reading to learn more.

Contribute to your 401(k) even without the match.

For 2023, you can contribute up to $22,500 into a 401(k). If you’re over 50 years old, you can add an extra $7,500. These amounts are taken off your taxable income for the year, so you’ll not only earn on your investments, plus interest, but you’ll reduce your tax burden as well.

Invest more heavily in your 401(k).

If your employer isn’t matching, you may want to put a higher percentage of your income into your retirement plan since you have only yourself to rely upon. If your company was providing a match, you might put in 6% of your salary and receive another 3% from your employer’s 50% match. Since you’re not getting that match, you may want to simply put 9% of your salary in yourself.

Contribute to an IRA.

Anyone can take out a self-directed Individual Retirement Account. Even if you have an employer-sponsored 401(k), you’ll be able to contribute funds to both. The benefit of an IRA is that the fees are low and there are unlimited investment options. The downside is that you can only contribute a maximum of $6,500 into this account (or $7,500 if you’re 50 or older), so you’ll have to put more money into your 401(k) once you hit the IRA’s annual ceiling.

Open a Solo 401(k).

You may consider opening a Solo 401(k) if you’re self-employed or earn income from freelance work or side jobs. If your employer offers a traditional 401(k), an alternate option might be to open a Roth Solo 401(k) in which you pay taxes up front in exchange for a tax-free withdrawal in retirement. You can also elect to make profit-sharing contributions to a Solo 401(k) plan.

Talk to your employer.

Talk to your employer, as you may be able to persuade your company to begin offering a match. One big advantage of employer matches is that they can be taken as deductions on the federal corporate income tax return, and are often exempt from state and payroll taxes as well. Plus, offering a match makes employers more competitive, so they can quickly recoup the expense by improving their employee retention rate.

Retirement lasts for roughly a quarter of your life. Employers and employees alike can make sure their retirement savings goals are met by starting an affordable, easy-to-manage 401(k) for small businesses. From Safe Harbor plans that avoid annual IRS testing to a Roth 401(k), we can help you find the right plan that is tailored to the needs of your business. See how simple it is to get started by contacting us today for your free consultation.

Creating Retirement Stability in Times of Financial Uncertainty

Siân Killingsworth / 19 May 2022 / Business

Despite a climate of economic uncertainty, it’s still possible to create stability for retirement by maximizing 401(k) plan benefits, diversifying investments, maintaining the right portfolio mix, and resisting the temptation to cash out early.

For many Americans, a “golden retirement” may not feel as certain as it once was. A recent study from the Natixis Global Retirement Index found 59% of Americans accept that they will have to keep working longer, 41% say their ability to secure financial freedom is “going to take a miracle,” and 36% have given up hopes of being able to retire at all.

These days, investors are particularly worried about Social Security running out of funds, low interest rates, and soaring inflation. However, boom and bust cycles are inevitable in the economy, so investors will need a disciplined approach to temper these natural fluctuations.

Get the Full Employer 401(k) Match

Knowing the company 401(k) plan is one of the earliest steps to creating a stable retirement foundation. A company’s matching funds represent “free money” that can be added to a savings plan, tax-free, with compounding growth and interest at very little expense to the employee.

Plans vary, but a company may offer a 100% match on the first 4%, followed by a 50% match on the next 2%, for instance. Contributing at least that amount will ensure not a penny is left on the table.

Consider Working for Enjoyment

Picking up a part-time job after departing a full-time position can present an opportunity to explore hobbies and interests while postponing Social Security and retirement distributions, so the payouts are ultimately larger. This extra time also allows a portfolio the chance to recover after taking a few lumps from a downturned economy.

For instance, a 401(k) plan that dipped from $200,000 to $150,000 in value could be worth $190,000 if an investor socked the money away into a low-risk five-year CD that pays 5% returns. Meanwhile, working 20 hours a week—even if the job only paid a meager $12 per hour—would pay $12,000 per year—equivalent to a $100,000 portfolio earning a 12% annual distribution.

Stay the Course With Disciplined Withdrawals

Even before the pandemic, Boston College’s Center for Retirement Research estimated that 1.5% of assets leak out of 401(k)s and IRAs each year due to pre-retirement withdrawals for hardships after age 59.5, job cash-outs, and loans. While these avenues for emergency funds exist, they also jeopardize one’s financial future—often resulting in a 25% reduction in wealth at retirement.

After years of saving money and sacrificing, the temptation for new retirees to treat themselves with a big year-one withdrawal for a vacation or major purchase is very real. However, most experts suggest withdrawing 3-5% of account funds in the first year and determining how to adjust annual withdrawals to keep pace with inflation.

Make the Biggest 401(k) Contribution You Can Afford

There may be some years when you are not able to make the maximum contribution to your 401(k), especially in an unpredictable economy. However, contributing the maximum amount that you can afford will give you the best chance to stay on track to meet your retirement savings goals.

In 2022, the maximum 401(k) contribution amount is $20,500. To see how 401(k) contributions affect your take-home salary and to find the amount that will work best for you in your current financial situation, use our handy, free 401(k) paycheck calculator.

Are you looking into 401(k) retirement plans for your small business? Ubiquity is a top provider of low-fee, easy-to-manage small business 401(k)s. Reach out today to see how we can help you set aside more money for retirement and meet your savings goals even in financially tumultuous times.

SECURE Act 2022 Eligibility Updates

Siân Killingsworth / 18 Apr 2022 / Business

The 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act changed the rules for 401(k) eligibility, as well as for top-heavy and nondiscrimination testing. The most recent expansion of eligibility to participate in 401(k)s went into effect at the start of 2021. Further SECURE Act updates may be in the works. Read on below to learn what these new rules mean for your small business 401(k) plan.

Who is eligible to participate in 401(k) plans in 2022?

Previous to the SECURE Act, part-time employees working less than 1,000 hours in a year could be excluded from an employer’s 401(k) plan. Plan years beginning after December 31, 2020, require employers to open vesting to:

• All long-term, part-time employees who will be at least 21 years of age by December 31, 2023
• Have worked 500 to 999 hours each year for three consecutive years, and
• Who are not covered under separately governed collective bargaining plans like 403(b)s or 457(b)s

Employees must be at least 18 years old in 2021 for vesting and 21 to participate. Therefore, employers are not required to permit these long-term, part-time employees to enter the plan under this rule until January 1, 2024.

Do employers have to track time to determine eligibility?

Employers may choose to allow employee elective deferrals right away so they do not have to track hours. Otherwise, employers will need to update their administrative systems and begin tracking all service hours after January 1, 2021, to determine eligibility.

Do employers have to match part-time workers’ 401(k) contributions?

Employees working less than 1,000 hours a year must be allowed to make their own 401(k) contributions if they wish. But employers can still choose to exclude part-timers from employer matching contributions, safe harbor contributions, and employer profit share contributions.

Are part-time workers included in non-discrimination testing under the SECURE Act?

Part-time employers who have recently gained eligibility to participate in the 401(k) plan solely under the SECURE Act provision can be excluded from annual non-discrimination and top-heavy tests.

What are the deadlines for plan sponsors to amend their 401(k) plan documents?

• All eligible part-timers must be allowed the opportunity to contribute to a 401(k) by January 1, 2024
• The SECURE Act changes must be reflected in the 401(k) plan documents by December 31, 2022
• Unless elective deferrals are immediately approved, employers need to track hours by January 1, 2021

What eligibility changes are included in the SECURE Act Update?

The House Ways and Means Committee introduced a SECURE Act update on October 27, 2020. If passed, the Securing a Strong Retirement Act bill (SECURE Act 2.0) would reduce the vesting period for long-term, part-time employees from three years to two years.

Starting in 2025, all eligible participants would be auto-enrolled at a minimum contribution rate of 3%. This rate will increase by 1% each year until reaching 10%, unless the employee specifically opts out. Also, eligibility for required minimum distributions would increase from 72 to 73. It’s best to start planning for changes to plan enrollment sooner than later.

Ubiquity offers easy, affordable 401(k) retirement plans for your small business. Contact us to learn how to start a new plan or if you have questions about switching from your current provider.

How Are Small Businesses Doing in 2022?

Siân Killingsworth / 18 Apr 2022 / Business

Small businesses in 2022 are worrying less about last year’s woes—forced closures, employee quarantines, and new health guidelines. Instead they are now concerned about inflation, supply chain issues, and labor shortages. Despite these challenges, small business filings and overall optimism remain high.

Small Businesses Are Growing

It’s not exactly smooth sailing, but small businesses are weathering the storm and cruising forward with optimism in 2022. Even amid the worst stages of economic uncertainty, over 900,000 entrepreneurs in the U.S. stepped up to form new retail small businesses in 2021. Another 77,000 manufacturing and 111,0000 wholesale applications were filed, according to the U.S. Census Bureau. All told, 5.4 million new companies formed in 2021, up from 4.3 million in 2020.

Reasons for Small Business Optimism in 2022

The  Small Business Index found that 77% of small business owners are optimistic about their future.

• Confidence – After surviving overwhelming challenges, business owners have been surprised by their own resilience. As we shift to the new phase of living with endemic coronavirus, it seems unlikely we will go into full lockdown mode again.
• Innovation – Innovations like curbside pickup, home delivery service, and remote working have allowed businesses to thrive amid uncertainty. These adaptations are likely here to stay. In the coming year, evolving retail media revenue opportunities will allow small businesses to compete with much bigger ones.
• Customer Support – Americans are eager to support small, local businesses, according to the U.S. Chamber of Commerce. In December 2021, 57% of U.S. shoppers said they planned to “spend more money at small businesses over the next six months to help local employers and enjoy stellar customer service.”

Small Business Challenges in 2022

Small businesses have big growth planned, but have trouble meeting objectives when funds, supplies, and personnel are in short supply.

• Inflation – The Clarify Capital survey found that 42% of small businesses cite inflation as their chief worry. Two-thirds say it has become “increasingly problematic” in the first half of 2022. With inflation stuck at a 40-year high, three in five small business owners say they’ve had to raise prices this year, according to the Small Business Index. Some have decreased staff or taken out loans to manage the higher cost of raw materials.
• Supply Chain Issues – A Goldman Sachs survey found 69% of small business owners have supply chain issues that negatively impact their bottom line. Most respondents feel suppliers are favoring larger volume clients. Two in three small businesses have had to alter their supply chains over the past six months, according to the U.S. Chamber of Commerce. They expect supply chain issues to persist for at least six months.
• Labor Shortages – People understand that they hold the upper hand in the labor market. As record jobs are created, workers are dropping out of the market to care for a loved one or retire early. Finding and retaining top talent is difficult for 87% of small businesses. Unfilled positions are hurting the bottom line for 97%, according to Goldman Sachs.

Looking to Make Your Small Business Even Better in 2022?

Ubiquity is a top provider of small business 401(k)s, offering full setup and ongoing administrative support for one low monthly fee. We never charge Assets Under Management or per-person fees, so you can scale your business and your 401(k) plan without worry. Plans are flexible, so you can pause, adjust, and adjust as needed.

Offering a 401(k) plan for your small business is a great way to lower your tax burden, pick up new tax credits, attract and retain employees, and save a comfortable cushion for your future, too. Contact us to schedule a free consultation.

How Much Do Companies Typically Match on 401(k) in 2022?

Siân Killingsworth / 9 Mar 2022 / Business

Looking for the update on company match rates for 2023? Visit How Much Do Companies Typically Match on 401(k) Plans in 2023?  

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 2022.

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 2022

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 2022

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 2022, the most common default rate is now 6% of pay, according to the Plan Council Sponsor of America.

2022 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) Limits in 2022

Employees can put up to 100% of their compensation into a 401(k), up to the maximum limit. In 2022:

• Employees can contribute up to $20,500 (up $1,000 from 2021)
• Employees age 50 and older can add an additional $6,500 on top of this amount (unchanged since 2021)
• Employers can add $40,500 to their own 401(k), bringing the total balance up to $61,000 in 2022 (up $3,000 from 2021)

SIMPLE 401(k) Limits in 2022

Employers offering a SIMPLE 401(k) allow employees to save up to $14,500 in 2022, which is up by $1,000 from 2021. Those age 50 and older may contribute another $3,000 for a total of $17,000.

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 $305,000 for 2022.

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.

4 Tips for 401(k) Administration in 2022

Siân Killingsworth / 8 Mar 2022 / Business

Top priorities for small business owners and other 401(k) administrators in 2022 include understanding how recent legislative changes (such as state-run auto-enrollment plans) will impact their retirement plans this year.

Employers take on a number of responsibilities when they act as administrators of their 401(k) plans, such as hitting key filing deadlines, understanding how employer contributions can affect employee retention rates, and keeping plan costs under control. These administrative duties can be taken off your hands when you partner with a leading small business 401(k) provider like Ubiquity. We not only make plan setup a breeze, but we oversee your plan to make sure that you are always in full compliance and staying on course to meet your savings goals.

Here are four tips for effective administration of retirement benefits in 2022.

1. Don’t Wait Until It’s Too Late

As of April 2022, workers are automatically enrolled in IRA retirement plans in four states—California, Connecticut, Oregon, and Illinois. Similar legislation has passed in seven states—Colorado, Maine, Maryland, New Jersey, New Mexico, New York, and Virginia—as well as the cities of Seattle, WA, and New York, NY.

In California, the final CalSavers deadline—affecting small businesses with five to 50 employees—is set to go into effect on June 30, 2022. Employers can opt out of these state-mandated retirement plans by offering their own flexible 401(k) plans.

If you operate in one of these states and haven’t contacted a 401(k) plan administrator yet, now is a great time to do it. Offering your own retirement savings program allows you greater flexibility in contribution amounts, investment selection, fees, eligibility, vesting schedule, and matching formulas.

2. Increase Your Contributions to Be More Competitive

The Great Resignation has taken a toll on employee retention across industries, so it may be time to consider increasing your employer contribution. In 2022, your employees can contribute up to $20,500, up $1,000 from 2021. Workers over 50 may contribute an extra $6,500 in catch-up savings. Employers can contribute $40,500 more, bringing an employee’s grand total to $61,000 or $67,500 for the year.

If you’re looking to be more competitive this year, keep in mind the average American employer is matching 6% of employee contributions.

If your small business is offering a SIMPLE 401(k), the maximum contribution limit is $14,000 with $3,000 allowed as an additional catch-up. Employers contribute a dollar-for-dollar match up to 3% of employee pay or a 2% non-elective contribution for each eligible employee. The compensation cap is $305,000 in 2022.

3. Meet Your Deadlines

There are a number of deadline-oriented tasks a good 401(k) plan provider will help you meet:

• 2/14/22 – Provide fourth quarter 2021 benefit statements to employees
• 3/15/22 – Distribute funds to correct a failed 2021 ADP/ACP test to avoid 10% excise tax
• 3/15/22 – If you’re an S Corp: fund 2021 employer contribution to take 2021 tax deduction
• 4/1/22 – Distribute RMDs to employees who became eligible for distributions in 2021
• 4/15/22 – If you’re a C Corp: fund 2021 employer contribution to take 2021 tax deduction
• 5/15/22 – Provide first quarter 2022 benefits statements to employees
• 8/1/22 – File Form 5500 or request a 2.5-month extension using Form 5558
• 8/15/22 – Provide second quarter 2022 benefits statements to employees
• 9/15/22 – If you’re an S Corp who filed for extension, you can fund 2021 employer contributions now
• 9/30/22 – If you modified your plan in 2021, deliver a summary of material modification to employees
• 9/30/22 – Send your 2021 summary annual report to employees
• 10/15/22 – If you’re a C Corp who filed for extension, you can fund 2021 employer contributions now
• 10/15/22 – File Form 5500 for 2021 if you received approval for extension
• 11/14/22 – Provide third quarter 2022 benefits statements to employees
• 12/2/22 – Provide 2023 notices for Safe Harbor, Qualified Default Investment Alternative, fee disclosure, and automatic negative enrollment
• 12/15/22 – Send summary annual report if you received extension
• 12/31/22 — Distribute funds to correct failed 2021 ADP/ACP test with 10% excise tax
• 12/31/22 – Distribute RMDs to employees who became RMD-eligible prior to 2021
• 12/31/22 – Make 2021 safe harbor contributions
• 12/31/22 — Sign any 2022 discretionary amendments

4. Consider What Fees You’re Paying

Many employers serve as sponsors of their 401(k) plans. As such, sponsors owe a fiduciary duty to shareholders that they will manage the plan with participants’ best interests in mind, keep plan expenses to a reasonable level, follow governing document terms, diversify investments, and oversee the plan with “care, skill, prudence, and diligence.” These requirements are outlined in the Employee Retirement Income Security Act of 1974 (ERISA).

Many fees can be avoided. For instance, your brokerage firm may have you tied up in costly investments. Low-cost options include index funds, institutional funds, and some target-date funds.

If you’re paying 1-2% for “investment advice” through your brokerage, consider switching to a certified financial planner who can get your plan on track with a one-time consulting fee.

Also, be aware that some 401(k) plan providers charge Assets Under Management fees and per-person fees that essentially penalize your plan for growing. Others – like Ubiquity – only charge a low, flat, transparent fee for plan administration. Contact us to learn more about starting your small business 401(k) in 2022.

2022 Solo 401(k) Contribution Deadline

Siân Killingsworth / 8 Mar 2022 / Business

Even though 2022 has already begun, it’s not too late to set up and make contributions to a Solo 401(k) for 2021.

The 2021 Solo 401(k) contribution deadline is the corporate tax return deadline of April 18, 2022. You may have even more time if you choose to file a corporate tax extension.

Please note that if you started your plan AFTER December 31, 2021, you won’t be able to make salary deferrals and your contributions will be limited to employer contributions. If this is the case, the maximum 2021 contribution for a new solo plan could be up to $58,000.

As for this year, the SECURE Act allows entrepreneurs and the self-employed to set up a plan as late as April 15, 2023, to meet the 2022 Solo 401(k) deadline.

What Are the Traditional Solo 401(k) Deadlines for 2022?

The precise Solo 401(k) deadlines depend upon how your business is structured:

• For a Single LLC or C Corp: you have until April 17, 2023, to set up and contribute to a Solo 401(k) plan for 2022
• For a Partnership LLC or S Corp: You have until March 15, 2023, to set up and contribute to a Solo 401(k) plan for 2022
• If you request and receive a tax extension: you may have until as late as September or October 16, 2023, to establish your plan and contribute

What Are the Roth Solo 401(k) Deadlines for 2022?

There is one caveat about the extended deadlines for 401(k)s: they only apply to traditional after-tax 401(k)s. If you want to adopt a Roth 401(k) plan so that you can make pre-tax deferrals and pay no tax on the money when you take distributions in retirement, you will need to set up the plan and make all contributions by December 31, 2022.

What Are the Solo 401(k) Contribution Limits for 2022?

It’s a great year to start saving for retirement if you haven’t already, as the limits recently increased:

• Solo 401(k) participants may contribute to their retirement plans as both “employee” and “employer”
• As the “employee,” you may contribute up to 100% of your wages to a Solo 401(k) account if you choose
• $20,500 is the maximum 2022 Solo 401(k) contribution limit for employees (up by $1,000 over 2021)
• Employees age 50 and older may put in another $6,500 on top of this limit in “catch up contributions”
• As the “employer,” you may reserve up to 25% of the business entity’s income to your 401(k)
• The total employer/employee maximum in 2022 is $61,000 (up $3,000 from 2021)
• If your spouse works for the business, the same allowances can be made on their behalf

Is a Solo 401(k) Plan Worth It in 2022?

A Roth Solo 401(k) lets self-employed entrepreneurs pay taxes up front to avoid paying taxes upon withdrawal in retirement. Plus, all income and gains earned from the 401(k) plan are tax-free. You’ll never have to pay tax on the money you take out during retirement because you’ve already paid it. This can be a great way to pass money on to your heirs.

Opening a Solo 401(k) plan is quick, easy, and affordable with Ubiquity. Unlike other companies, we administer your plan for one low, flat monthly rate, with no additional fees. You are free to work with a broker of your choice or choose your own investments.

If desired, you may roll over money from other accounts or set up automatic transfers to put your retirement account on autopilot.

Contact Ubiquity to take a step toward future financial freedom.

4 Small Business Trends in 2022

Siân Killingsworth / 8 Mar 2022 / Business

A record number of Americans chose to quit their jobs in 2021 and reevaluated their career priorities – a trend dubbed “The Great Resignation.”  Many experts predict that a small business revolution will follow in 2022. As more workers abandon employment at big companies in favor of smaller ones, employers will find themselves competing for the talents of a large pool of job seekers who are prepared to hold out until they find the right opportunity that meets their needs.

To attract great employees, small business owners will likely have to increase starting salaries, bonuses, and benefits, including attractive retirement savings plans. Additionally, employers will need to place an emphasis on  what small businesses do best, which is to foster intimacy among employees and provide a sense of belonging.

1) Family-First Mentality

Covid exposures, mandatory quarantine periods, and school closures could continue to cause disruption in 2022. Small business workplaces must evolve to handle these challenges and support employees. Company owners will need to emphasize a people-first workplace by offering flexible schedules, remote work options, expanded parental leave, and the ability to unplug completely on days off.

Some companies have shifted to four-day work weeks or provided paid time off to participate in charitable activities of the employee’s choosing. Other businesses monitor individual workloads carefully to ensure that employees are not overloaded.

2) Humanized Branding

Many workers are drawn to the personal, more humanized brands that small business owners create. With a variety of easy-to-use tools at their disposal, each employer has significant freedom to express their values in an attractive and accessible way. They use video storytelling, a well-designed website, LinkedIn and other social media networking, and blogging. The strongest small businesses will be the ones that are unafraid to show their humanity, showcasing employees and featuring value-driven work.

3) Advanced Technology

Affordable artificial intelligence technology tools are increasingly marketed to smaller businesses as a way to streamline efficiency, save time and money, and be more competitive. AI software is used to accomplish many functions faster and cheaper, including:

• Draft and review contracts
• Manage inventory and logistics
• Improve call center routing with chatbots
• Screen job candidates
• Manage customer relationships

Small businesses that leverage advanced technology to alleviate drudge work and allow employees to focus on more enjoyable tasks will have the hiring advantage in 2022.

4) Small Business 401(k) Retirement Plans

In recent years, retirement plan administrators like Ubiquity have focused their attention on serving small business owners with low-cost, flat-fee 401(k) plans without Assets Under Management costs or per-person fees that can present a large financial burden to a growing company.

In 2022, it is likely that even more small businesses will begin to offer their employees retirement options. State-mandated retirement plans are rolling out in California, Illinois, Maryland, Massachusetts, New Mexico, New York, Oregon, Vermont, and Washington. In California, for example, the CalSavers plan is already enforced for businesses with 50+ employees, but it will be required for any business with five or more employees by June 30, 2022.

Instead of  accepting the cookie cutter government option, most small businesses choose to create their own retirement offerings. This empowers them to design plans that meet their specific needs and have more control over how the plans are run. Employers can also take advantage of auto-enrollment tax credits and Safe Harbor designs with built-in IRS discrimination test compliance.

Offering small business 401(k)s can be an excellent way to level the playing field, attract, and retain top talent with the same benefits offered by much larger corporations, and enable employers to benefit from tax credits.

Questions about 401(k) retirement plans for your small business? Contact Ubiquity.

What Is the Change to the Maximum 401(k) Contribution for 2022 for 50 and Older?

Siân Killingsworth / 10 Feb 2022 / Business

Turning 50 in 2022 is more than just another milestone birthday if you participate in a 401(k) plan. Participants who are 49 and younger may save $20,500, but those over 50 are allowed an additional catch up contribution of $6,500. Those turning 50 (or older) can put a maximum of $27,000 into their 401(k) plans in 2022.

When can a person turning 50 in 2022 start contributing an extra $6,500 for retirement?

If you were born in 1972, you’ll be able to start setting aside extra money in your retirement savings account starting on January 1, 2022. This catch up contribution is designed to help people nearing retirement age rapidly increase their nest eggs, even if they didn’t save as much when they were younger.

The ability to save an extra $6,500 can also help lower a 401(k) plan participant’s taxable income for the year if contributing pre-tax, potentially taking them to a lower tax bracket and percentage of their income that’s due.

Why didn’t the 401(k) catch up contribution increase in 2022?

The catch-up contribution limit changes to keep up with rising inflation (as does the regular 401(k) contribution), though it doesn’t necessarily change annually.

• When the catch up contribution was first announced in 2002, the limit was $1,000
• Every year from 2002-2006, the allowance increased by $1,000
• From 2006-2008, the limit remained $5,000
• From 2009-2014, the limit increased to $5,500 and remained that way
• From 2015-2019, the limit increased to $6,000
• In 2020, the limit increased to $6,500

When will the 401(k) catch up contributions increase?

Based on recent trends, we can expect the limit to increase to $7,000 in 2026. However, in the summer of 2021, Congress members in the Senate and House proposed a bill (SECURE 2.0) that would expand catch up contributions further for workers in their 60s.

The House bill would allow a catch up of $10,000 for anyone aged 62, 63, or 64. This contribution would apply as a Roth contribution – meaning that it would be taxed as regular income the year in which it was deposited, but there would be no taxes owed upon withdrawal. The Senate bill would allow $10,000 catch up contributions for anyone over 60, but the pre tax treatment would remain the same.

There is no telling when or if SECURE 2.0 will pass, but the changes could make a big difference for people needing to bolster their savings as they near retirement.

What is the 2022 catch up contribution for SIMPLE 401(k)s?

A SIMPLE 401(k) or IRA plan permits a $3,000 catch up contribution in 2022, which has stayed the same since 2015. Contributions are considered “catch up” after the annual contribution reaches $14,000.

Should you take advantage of the catch up contribution in 2022?

Absolutely. If you can find strategies to save more of your income for retirement, this catch up contribution is an an excellent opportunity to reduce taxable income and increase retirement savings

For easy, low-cost, flat-fee 401(k)s for small business, get in touch with Ubiquity today! As your plan provider, we are here to answer any questions you may have on topics ranging from the 401(k) contribution limits for high earners, to the potential benefits of adding a Safe Harbor provision. We will give you all the information and guidance you need to maximize your retirement savings. Contact us today to get started!