State Mandated Retirement Plans Archives

Catch-Up Contributions and SECURE 2.0: What to Know and Next Steps

Connie Lee / 23 Feb 2024 / Retirement Trends & News, Small Business 401k, State Mandated Retirement Plans

In its simplest form, catch-up contributions are exactly what it sounds like: An opportunity for people 50 and older to “catch up” and save more money in their retirement accounts than what the usual annual contribution limits from the IRS allow. This is perfect for those that got a late start with their retirement savings or had to delay saving entirely because life happens.

But when examined more closely, catch-up contributions are crucial to help improve the overall state of retirement in the U.S. According to the U.S. Census Bureau, about 47% of men and 50% of women ages 55 to 66 have no personal retirement savings. Because of this, they’re generally more stressed and worried, have lower financial wellbeing, and just don’t have the room to enjoy their retirement years like they would want to – and this may apply to several of your employees! Catch-up contributions pick up the slack, making saving for retirement possible for all through flexibility and more tax-saving opportunities. It makes gaining brighter financial futures possible.

In this article, we’ll discuss key facts to keep in mind about catch-up contributions ahead of SECURE 2.0 requirements that are coming in 2025, amounts and limits to know for you and your workforce, and how you can raise awareness around the changing landscape by informing and educating your workforce.

What the Facts Are

Almost all employers offer catch-up contributions in their retirement plans. A study from Vanguard showed that this specifically is 98% of employers.
Additionally, Vanguard found that only 16% of people take advantage of catch-up contributions when they’re offered. They’ve been missing out on huge opportunities to build and save!
The key to catch-up contributions is compound interest. All the money that is contributed to retirement plans grows with time, making it easier to increase savings and even surpass financial goals.
SECURE 2.0 will change the retirement landscape by requiring most companies to enroll eligible employees into their designated retirement plan automatically. It also will allow for higher catch-up contribution limits, which will help transform retirement for all.

Catch-Up Contribution Amounts and Limits

For 2024, the catch-up contribution is an extra $7,500, along with the $23,000 limit, totaling $30,500.
Starting in 2025, catch-up contribution limits for workplace plans will increase from $7,500 per year to $10,000. This will be indexed as inflation.
Beginning in 2026, employees that have an income of more than $145,000 per year will require catch-up contributions to be done after taxes to a designated Roth account. While this means less tax savings, these individuals will have tax-free withdrawals in retirement.
A full breakdown of what’s going on in 2024 can be found on the IRS’ website.

Raise Awareness About What’s Coming Up Next with Catch-Up Contributions

From now until SECURE 2.0 is put into action, things may be a little hectic in your workplace. Employees may be confused and have questions, and you’re probably wondering how to best navigate changes, reinvigorate your offerings, and talk to your workforce.

The best thing you can do during this time is raise awareness and let your employees know how SECURE 2.0 and any changes you make with your company’s retirement benefits is going to improve their catch-up contributions in the long term. A few things to consider bringing up include:

The expansion of catch-up contribution amounts, which will allow them to save more and actually meet their retirement goals – instead of feeling like they’ll always be steps behind. They’ll be better set up for success.
The overall impact of this on their financial and overall wellbeing as they get older. By contributing more and becoming financially secure, they’ll be happier, mentally and physically healthier, and will feel confident enough to navigate any money issues that may pop up.

The Bottom Line

Ideally, people should start saving for retirement as soon as possible (which is a whole other conversation to have with your employees). But, because life happens, people – especially your employees – need to understand things such as catch-up contributions can give them the boost to build the nest egg they want. Whether several of your employees are already 50 or older, or won’t be for a while, it’s important to start having discussions now so they understand how beneficial catch-up contributions are for their futures, and that your company is dedicated to supporting them.

And as you plan for conversations around catch-up contributions, it’s also time to think about your retirement offerings ahead of SECURE 2.0. Whether you’re starting from scratch or are looking to take your company’s benefits to the next level, it’s important to ensure now that your offerings best meet the needs of your company and workforce, which means including catch-up contributions as part of those perks. Ubiquity is here to help guide you to the right retirement choice for your business. We offer customized, flat-fee, full-service solutions that ensure success for your company. Contact us today to start tailoring a plan that meets your needs!

SECURE Act Explained: Plan Eligibility for Long-Term Part-Time Employees

Jefferson Baniqued / 22 Dec 2023 / Retirement Trends & News, Small Business 401k, State Mandated Retirement Plans

The retirement planning landscape has undergone transformative changes with the introduction of the SECURE Act in 2019 and the SECURE Act 2.0 in 2022. These legislative milestones have reshaped retirement plan eligibility, especially for long-term part-time employees. For plan sponsors, understanding and adapting to these changes is essential for tailoring your company’s retirement solutions. This post aims to provide an insightful guide for plan sponsors navigating these new regulations, ensuring smooth transition and compliance.

Defining Long-Term Part-Time Employees:

Central to these changes is the redefined criteria for long-term part-time (LTPT) employees, a key group affected by the SECURE Act. Individuals, who have logged over 500 hours (around 12.5 weeks full-time) annually for three consecutive years, starting from January 1, 2021, are now eligible for retirement plan participation, marking a significant shift in eligibility criteria.

Flexibility and Impact of Updated LTPT Eligibility Criteria:

The SECURE Act’s modifications, effective from January 1, 2024, introduce not just new eligibility criteria for Long-Term Part-Time (LTPT) employees but also considerable flexibility. If they meet the plan eligibility criteria, LTPT employees can continue their participation in the company’s 401(k) plan even with fluctuating annual work hours, ensuring financial inclusivity and acknowledging the diverse contributions of all employees. However, it’s important to note that plans are not required to include LTPT employees in employer contributions, automatic enrollment, or the plan’s non-discrimination testing, including Top Heavy requirements. This distinction is crucial for understanding both the scope and the limitations of LTPT employees’ participation in these retirement plans.

Staying Ahead with SECURE Act 2.0:

In 2025, the SECURE Act 2.0 will further amend the eligibility requirement for LTPT employees, reducing it from three to two consecutive years. It’s crucial for plan sponsors to stay informed about these legislative changes and adapt their strategies accordingly to anticipate future shifts.

Effective Communication Strategies:

Plan sponsors are tasked with the crucial role of communicating SECURE Act updates to eligible long-term part-time employees. They must ensure these employees are informed about their new retirement plan eligibility and enrollment process before January 1st, 2024. While plan sponsors may coordinate with their plan providers for logistical support, the primary responsibility for clear and timely communication lies with them.

Ensuring Compliance Through Plan Document Updates:

Understanding the evolving landscape of the new LTPT rules is essential for maintaining compliance in the future. Currently, the industry is awaiting further technical guidance from the IRS regarding these requirements. While plan amendments for LTPT compliance have not yet begun, it’s important to operate in good faith with the anticipation of adapting your plan accordingly. Once the IRS approves the necessary amendments, leveraging the expertise of your plan provider will be key to ensure your documents are accurately updated and fully compliant with the new regulations. Staying informed and prepared will help mitigate potential issues and align your plan with the latest regulations when the time comes.

Preparing for the Change:

The inclusion of long-term part-time employees in retirement plans is a significant step towards financial security and inclusivity. As a plan sponsor, staying informed and adaptable to these evolving regulations is crucial. By adhering to the new eligibility criteria, engaging in effective communication, and being vigilant about legislative updates, you ensure that your retirement solutions are inclusive and compliant. This proactive approach not only aligns with current regulations but also promotes a culture of financial well-being among your employees.

Explore Retirement Solutions with Ubiquity Retirement & Savings^®

Need assistance with the SECURE Act’s retirement plan changes? Ubiquity Retirement + Savings offers expert solutions for small businesses. Whether converting an existing plan or setting up a new one, we’re here to guide you to the right choice. Contact us today for compliant and efficient retirement plan options tailored to your business needs.

Retirement Mandate Deadlines in 2023: A Guide for Small Business Owners

Siân Killingsworth / 3 Jul 2023 / 401(k) Plan Information, Small Business 401k, State Mandated Retirement Plans

For small business owners, offering a retirement plan can be particularly advantageous. One significant benefit is the ability to attract and retain skilled employees. In competitive job markets, job seekers often consider not only their salary but also the overall benefits package offered by potential employers. A well-structured retirement plan can serve as a valuable incentive for prospective employees, making your business more appealing compared to others without such benefits. Likewise, existing employees are more likely to remain loyal to a company that invests in their future and offers a retirement plan, fostering a sense of security and commitment.

Moreover, in some states or regions, offering a retirement plan may be mandatory for businesses above a certain size or revenue threshold. Government regulations and labor laws may require employers to participate in state-run retirement programs or offer their retirement plans to employees. By complying with these regulations, small business owners can avoid legal issues and potential penalties while providing a valuable financial safety net for their workers.

Several states have already implemented retirement mandate deadlines to encourage small businesses to provide retirement benefits. As a retirement plan provider, it’s essential to stay updated on these deadlines to ensure compliance and support your clients effectively. Following are the deadlines to be aware of for 2023:

Oregon

Deadline: July 31st for businesses with 1–3 employees.
The OregonSaves program requires employers to facilitate retirement savings for their employees.
Deadlines are determined by the number of employees. The more employees you have, the earlier deadlines will be.

Answer a few simple questions to find the optimal plan for you and your small business.

How many employees do you have?

I am a sole proprietor
(just me/or my business partner/spouse)

Or schedule a free consultation with a retirement specialist.

Connecticut

Deadline: August 31, 2023
Businesses with 5 or more employees must offer a retirement plan or provide access to MyCTSavings.
Employers have the flexibility to choose between sponsoring their plan or offering a payroll deduction IRA.

Illinois

Deadline: November 1, 2023
Employers with 5–15 or more employees must offer a retirement plan or enroll in the Illinois Secure Choice Savings Program.
The program allows employees to contribute a portion of their paycheck to an individual retirement account (IRA).

Own a small business? Here’s how to prepare for your upcoming state deadline.

Plan ahead

Stay informed about retirement mandate deadlines in your state.
Allocate resources and time to implement a retirement plan or enroll in a state-sponsored program.

Seek guidance from professionals

Consult a retirement plan provider to understand the requirements and options available.
They can guide you through the process, help choose the right plan, and ensure compliance with regulations.

Educate your employees

Communicate the benefits of retirement plans to your employees.
Provide resources and educational materials to encourage participation and empower your workforce to make informed decisions.

Assess the financial impact

Evaluate the financial implications of offering a retirement plan or participating in a state-sponsored program.
Consider tax incentives, cost-sharing options, and long-term benefits to make an informed decision.

The Benefits of a Ubiquity Small Business 401(k)

You may think, “Well, a state-sponsored plan might be the path of least resistance,” but there are several reasons a Ubiquity small business 401(k) might be a better solution for your business:

Ubiquity 401(k) complies with your state mandate requirements, no guesswork required.
It also saves more in personal and business taxes, while lowering your taxable income.
Our plug-n-play payroll integration saves time and stress.
Low, flat fees are your friend.
As a private solution, a small business 401(k) plan through Ubiquity isn’t tied to the state (so it offers better protection of your assets).

As a small business owner, complying with retirement mandate deadlines is crucial not only for legal reasons but also for attracting and retaining top talent. By offering retirement benefits, you demonstrate your commitment to your employees’ financial security and wellbeing.

Stay proactive, seek professional guidance, and engage your workforce to ensure a smooth transition towards a secure future–no matter when your state’s deadline is.

Category: State Mandated Retirement Plans