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Find easy to understand Business Information relating to 401(k) plans and from Ubiquity Retirement + Savings. Find easy to understand rules and regulations, along with tips and advice from our team of 401(k) business experts. Call Ubiquity today for a Free Consultation at 855.466.5825.

SECURE Act 2022 Eligibility Updates

Siân Killingsworth / 18 Apr 2022 / Business

Capitol Building–SECURE Act 2.0 | Ubiquity

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.

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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

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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.

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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.

9 Tips for 401(k) Administration in 2022

Siân Killingsworth / 8 Mar 2022 / Business

401k Plan administration in 2021

Making smart moves with your 401(k) savings plan in 2022 will take you closer to your dream retirement while reducing the tax burdens you face today. As a leading 401(k) plan administrator for solopreneurs and small business owners, Ubiquity can help you set and achieve your financial goals. Here are our tips for optimizing  your 401(k) in 2022:

1) Check your savings rate.

Many employees end up with the default auto-enrollment rate. The most common auto-enrollment savings rate is now 6%. This is an increase from 3% just a few years ago, as more and more Americans see value in a 401(k) investment. Some financial advisors recommend setting aside at least 10% of your income for a comfortable retirement.

2) Use a retirement calculator.

To help make sure our clients are saving enough, we’ve created this free online 401(k) calculator to show you the possibilities. You can use this calculator to answer questions like:

  • What will my savings be when I retire if I keep saving at the current rate?
  • How much of an impact would saving a little more make?
  • What if I withdraw some of my retirement savings early?

3) Get the free money match.

Most employers offer matching contributions. This is free bonus money you can access simply by participating in the plan and saving as much as you can. Check with your company HR department to find out how much you have to contribute to receive the full match. Don’t walk away from free money!

4) If you can, aim for the maximum contribution.

The most an individual can contribute to a 401(k) went up by $1,000 in 2022 to $20,500. You would need to save about $1,708 per month from your paychecks, or $854 per biweekly pay period. Workers age 50 and older can save up to $2,250 per month with the $6,500 catch-up contribution added on.

5) Remember, putting money into a traditional 401(k) reduces your tax bill for this year.

You can defer paying income tax on the amount you put into your 401(k) plan in 2022. A worker in the 24% tax bracket who saves the $20,500 maximum in 2022 can reduce their tax bill by $4,920. The tax isn’t due until the money is withdrawn from the account in retirement – at which point, you may be at a lower tax bracket.

Workers earning less than $34,000 who cannot save the maximum might still qualify for the saver’s credit, which is worth 10 -50% of 401(k) contributions up to $2,000.

6) Consider your future tax bracket.

If you don’t have a lot of debt right now, you might consider a Roth 401(k). This type of plan allows you to pay your taxes up front. When you take distributions later, you will not need to pay tax on the money at that time. This is a good choice if you have a growing business or inheritance coming that could put you into a higher tax bracket by retirement.

7) Don’t forget to repay your CARES Act loan.

Many Americans were able to withdraw up to $100,000 (or 100% of the balance) from their 401(k)s to help cover household expenses when the pandemic hit. However, these loans were not “free money” and need to be repaid in full within three years to avoid incurring a 10% penalty. If you took out a loan, make sure you are on track to repay it this year to avoid a tax bill surprise.

8) Avoid age-related IRS penalties.

In 2022, it is advisable to leave your money in your 401(k) account if you’re age 55 or younger. But if you will turn 72 this year, you’re required to take out minimum 401(k) distributions. The IRS assesses a 50% penalty for failing to take a required minimum distribution.

9) Avoid excess fees.

Fees can eat away at your portfolio balance over time. If you have a solo 401(k) or small business 401(k), you’re likely overpaying for administration. Most providers charge a monthly rate PLUS a percentage of Assets Under Management and per-person fees. These fees can cost you a lot.

Fortunately, there is an effective and affordable alternative. As a small business-focused 401(k) plan administrator, Ubiquity does NOT charge AUM or per-person fees; instead, we give you full administration for a flat, low, monthly rate.

You should be able to see the plan fees and expenses paid in your summary annual report. If you’re paying too much, consider switching to Ubiquity.

Call us today to see how we can help!

2022 Solo 401(k) Contribution Deadline

Siân Killingsworth / 8 Mar 2022 / Business

Self employed woman saving in a solo 401k in 2021

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

Trendy young businesswoman smiling working on laptop.

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.

 

 

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!

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2022 IRS 401(k) Limits

Siân Killingsworth / 10 Feb 2022 / Business

deadline calendar

Whether you are a small business owner offering a 401(k) to your employees or you’re contributing to a retirement savings account for yourself, the Internal Revenue Service 401(k) contribution limits for 2022 can help guide your money management for the year.

Unlike a regular savings account, money put into a traditional 401(k), IRA, or HSA can reduce the saver’s taxable income for the year and lowers their tax bracket. The investment will generate much larger returns (11% over five years, on average) and will earn interest on the interest, too.

Current 401(k) distribution rules give you the option to wait until you turn 72 to take a Required Minimum Distribution, so 401(k)s can be a great way to build up inheritance as well as fund a comfortable retirement lifestyle.

401(k) Contribution Deadline for 2022

  • Employee 401(k) contributions for 2022 are made with each payroll up until December 31, 2022
  • Any Roth or catch up contributions must also be made by December 31, 2022
  • Solo 401(k) owners can make regular or one-time contributions on any day up until April 17, 2023 (since April 15, 2023 falls on a Saturday)
  • Corporations also have until April 17, 2023, to make employer contributions for the 2022 calendar year, unless they go on extension
  • S Corporations and Partnerships must fund employer contributions by March 15, 2023 unless they go on extension

For business owners interested in starting a new 401(k) plan in 2022, the recently-passed SECURE Act allows more time to create and contribute up to the expanded 401(k) contribution deadline. S-corps and partnerships must draw up new 2022 plans by March 15, 2023. The extended deadline is September 15, 2023.

C-corps and sole proprietorships have until April 15, 2023. If the business files for a tax extension, they could have until as late as October 15, 2023, to make contributions for the 2022 calendar year.

One exception is if you are considering a Safe Harbor 401(k); the IRS stipulates the first plan year must be at least three months to allow employees sufficient time to defer, so this provision must be added no later than October 1, 2022, to be effective for the 2022 calendar year.

What Are the 2022 401(k) Limits for Individual Contributions?

Given the 5.9% inflation we saw in 2021, the IRS increased individual contribution limits by $1,000 to:

  • $20,500 (Age 49 & under by 12/31/22)
  • $27,000 (Age 50 & over by 12/31/22)

These same contribution limits apply to 403(b) tax-sheltered annuities for public school employees.

2022 Solo 401(k) Limits and Maximum Employer/Employee Contributions

Most 401(k) plans include employer matching to a set formula or nonelective contributions up to:

  • $61,000 for those 49 & under by 12/31/22 (+$3,000 from 2021)
  • $67,500 for those 50 & over by 12/31/22

This means that if an individual contributes the maximum $20,500 this year, an employer could increase the total contribution another $40,500. Self-employed entrepreneurs may contribute as both “employer” and “employee” up to the $61,000 or $67,500 maximums likewise.

The employee compensation limit used in the savings calculation increased by $15,000 to $305,000 in 2022. A spouse may contribute to a Solo 401(k) plan, effectively doubling the household’s tax-free savings and retirement earnings.

SIMPLE 401(k) Limits for 2022

A SIMPLE 401(k) geared toward businesses with 100 or fewer employees allows the following 2022 maximum:

  • $14,000 (for those 49 & under, a $500 increase from 2021)
  • $17,000 (for those age 50 & older, with an unchanged $3,000 catch up contribution allowed)

2022 Highly Compensated Employee and Key Employee Definitions and Limits

Employers with Traditional 401(k) plans will need to know who to consider a “Highly Compensated Employee” or “Key Employee.”

  • $135,000 is the income threshold for a “Highly Compensated Employee,” an increase of $5,000 from 2021
  • $200,000 is the income threshold for a “Key Employee,” an increase of $15,000 from 2021
  • $305,000 is the annual compensation limit, up $15,000 from 2021

If you are worried about passing nondiscrimination tests every year, you may consider adding a Safe Harbor provision, which removes most of these rules, audits and tests and replaces with deferral and match non-discrimination testing and potentially, Top-Heavy requirements. The 401(k) withdrawal rules generally remain the same as with a traditional plan.

2022 Limits on IRAs

Some Americans also have IRAs to maximize their retirement savings. Limits for 2022 are:

  • $6,000 for those 49 & under with Roth or Traditional IRAs (unchanged from 2021)
  • $7,000 for those 50 & over with Roth or Traditional IRAs (unchanged from 2021)

Modified Adjusted Gross Income limits apply to IRA holders:

  • For full deductibility of Traditional IRAs, filing single, in 2022: $78,000 (increased $2K since 2021)
  • For full deductibility of Traditional IRAs, filing joint, in 2022: $129,000 (increased $4K since 2021)
  • Full Traditional IRA deduction with a non-working spouse in 2022: $214,000 (increased $6K over 2021)
  • If neither participant or spouse is enrolled in a workplace plan: there is no income limit for deductions
  • For partial Roth IRA deductibility, filing single, in 2022: $129,000-144,000 (increased $4K since 2021)
  • For partial Roth IRA deductibility, filing joint, in 2022: $204,000-$214,000 (increased $6K since 2021)
  • You cannot contribute to a 2022 Roth IRA if your individual income is above $144,000
  • You cannot contribute to a 2022 Roth IRA if your joint income is above $214,000

2022 Limits on HSAs

Health Savings Accounts are another great option for employees to set aside money that reduces taxable income, up to:

  • $3,650 for individuals with Health Savings Accounts (+$50 from 2021)
  • $7,300 for families with Health Savings Accounts (+$100 from 2021)
  • Additional $1,000 for those age 55+ with Health Savings Accounts (unchanged from 2021)

Start Your Own Easy, Low-Cost 401(k) with Ubiquity

Ubiquity is a small business 401(k) plan provider offering full administrative support for employers and employees. Since 1999, we have operated on a low, flat monthly fee model that lets you grow your business without incurring greater 401(k) expenses.

Contact us to learn about starting a new 401(k), switching to a different type of plan, adding a Safe Harbor provision onto an existing plan, for information on 401(k) withdrawal rules, or to learn how you can maximize your contributions in 2022.

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How to Save More in 2022 With a 401(k)

Dylan Telerski / 10 Feb 2022 / Business

Blog Illustration: Saving money in your 401(k) in 2021

Small business employers and employees with a 401(k) plan can save more in 2022 in more ways than one:

  • Higher limits: Increasing IRS limits will allow you to save more in 2022, so it’s worth looking into strategies that allow you to maximize your 401(k) investment.
  • Smart saving strategies: You might cut back on spending or pick up a side gig to bring in more income, refinance your mortgage to take advantage of rock bottom interest rates, or put bonuses and tax refunds into your retirement savings account.
  • Reduced tax burden: Even when times are tough, knowing how to take full advantage of a 401(k) opportunity can build significant wealth over time while also lowering your tax bracket for the year.

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 2022 income tax burden as well.

How to save more for retirement with a 401(k) in 2022

From 2021 IRS 401(k) savings limit have increased $1,000 in 2022 to $20,500. The 2021 401(k) catch-up contribution for those age 50 and over will remain the same in 2022, letting those who qualify add another $6,500 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 less you’ll be taxed on this year. 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 $40,500 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 $61,000 in 2022. Your spouse may join the plan, potentially bringing your household maximum to $122,000. The $6,500 catch up contribution (for individuals age 50 or older) is allowed in addition to these maximum limits.

Surprisingly, IRA limits aren’t changing in 2022 – they’re still $6,000 or $7,000 if you’re age 50 or older – so using a 401(k) savings vehicle is wise if you’re hoping to combat this year’s inflation spike.

How much should I set aside to max out my 401(k) in 2022?

Investors under age 50 who are on a biweekly pay schedule will need to save $788 per check to reach the $20,500 retirement plan contribution limit in 2022. Those over 50 looking to capitalize on the catch up bonus will need to save $1,038.

What strategies do people use to max out a 401(k)?

There are numerous strategies to help you save more for retirement in 2022, such as:

  • Saving your entire annual raise to put into your account.
  • Putting tax refunds, profit shares, and bonuses into savings.
  • Using birthday or holiday cash and inheritance money to maximize a 401(k).
  • Taking smaller budget trips rather than large vacations.
  • Cutting back on spending in small ways – like eating out one time less per week.
  • Canceling unnecessary or unused membership subscriptions.
  • Refinancing the mortgage to lower housing costs and putting the difference into the 401(k).

How can I change my 401(k) deferral elections in 2022?

Employees may contact their Human Resources Department at any time to change a 401(k) deferral election. The employer will then contact their 401(k) plan provider to make the changes. 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.

How much will you pay for 401(k)? Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

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 2022, you can contribute up to $20,500 into a 401(k). If you’re over 50 years old, you can add an extra $6,500. 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 $6,000 into this account (or $7,000 if you’re over 50), 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 runs a Traditional 401(k), an alternate option might be to open a Roth Solo 401(k) – agreeing to 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.

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© 2022 Ubiquity Retirement + Savings
Privacy Policy
Do not sell my info
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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