How Plan Sponsors Can Help Employees Retire on Time: Turning Plan Design into Positive Outcomes

As a corporate plan sponsor, your role in your employees’ retirement journey is more significant than you might think. Yes, you’re responsible for managing the mechanics of the plan and meeting fiduciary obligations. But beyond that, you have the opportunity to shape outcomes that deeply affect your employees’ futures. One of the most valuable gifts you can offer is the ability for participants to retire on time, with financial security and dignity.

Yet far too many American workers aren’t on track. According to a recent survey by the Employee Benefit Research Institute (EBRI), only 1 in 5 workers feel “very confident” they will have enough money to live comfortably throughout retirement. The causes are complex—low savings rates, competing financial priorities, and a lack of clear guidance—but the good news is, thoughtful plan design can make a meaningful difference.

In this post, we’ll explore how corporate plan sponsors can use three key strategies to help improve participant outcomes:

• Automatic features (auto-enrollment and auto-escalation)

• Financial wellness programs

• Target date fund alignment

Let’s take a closer look at each—and see how they can move the needle toward better retirement readiness.

1. Auto Features: Participation and Savings on Autopilot

One of the most common roadblocks to retirement saving is inertia. People know they should save, but life gets in the way. Bills are due, kids need clothes, and the retirement plan enrollment form gets pushed to the bottom of the pile.

That’s why auto-enrollment and auto-escalation are such powerful tools. By flipping the default from “opt-in” to “opt-out,” you nudge employees to start saving without relying on them to take the first step.

Real-World Example: Boosting Participation Through Auto-Enrollment

Consider the example of a mid-sized manufacturing firm with 200 employees. Prior to implementing auto-enrollment, only about 58% of eligible employees were participating in the company’s 401(k) plan. Despite regular educational sessions and email campaigns, participation plateaued.

After consulting with their retirement plan advisor, the company introduced auto-enrollment at 3% of pay for all new hires and added auto-escalation of 1% per year, capping at 10%.

The result? Within 12 months, plan participation rose to 91%, with average deferral rates increasing from 4.2% to 6.7%. Not only were more employees saving, but they were saving more.

That’s the power of default settings. They meet employees where they are and guide them toward better decisions without requiring perfect financial discipline.

Best Practices for Auto Features

• Start with at least 6% as the default contribution rate to promote meaningful savings.

• Pair auto-enrollment with auto-escalation to grow savings over time.

• Re-enroll existing employees annually or during life events to boost ongoing participation.

2. Financial Wellness: Helping Employees Solve the Right Problems

Let’s face it, retirement isn’t the only financial concern on your employees’ minds. Many are juggling credit card debt, student loans, rising childcare costs, or simply trying to build an emergency fund.

Financial stress is one of the biggest barriers to retirement saving.

That’s where financial wellness programs come in. These programs provide holistic education and resources to help employees address their broader financial lives from budgeting and debt management to saving for retirement and understanding insurance.

When employees feel more in control of their finances, they’re more likely to participate in retirement plans and contribute consistently.

Ideas for Enhancing Financial Wellness

• Offer financial coaching (virtual or in-person) as part of your benefits package.

• Provide interactive tools and calculators within the retirement platform.

• Partner with your recordkeeper to host on-demand webinars or in-person workshops.

• Measure engagement with these resources and adjust based on feedback.

Tip: If your retirement plan provider offers a financial wellness hub, promote it through onboarding, annual enrollment, and internal communications. Awareness is half the battle.

3. Target Date Funds: One Fund, Many Benefits

Most participants aren’t investment experts and they shouldn’t have to be. That’s why target date funds (TDFs) are the default investment of choice in most corporate retirement plans.

TDFs automatically adjust the mix of stocks and bonds based on the participant’s retirement date. They’re easy to understand, low maintenance, and well-diversified.

But as a plan sponsor, your job isn’t just to offer TDFs. It’s to make sure the ones you offer are aligned with your workforce’s needs.

What to Watch For in TDF Design

• Glidepath philosophy: Is it “to” retirement (becomes conservative at retirement) or “through” retirement (remains growth-oriented after retirement)?

• Workforce demographics: Younger, lower-income employees may need a more growth-oriented TDF to build assets.

• Cost and transparency: Ensure the funds are reasonably priced and clearly disclose fees. .

Regularly review your TDF lineup with your advisor or investment committee. If your population is diverse, you may even consider offering multiple TDF suites or personalized managed accounts.

Putting it All Together: A Culture of Retirement Readiness

Improving participant outcomes doesn't happen by accident, it happens by design.

Here's how you can start moving the dial:

Action	Why It Matters
Implement or raise auto-enrollment	Captures more participants early and eliminates inertia
Add auto-escalation	Encourages long-term savings growth
Introduce financial wellness resources	Helps employees balance competing financial needs
Review and align your TDF lineup	Ensures investment options match participant profiles
Communicate consistently	Reinforces engagement and boosts trust in the plan

Even modest changes, like increasing the default contribution rate or adding a budgeting tool can produce significant long-term benefits for your employees.

And when your people are financially prepared to retire, everyone wins. Employees transition with confidence. Turnover can become more predictable. And your organization earns a reputation as a workplace that truly cares about long-term financial health.

Final Thoughts

As a corporate plan sponsor, you hold the keys to helping your employees retire on time. That’s not just a fiduciary role, it’s a leadership opportunity. By making smart design decisions today, you can unlock better futures for tomorrow.

If you’re ready to assess your plan’s impact on retirement readiness or explore how to implement these strategies, connect with your advisor or provider for a plan review. The right steps now can lead to measurable results and lasting financial clarity for your employees.

Scott Higgins | AIF ®, CFP®, CPFA®, NSSA®

Financial Advisor

Since 2012 at Rose Street, Scott has been responsible for helping the firm’s individual wealth management clients with income strategies for retirement and consulting with employers with their employee retirement plans. In free time, he enjoys golf, biking, skiing, cooking, and traveling. Fun Fact, Scott has a hobby of filling growlers with coins!

Securities and Investment Advisory Services Offered Through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Adviser, Member FINRA/SIPC. Rose Street Advisors is independently owned and operated. #4520200

All Things 401k | 5 Helpful Ways to Organize Your 401(k) Fiduciary Files

Managing Discover top strategies for maintaining organized 401(k) fiduciary files with best practices for compliance and peace of mind. As a plan sponsor, one of your primary responsibilities is ensuring that your company's retirement plan operates smoothly and within the boundaries of compliance regulations. This is no small feat, especially when dealing with the complexities of a 401(k) plan. One of the ways to help enable hassle-free management is by maintaining neat and tidy records. This article will provide you with some practical tips and best practices on how to organize and document your fiduciary files.

Why Is Retirement Plan Documentation Important?

First, let's delve into why retirement plan documentation is crucial. Proper documentation serves as evidence of your diligent fiduciary oversight. It helps to show that you are actively managing your company's retirement plan in accordance with ERISA regulations. Moreover, it helps streamline the auditing process and makes it easier to answer inquiries from your plan's third-party administrator (TPA).

Best Practices for Organizing Fiduciary Files

Now, let's explore some of the best methods to keep your fiduciary files in order: 1. Create a Fiduciary File System: Designate a secure location, preferably a locked file cabinet or encrypted digital storage space, for all plan-related documents. This includes the plan document, amendments, participant communications, government filings, and investment reviews. Action item: Create a new master folder and label it “401(k) Plan”. Within this master folder, create subfolders with important categories such as, “Plan Document and Amendments”, “Participant Communications”, “Annual Filings”, and “Investment Reviews”. Ensure that relevant documents are correctly placed within their corresponding subfolders. 2.Implement a Document Retention Policy: Develop a policy that outlines for how long different types of documents should be retained. For instance, the plan document and amendments should be kept permanently, while records related to plan operations should typically be kept for at least six years. 3.Regularly Update Your Files: Make it a habit to update your files regularly. This includes adding new documents as they come in and removing outdated ones based on your retention policy. 4.Use Clear Labeling and Categorization: Clearly label each document with its type and the date it was created or received. Categorize documents based on their nature, such as plan administration, investment management, participant records, and compliance tests. Folder / File Name Examples •Plan Document and Amendments / Plan Document-ABC Company-401k Plan-2010.docx •Investment Reviews / Investment Review-ABC Company-401k Plan-Q1 2024.docx •Participant Communications / Participant Education-ABC Company-401k Plan-Q1 2024.docx 5.Ensure Accessibility While Maintaining Confidentiality: Balancing accessibility with confidentiality is vital when managing fiduciary files. The documents should be readily retrievable as needed, yet stored in a manner that protects sensitive data from unauthorized access. Implement safeguards such as password protection for sensitive documents and restrict access to authorized personnel only. Let’s take the company's census file as an example. This file holds sensitive information like Social Security numbers, dates of birth, salaries, 401(k) deferral amounts, employer match, and profit sharing calculations. This file should be safeguarded with a password and is only accessible to employees who require this information for their roles. For instance, a newly hired temporary employee would not have access to this file, ensuring the information remains confidential.

Reduce the Hassle of Compliance Testing

One of the many benefits of maintaining organized fiduciary files is how much easier it makes compliance testing. For example, your plan's TPA usually asks for uploading census data by January 31st to run their compliance tests for the year. By having clean data and organized files, this task becomes significantly less daunting. Instead of spending hours searching for and compiling the requested information, you can access it within a few clicks. This not only saves you valuable time, but it also helps ensure that your TPA has all the necessary information to perform accurate compliance tests.

Structure for Success

Maintaining a well-organized 401(k) is more than just a tidy system of records. It's an outward sign of effective fiduciary oversight, accurate audits, and comprehensive compliance testing. As a plan sponsor, you play an important role in the smooth operation of your company's retirement plan. However, you don't have to navigate this path alone. Partnering with an experienced 401(k) advisor can offer valuable assistance, provide answers to your questions, and help ensure you're on the right track. Remember, the success of your 401(k) plan is not just about its performance but also about its organization and compliance. We are here to provide guidance, help you stay organized, and support the development of a bright financial future for your employees.

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

Meet Julia, a people-focused life-long learner with several years of experience in the retirement plan industry. Throughout her career, Julia has been committed to maintaining strong client relationships by providing incredible customer service. She is passionate about helping clients define and plan for their retirement goals. Julia’s daily role at the firm energizes and reinforces her commitment to client-focused work.

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Since 2012 at Rose Street, Scott has been responsible for helping the firm's individual wealth management clients with income strategies for retirement and consulting with employers with their employee retirement plans. In free time, he enjoys golf, biking, skiing, cooking, and traveling. Fun fact, Scott has a hobby of filling growlers with coins!

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #6188012.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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

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All Things 401k | Wrapping up 2023: A Comprehensive Guide to End-of-Year 401(k) Tasks

As the end of 2023 draws near, those responsible for their company 401(k) plan have much to consider. With a combination of standard annual tasks and new SECURE Act provisions on your plate, we are here to help you. This article is a helpful guide for wrapping up 2023 smoothly! We will dive into those end-of-year 401(k) tasks that require your attention including plan design review, SECURE Act preparation, Required Minimum Distributions (RMDs), employee deferrals and more. Annual Review An annual review is a great time to kick the tires and make sure your plan is still working well. Assessing key demographics such as participation, deferral rates, assets allocation and loan activity can help shine light on opportunities for the plan. Updates could be necessary to keep your plan in compliance, boost performance and/or better suit your organizational needs. Safe Harbor Considerations If you are considering adding or changing your company match formula, now is a good time to discuss it before December 1st. Both new and existing plans need to finalize any decisions on safe harbor match changes before the deadline. This will allow sufficient time to distribute the required notices. Long-Term, Part-Time Employees Starting January 1st, 2024, new rules go into effect for long-term, part-time employees. The SECURE Act requires 401(k) plans to allow employees who have worked 500 hours or more in the past three consecutive 12-month periods to contribute to the plan. It's important that you track and record the correct hours. Required Minimum Distributions The annual deadline for paying out RMDs is December 31st, so now is the time to get ahead. Take this time to review the list of affected participants. This includes current and terminated participants over the age of 72 (73 if the person reached age 72 after December 31st, 2022). Bonuses If paying year-end bonuses, you might consider checking the definition of compensation in your document. If bonuses aren't included in this definition, there won't be any deductions for 401(k) or 403(b) contributions from the bonus. However, if the plan counts all types of pay as compensation, contributions should be taken from the bonuses. Opt-Out Records While the decision to participate in the retirement plan rests solely with each employee, it is your responsibility to keep accurate documentation. It's essential to keep clear records, indicating that employees were given the choice to defer their participation. Furthermore, any instances where an employee has chosen to defer 0% of their earnings must be meticulously recorded. Expense Account If you have an ERISA spending account, also known as an ERISA bucket or plan expense reimbursement account, review it before the year ends. This account is typically used to cover plan-related costs. However, if there is leftover money in the account, it is often distributed back to the participants. Your plan document should provide details on how this surplus revenue is distributed. Some plans distribute the excess to all participants, while others only disburse it to those who invest in funds with revenue-sharing agreements. Required Notices Remember, December 1st is the deadline for annual participant notices. These notices inform employees about their 401(k) plan's operations, investment options and fees. Ensuring timely distribution helps avoid penalties and maintains your plan's tax benefits. Lean on Your Advisor The end of the year is an exciting time, but it can also be stressful. That is why we work closely with our clients to tackle these end-of-year tasks. Whether it's questions about required notices, compliance deadlines, plan design review or anything else, we're here to help.

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #6006784.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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

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All Things 401k | 6 Common Administrative Tasks That Can Morph Into 401(k) Plan Headaches

Managing a 401(k) plan can leave even the most seasoned administrators feeling overwhelmed. With proper support, you can simplify the complex task of retirement plan management. Top 401(k) Plan Headaches The first step is to understand the potential problems. Here are some common issues that can cause headaches for plan sponsors: • Uploading Payroll • Determining Eligibility • Over-Contributions • Investment Changes • Distributing Notices • Regulatory and Legislative Updates Navigating the labyrinth of retirement plan management can seem like a daunting challenge for any plan sponsor, employer or 401(k) plan administrator. The various administrative tasks, ranging from uploading payroll to handling investment changes, can often turn into 401(k) plan headaches. 1. Uploading Payroll A seemingly straightforward process can quickly turn into a minefield of errors. Incorrect data entry could lead to improper contributions, which could potentially result in legal and financial complications. One area of particular focus is the plan’s definition of compensation. When a special payroll cycle includes different types of compensation such as bonuses, commissions, or overtime, it’s important to know whether that compensation should be included or excluded from the 401(k) plan. This specific issue ranks #2 on the IRS’ Top Ten Failures Found in Voluntary Correction Program. 2. Determining Eligibility When an employee may enter your 401(k) plan is different for each employer. Common eligibility requirements include 21 years old and 1,000 hours of service. Then the employee is eligible to enter the plan on the next entry date: for example, January 1st and July 1st. However, effective January 1st, 2024, there are new eligibility rules for long-term, part-time employees. Under the SECURE Act, employees that have worked 500 hours for three consecutive years are eligible to participate in the 401(k) plan on January 1st, 2024. 3. Over-Contribution Quandary An employee might max out their savings, then end up getting money back due to annual contribution limits. This creates extra administrative work and potential confusion for both parties. Get ahead of this now by running a report to learn if any employees are close to – or have - maxed out their 401(k) plan. 4. Investment Changes Moving from one investment option to another can be a complex process, requiring professional guidance from a 3(21) or 3(38) investment fiduciary. Plan sponsors should work with a 401(k) advisor, like us, to evaluate watch list funds and then implement recommendations based on your plan’s Investment Policy Statement. Additionally, it’s critical to communicate these changes to plan participants. 5. Distributing Notices Ensuring that all employees receive timely and accurate information about their 401(k) plan can be a daunting task, especially for large companies. One idea is to work with your recordkeeper and instruct them to send out notices. Another idea is to hire a 3(16) plan administrator who will send out and track required plan notices. 6. Regulatory and Legislative Updates Staying informed and compliant with the ever-changing landscape of retirement plan regulations is a significant challenge. For example, the SECURE Acts are two long and lengthy pieces of legislation that greatly impact 401(k) plans. 401(k) Plan Headache Relief This is where a 401(k) advisor can give a helping hand. We can offer valuable support and guidance across several key areas: • third party administrator (TPA) communication • recordkeeper collaboration • investment strategy • plan design support • employee education • fiduciary and regulatory guidance While the role of managing a 401(k) plan can be fraught with potential pitfalls and headaches, the support of a specialized retirement plan advisor can significantly lighten the load. We can help streamline processes, establish compliance best practices, educate employees and foster an efficient retirement plan.

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #6006781.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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

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All Things 401k | Talent Management and Total Rewards Edition

The future of talent management and total rewards is changing. With the SECURE Act 2.0 now in effect, the field of plan design must keep pace with the ever-evolving employment landscape. There are a number of ways that can help you stay ahead of the competition, toward securing better outcomes for your workforce. Our plan sponsor newsletter focuses on:

· Total Rewards: Helping define and implement effective compensation strategies tailored to individual needs.

· Plan Design: Developing 401(k) plans that meet key requirements while allowing employees to save effectively.

· SECURE Act 2.0: Making sure your plans are up to date with the latest regulations for the upcoming 2024 year.

CTA: Download the Newsletter

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5787277.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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

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Guide to Retirement | Long-Term, Part-Time Overview for 2024

For part-time workers, saving for retirement can be a challenge. Many part-time employees are often excluded from 401(k) plans because they often don’t meet the plan’s eligibility requirements. This includes many students, parents and individuals with multiple part-time jobs. However, new legislation that goes into effect on January 1, 2024, is about to change that.

Effective on January 1, 401(k) plans must allow employees who have worked more than 500 hours of service in three consecutive 12-month periods to contribute elective deferrals to the plan. Let’s look at an example.

Example 1

Alex was hired in 2016 as a part-time employee. She has never been able to participate in the company’s 401(k) plan because she didn’t meet the 1000 hours requirement. In 2021, 2022 and 2023, she worked 600 hours per year. She has worked more than 500 hours and completed three consecutive 12–month periods, so she can enter the plan on January 1, 2024.

Example 2

Riley was hired on May 15, 2021 as a part-time employee. He worked 400 hours in 2021, 600 hours in 2022 and 600 hours in 2023. On May 15, 2024, he completed three consecutive 12-month periods; however, he did not work enough hours to be eligible.

Importantly, employers must properly track employee hire dates and hours worked to determine eligibility. Tracking hours is crucial to determining employee eligibility for the plan, including tracking periods starting from January 1, 2021 (since that date going forward determines eligibility). Additionally, employers should be aware of the administrative burden involved in operating their plans and how these changes will affect plan operations under the Long-Term, Part-Time provisions.

According to these rules, employers are not required to make employers contributions to the accounts of LTPT employees, which includes contributions under safe harbor 401(k) plan provisions and top heavy minimums but if employers want, they can. Additionally, employers can choose to exclude employees from nondiscrimination testing related to elective deferrals, employer match and nonelective contributions. See your TPA for more specifics.

2025 and Beyond

For 2025 and with the modifications in SECURE 2.0, the rules change again. An employee only needs two consecutive 12-month periods with more than 500 hours of service to be eligible to participate in the company’s 401(k) plan.

Example 3

Riley was hired on May 15, 2021 as a part-time employee. He worked 400 hours in 2021, 400 hours in 2022, 600 hours in 2023 and 600 hours in 2024. He has completed two consecutive 12-month periods with more than 500 hours; he is eligible to participate in the company’s 401(k) plan on the next entry date.

Understanding Plan Eligibility

In summary, the LTPT provisions are a significant change to retirement plan eligibility requirements. While the SECURE 1.0 and 2.0 Acts offer solutions, employers must take action to properly track employee hours and ensure those employees become aware of their eligibility to join the 401(k) plan.

Employers should also evaluate their plan design and consider whether allowing all employees to contribute immediately upon hire would be worthwhile. By working closely with your third party administrator and plan advisor, employers can ensure that they are meeting the requirements of the SECURE 1.0 and 2.0 Acts and offering employees the best possible retirement savings opportunities.

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5787251.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

Interested in more?

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Guide to Retirement | Stock Markets Impact on Retirement Savings

The stock market’s movements can cause a bit of anxiety and stress for investors. One of the keys to a successful retirement is to keep saving, no matter what the stock market is doing. It’s always beneficial to connect with an advisor to help understand your investments whether the stock market is up or down. Watch the Video

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5787304.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

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

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All Things 401k | Unlock Employee Potential with Effective and Appealing Total Rewards Program

You may have heard of a Total Rewards Strategy. It is a recruiting and retention strategy given that it goes beyond the traditional salary benefits by providing holistic rewards that entail added motivation for employees. This strategy allows companies to improve employee satisfaction without compromising business goals – it's an all-around win! CTA: Download the Guide

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5787273.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

Interested in more?

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All Things 401k | SECURE Act 2.0: What 401(k) Managers Need to Know for 2024

Required for 2024

Luckily, the required changes for 2024 are minimal.

Requirement Summary

Long-term, part-time employees become eligible to participate in the 401(k) plan. Catch-up contributions are required to be Roth if the participant earns more than $145,000 in W-2 compensation.

Long-term, Part-time Employees

As part of SECURE 1.0, there is an important provision about long-term, part-time employees and retirement plan eligibility. In short, effective January 1, 2024, 401(k) plans must allow employees who have worked 500 hours or more in the past three consecutive 12-month periods to contribute elective deferrals to the plan.

Changes for High Earning Pre-Retirees

Employees looking to maximize their retirement savings with catch-up contributions should be aware that if they earn more than $145,000 in W-2 wages, their contributions are now required to be Roth. If the employee earns less than $145,000, they can choose either pre-tax or Roth contribution type. Note that plans need to allow for Roth contributions for this option to be available. UPDATE as of August 25, 2023: The IRS announced a two-year transition period that extends until 2026 this provision requiring higher-income participants to make catch-up contributions as Roth. In addition, the IRS clarified that plan participants who are age 50 and over can continue to make catch-up contributions after 2023, regardless of income. These required provisions may need additional explanation. Contact us to discuss your specific plan.

Optional for 2024

While this is not a complete list of the optional provisions to consider in 2024, this short list includes several of the most anticipated. We want to focus on the provisions that may reduce your administrative hassle, provide employees relief during compromising situations and could encourage positive savings behaviors.

Reduce Administrative Hassle

Account Transfers for Former Employees

Retaining 401(k) accounts of former employees can be onerous for plan sponsors, particularly if the accounts are small and inactive. However, there is a new solution available that helps facilitate the transfer of accounts to the ex-employees' new employers. Automatic portability is a transaction process that allows 401(k) accounts with balances between $1,000 and $7,000 to be transferred to the new employer's retirement plan automatically, without involving the former employee. This can save plan sponsors time and resources, while also ensuring that former employees' retirement savings remain safe and intact. Fortunately, many recordkeepers and service providers can help facilitate smooth 401(k) account transfers. From locating missing plan participants to handling necessary paperwork, the right partner may help reduce costs, improve efficiency and enhance employee satisfaction.

Safe Harbor IRA Upgraded

Previously, plan sponsors could only transfer former employees' 401(k) accounts to a Safe Harbor IRA if the balance was not more than $5,000. The revised provision increased that amount to $7,000. This may help improve plan administration by helping sponsors avoid large plan audits, additional fees and issues caused by missing participants.

Provide Employees Support

Help Workers Access $1,000 for Emergencies

SECURE Act 2.0 offers a simple solution for employees who need to access retirement savings for personal or family emergencies. This provision allows workers to withdraw up to $1,000 from their retirement savings without incurring the typical 10% excise tax penalty. Even better, the withdrawal is not a loan and requires little additional paperwork or administrative burden. Employees can take advantage of this one-time distribution and optionally repay it within three years. This feature could prove particularly useful for busy HR professionals and 401(k) administrators, looking to streamline processes and save time.

Payroll Deducted Emergency Savings

This "side-car" emergency account can provide employees with further security and peace of mind in the face of financial uncertainty. Under this provision, employers can automatically enroll their employees in a savings account that allows up to 3% of their wages to be saved for emergencies. Account contributions are made on a Roth-like basis and are capped at $2,500. Once the cap is reached, additional contributions can be directed into a Roth-defined contribution plan or stopped altogether. The accounts are also subject to annual matching contributions. Additionally, the first four withdrawals from the account each year are not subject to any fees or charges. These emergency savings accounts are for non-highly compensated employees. This new feature helps employers support their workers' financial well-being and to become more confident and secure in their financial lives.

Penalty-Free Withdrawals Available for Victims of Domestic Abuse

Domestic abuse survivors can withdraw up to $10,000 (or 50% of their retirement fund, whichever is lesser) without penalty. This initiative provides much needed financial security for survivors.

Natural Disasters and Financial Response

In the unfortunate event of a natural disaster, this new measure provides relief for those dealing with it. Individuals can withdraw up to $22,000 from their retirement plan or IRAs without facing the 10% early withdrawal tax penalty. This amount can be paid back over three years or the recipient can pay taxes on the distribution, if not repaid, spread out over three tax years.

Encourage Positive Savings Behaviors

Auto-Features and Honest Mistakes Are Now Protected

Auto-features have been proven over and over to help all workers save for retirement. In that spirit, this provision provides a grace period for correcting certain retirement plan errors. Plan sponsors now have 9 ½ months after the close of each plan year to rectify mistakes related to default enrollment or matching contributions without facing any penalty. This is beneficial for HR executives, who often have to deal with a large number of employees and may occasionally make innocent mistakes. The extension offers them peace of mind from potential fines and allows them to focus on more important tasks rather than worrying about errors made when administrating their retirement plans.

Next Steps

As a 401(k) manager or employer, you have the opportunity to take advantage of the SECURE Act 2.0 provisions to reduce administrative hassle, encourage positive savings behaviors and enhance financial confidence for your employees. Reach out to us today to learn more about how the new legislation can benefit your plan. Don't miss out on this chance to make a real impact on your employees' future!

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5787251.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

Interested in more?

Let's Talk

Guide to Retirement | Demystifying Social Security Benefits and Taxation in Retirement Planning

Social Security benefits serve as a vital source of income for millions of retired and disabled individuals in the United States. While these benefits are designed to provide financial security, it’s important to understand how they are taxed. Let’s break down the basics of Social Security benefit taxation, including when and how it occurs, ensuring you have a clearer picture of how this impacts your overall retirement income. When Social Security Benefits are Taxed: Not all recipients of Social Security benefits are required to pay taxes on their benefits. The taxability of these benefits is determined by a combination of your income and fling status. The Internal Revenue Service (IRS) uses a formula known as “provisional income” to calculate whether your benefits are subject to taxation. Provisional income is calculated by adding up your adjusted gross income (AGI), non-taxable interest, and half of your Social Security benefits. Based on this provisional income, the IRS established certain income thresholds to determine whether your benefits are taxable. These thresholds are as follows for the tax year 2023:

1) Single filers:

· If your provisional income is below $25,000, your benefits are generally not taxable.

· If your provisional income falls between $25,000 and $34,000, up to 50% of your benefits may be subject to taxation.

· If your provisional income exceeds $34,000, up to 85% of your benefits may be taxable.

2) Married couples filing jointly:

· If your provisional income is below $32,000, your benefits are generally not taxable.

· If your provisional income falls between $32,000 and $44,000, up to 50% of your benefits may be subject to taxation.

· If your provisional income exceeds $44,000, up to 85% of your benefits may be taxable.

It’s important to note that these income thresholds may change over time due to inflation or adjustments in tax regulations, so it’s always wise to consult the latest information provided by the IRS. In addition, social security benefits may be subject to a reduction of benefits if receiving benefits while still working prior to you full retirement age. This topic will be covered in a later article. How Social Security Benefits Are Taxes: If a portion of our Social Security benefits is subject to taxation, the IRS uses a multi-tiered system to determine the specific tax liability. The taxable portion can be added to your other sources of income to determine your overall tax bracket. However, it’s crucial to understand that the maximum taxable amount of Social Security benefits is limited to 85% of the total benefit amount. In other words, even if you fall into the higher tax bracket, you will not pay taxes on more than 85% of your Social Security benefits. Reporting and Paying Taxes: To account for the taxation of Social Security benefits, you are required to report the taxable portion of your benefits on your federal income tax return. This is done using IRS Form 1040 or 1040A. If you receive a Form SSA-1099 (Social Security Benefit Statement) from the Social Security Administration, it will provide you with the necessary information to determine the taxable portion of your benefits. If you anticipate owing taxes on your Social Security benefits, you have the option to make quarterly estimated tax payments or have taxes withheld from other sources of income, such as pensions or retirement account distributions. To have taxes withheld from your Social Security benefits themselves, you can complete IRS Form W-4V. Understanding the taxation of Social Security benefits is essential for retirees and those nearing retirement age. By grasping the basic principles outlined in this article, you can better navigate the complex tax rules surrounding these benefits. Remember, not all Social Security income is taxed, and the taxability depends on your provisional income. Consult with a tax professional to determine the specific tax implications based on your personal circumstances. Stay informed, plan ahead, and make the most of your Social Security benefits. The tax and legal references attached herein are designed to provide accurate information with regard to the subject matter covered and are provided with the understanding that Rose Street Advisors is not engaged in rendering tax, legal, or actuarial services. If tax, legal or actuarial advice is required, you should consult your accountant, attorney, or actuary. Rose Street Advisors does not replace those advisors.

JULIA SANDERS

AIF®, CPFA® | Retirement Relationship Manager

SCOTT HIGGINS

AIF®, CFP®, CPFA® | Financial Advisor

Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. Rose Street Advisors, LLC is independently owned and operated. #5829024.1

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

Interested in more?

Let's Talk