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, asset 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.

 About Your Orange County Retirement Advisors

At Financial Management Network, we are committed to helping our clients, their families, and our community achieve financial harmony. We are passionate about providing solutions that:

  • ·        Relieve administrative burden

  • ·        Drive retirement plan success

  • ·        Boost participant outcomes and retirement readiness.

Since 1991, FMN has been an independent, comprehensive financial advisory firm dedicated to providing superior service and quality financial advice to clients.

 
 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x.222
cfarrell@fmncc.com

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

4th Quarter Newsletter: OPTIMIZING 401(k) PLAN ADMINISTRATION - News and Information for Employees

Stay informed about the latest updates and responsibilities regarding your 401(k) plan. Our latest newsletter is curated to provide valuable insights on end of year administrative tasks, plan headaches to avoid and tax strategies for business owners.

CTA: Download the Newsletter

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

 

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Plan Sponsor Newsletter: Talent Management & Total Rewards

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

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

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 employer 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, 600 hours in 2022, 600 hours in 2023 and 400 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.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

IRS Provides Two-Year Delay in Roth Catch-Up Requirements

The Internal Revenue Service (IRS) has granted a two-year delay in the Roth catch-up requirements. This decision brings relief to retirement plan participants and sponsors who were facing looming compliance deadlines. Let's delve into the details of this breaking news.

The Original Rule

As part of SECURE 2.0, employees ages 50 or older who were looking to maximize their retirement savings with catch-up contributions and if earning more than $145,000 in W-2 wages, their catch-up 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.

Delay in Effective Date

Under the new guidance, the IRS grants a two-year delay in the provision's effective date that mandates catch-up contributions must be Roth for those earning more than $145,000. Catch-up contributions can now be made on a pre-tax basis through 2025, regardless of income.

The IRS has acknowledged the need for an administrative transition period to allow retirement plans and sponsors to comply with the new policy. The notice announced a two-year transition period for the requirement. Under section 603(c) of the SECURE 2.0 Act, the provisions of section 603 apply to taxable years beginning after December 31, 2023. The IRS notes that the first two taxable years beginning after December 31, 2023, will be regarded as an administrative transition period.

It also addressed the technical error that would have eliminated all catch-up contributions beginning in 2024. Under the notice, catch-up contributions can continue to be made after 2023.

 Impact on Retirement Planning

This delay comes after a mass amount of retirement industry feedback that implementing the change for all defined contribution plan sponsors would be administratively challenging to get done by the original deadline. The extension of the deadline for Roth catch-up contributions has been regarded as a positive step towards easing the burden on individuals and plan sponsors.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

3rd Quarter 2023: Plan Sponsor Guide - 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

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

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 regarding 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.

  

**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!

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Should You Add an Automatic Safe Harbor IRA to Your Plan?

High employee turnover could lead to a rise in small 401(k) accounts. Explore how adding a Safe Harbor IRA provision to your plan may help reduce plan costs and potential fiduciary risks.

  

In 2022, more than 50 million Americans left their jobs and in the last two years, there has been record-breaking employee turnover.1 While the number of employee departures has begun to decrease, it still remains higher than pre-pandemic levels.

Employee turnover can cause problems for employers, such as many small 401(k) accounts being left behind in the company's plan. Such accounts can amplify plan costs and fiduciary risks, making it essential for plan sponsors to address these orphaned accounts. So much so that the Department of Labor (DOL) has made missing participant search and uncashed check processes a focus of audits in recent years.

  

Consider A Safe Harbor IRA Provision

One potential solution to this challenge is to add a Safe Harbor IRA (a.k.a. automatic rollover IRA) provision to your plan. This enables plan sponsors to remove smaller accounts from their plans automatically by rolling them into a Safe Harbor IRA.

This provision allows plan sponsors to automatically roll former participant’s accounts with balances between $1,000-5,000 into an IRA — and in 2024, the upper limit increases to $7,000, thanks to SECURE 2.0.

Automatic rollover IRAs can be advantageous for plan sponsors and participants. Plan sponsors benefit because removing small account balances can help:

·         Keep plan data clean

·         Reduce missing participant issues

·         Manage plan costs

·         Simplify participant disclosures and reporting

·         Limit fiduciary risk

In addition, these provisions help plan sponsors address challenges associated with uncashed checks. If the plan document allows it, unvested employer profit sharing contributions can be applied to help plan sponsors pay for plan expenses and/or offset contributions.


Safe Harbor IRAs Help Participants

With a Safe Harbor IRA provision, the small accounts belonging to former employees periodically and automatically rollover into IRAs. It’s a feature that benefits participants in a variety of ways, and can:

·         Keep the former employee’s retirement savings intact

·         Preserve tax advantages

·         Provide more straightforward access to savings

 

Auto-Portability Networks: A Look into the Future of 401(k) Transfers

Automatic portability is a new option that was legitimately established under SECURE 2.0. This innovative feature allows a former employee's 401(k) account to be seamlessly transferred into the worker's new company's 401(k) without requiring the participants' express consent.

Today, there are new Auto-Portability Networks being established, and the range of participating recordkeepers is expected to increase, which should facilitate the implementation of automatic portability for more workers.

 

Safe Harbor IRAs Complement Automatic Enrollment Features

Many 401(k) plans have automatic enrollment and escalation features – and soon all new plans will be required to have these features.

While the push to add automatic savings features is likely to help Americans save more for retirement, it also has the potential to sharply increase the number of retirement plan accounts left behind. When an employee leaves, plan distribution options typically allow participants to:

Rollover into an IRA or a new employer’s plan. Rollovers help improve lifetime retirement outcomes because they preserve retirement savings and tax advantages, among other benefits.

Leave assets in the plan. Typically, participants with more than $1,000 in a plan account can opt to leave the savings in a previous employer’s plan. Some large defined contribution plans like to keep these assets in their plans because they provide scale, which can lower fees. The drawback is that plan sponsors have a fiduciary responsibility to keep track of former employees and must have a process in place to find missing participants. In contrast, sponsors of smaller plans often prefer not to keep the assets of former employees because having more accounts may increase plan costs and administrative responsibilities.

Take distributions in cash. About 41% of plan participants choose to cash out when they leave an employer, and the majority drain their savings.2 It’s one of the most significant threats to retirement security.

Safe Harbor IRA provisions offer a possible solution. When former employees fail to make distribution decisions, a Safe Harbor IRA enables the plan sponsor to remove those accounts from the plan, keeping plan data clean and costs low.

 

Is This Right for Your Plan?

In the world of 401(k) options, adding a Safe Harbor IRA provision to a company's plan can be an excellent arrow in its quiver. Especially for employers with high turnover rates. This option may help to reduce the number of small orphaned accounts left behind, potentially resulting in reduced plan costs and fiduciary risks.

Safe Harbor IRAs are a friendly solution that may help to keep plan data clean, manage costs, reduce risks and improve retirement outcomes of former employees.

1  “Job Openings and Labor Turnover Archived News Releases.” U.S. Bureau of Labor Statistics. 6 Apr. 2023.

2  Wang, Yanwen, et al. “Cashing Out Retirement Savings at Job Separation.” 7 Nov. 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

3rd Quarter 2023 - Employee Newsletter: Your Money Checkup

Financial education has become increasingly important in today’s job market. Workers are looking to their employers for financial wellness resources. By providing financial education to your employees, you’ll be helping them build the skills they need to help manage their finances and plan for the future. This can lead to greater job satisfaction and loyalty, as well as increased productivity in the workplace.1

This financial education resource focuses on key questions to help employees assess their financial situation, from overspending to retirement and beyond. Sharing this helpful resource with your employees can be a positive step toward alleviating financial stress in the workplace.

CTA: Download Employee Education Guide

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

How Can Our 401(k) Plan Help Us Attract and Retain Star Employees?

With thoughtful design features, you can structure a 401(k) plan that stands out in a time of talent scarcity and meets your employees’ needs.

Looking to attract and retain high-quality talent in today’s competitive labor market? Enhancing your 401(k) plan design could be the answer.

It could increase your employees’ retirement security and financial well-being while motivating talent to join and stay with the company long-term.

With many businesses struggling with staffing issues, savvy executives are realizing that boosting their retirement plan benefits can be a valuable part of the solution. In fact, 35% of employers have already taken proactive steps to stand out from their competitors and ensure their employees remain happy and satisfied.1

When it comes to successfully recruiting and retaining top talent, the competitiveness of your benefits package is key. As such, you should consider what employees value most when evaluating and implementing 401(k) plan design enhancements. A 401(k) plan that incorporates features that fit the company’s budget and the needs of your workforce is the best of both worlds.

  

Automatic Features Make a Difference

Plan design features such as immediate eligibility, automatic enrollment, auto-escalation and frequent plan entry points may help boost 401(k) plan competitiveness and make it easier for employees to save for retirement.

Immediate eligibility means employees can participate in the 401(k) on their date of hire, rather than based on their age or time of service. Then these eligible employees could be automatically enrolled into the plan at a meaningful rate (8–10%). Plus employers who adopt automatic enrollment can claim a tax credit of $500 for the first three years.2  Automatic entry helps increase retirement readiness and is a benefit employers can highlight in the recruiting process.

Going a step farther, employers could auto-escalate employee retirement saving by 1-2% per year until the employee is saving between 10-15% toward their retirement, the recommended savings rate per year by industry experts.3

Finally, implementing flexible eligibility requirements and frequent entry points can boost participation rates and enhance overall employee satisfaction levels.

  

The Match Matters

Prospective and current employees value employer matching contributions. If an employee is considering multiple job offers, all else being equal, companies that offer a 401(k) with a match may have an advantage. It’s no wonder that more than half of employers (55%) are making matching contributions to employees’ retirement accounts.4

Employers can help employees understand the value of retirement plan matching contributions by presenting them as part of their total compensation. It demonstrates an investment in your employees’ future, which can go a long way when it comes to attracting new talent and cultivating loyalty among your existing workforce.

  

Enhance Recruiting with Accelerated Vesting

Many employers have a waiting period for employees to become vested in employer contributions. One-year vesting periods are common; however, some employers delay letting employees vest in the company match and other employer contributions by as much as six years. Immediate vesting may offer more recruiting power than non-immediate vesting schedules. Again, employees considering more than one job opportunity may be more likely to accept one with a company that offers immediate vesting.

  

Beyond the 401(k): Get Creative

Offering a competitive 401(k) plan shows you’re committed to your employees’ financial well-being while helping them save for the future. Outside of a retirement plan benefit, specific financial rewards for longer-term employees can provide additional motivation for them to stay. These benefits may include restricted stock, cash balance plans and non-qualified deferred compensation plans. Offering creative benefits like these can help boost retention by making more tenured employees feel valued and rewarded while enhancing their total compensation.

A well-constructed 401(k) plan can be a game-changer for companies looking to attract and retain top-quality talent. By investing thoughtfully in plan design and staying competitive with benefits packages, businesses can stand out from their competitors and gain the advantage needed to succeed in today's challenging labor market.

1 WTW. “2022: The Next Evolution of DC Plans Survey.” Feb. 2022.

2 IRS. “Retirement Plans Startup Costs Tax Credit.” 16 Jun. 2022.

3 Vanguard. “How America Saves 2022: Insights to Action.” 2022.

4 Vanguard. “How America Saves 2022: Insights to Action.” 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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

4 Ways Employers Can Create a Culture of Wellness

To compete for top talent, companies are looking for innovative ways to stand out in a competitive labor market. Employees are looking for beefed up benefits that support their social, physical, mental and financial well-being.

  

Creating a culture of wellness in the workplace is a trend that’s catching on with employers across the country. A culture of wellness encourages employee health and well-being holistically by helping them adopt healthier habits in their personal and professional lives, such as exercising consistently, eating more nutritious foods, developing healthy interpersonal relationships and taking care of their mental health. Cultivating workplace wellness leads to happier, healthier and more productive employees, resulting in greater job satisfaction, loyalty, lower rates of absenteeism and reduced healthcare premiums.

Employees want holistic support including workplace programs that support their social, physical, mental, and financial well-being1.  Here are four ways employers can create a culture of wellness:

  

Social Health

Social health is the ability to form satisfying interpersonal relationships with others.

Employers can improve social health by supporting the creation of affinity and employee resource groups (ERGs). These employee-led groups aim to foster a more inclusive, diverse culture.

Generally, ERGs are composed of employees who share common interests, affiliations or identities. These groups help encourage loyalty and greater job satisfaction for employees from diverse backgrounds to feel seen, heard and included.

Additional opportunities to boost social health include encouraging volunteer opportunities, hosting networking and team events (in-person and online for remote employees), while offering family- friendly activities, such as company picnics and scavenger hunts.

  

Physical Health

Employers can help employees improve their physical health by offering fitness and preventive care programs. Offering perks like on-site fitness facilities or subsidized gym memberships, access to nutrition programs and resources to help employees manage chronic conditions like diabetes and autoimmune diseases are proactive ways to support employees’ physical health. On-site or virtual yoga or group exercise classes are another way to bring employees together and encourage them to focus on getting and staying healthy.

Fitness challenges are another fun way to encourage employees to be more active. It also encourages camaraderie and healthy competition throughout your organization.

  

Mental Health

No longer taboo, mental health has become a key priority for employers and employees due to the pandemic and recent legislation. Employees’ mental health, which includes psychological and emotional well-being, has experienced a backslide in recent years, with increasing numbers of workers reporting burnout, stress and depression.

Flexibility is a key component of mental health. In fact, workers whose employers support a healthy work/life balance are significantly more likely to say they feel mentally healthy (82%) vs. those that don’t have such flexibility (45%).2

Employers unable to accommodate flexible work schedules or remote work options, for instance, may consider offering creative, competitive perks such as:

●        More time off

●        Expanded benefits menu

●        Caregiver subsidies

●        Well-being programs

●        Commuter or transportation subsidies

●        Additional social opportunities

 

Financial Health

Nearly 60% of employees are stressed about their finances, and 45% can only cover six months’ worth of expenses.3 Employees want and expect help overcoming money challenges; 66% believe their employers are responsible for their financial well-being.4

Employers can meet these expectations by offering financial resources and benefits to help employees prepare for the unexpected, such as emergency savings accounts. Additionally, financial wellness education can reduce money stressors by helping employees gain confidence in their money management skills and cultivate good spending and savings habits. Providing access to a financial advisor can help ease employees’ anxiety about money so they can be more focused, productive and happier in their personal and professional lives.

Getting Started

Creating a culture of wellness in the workplace is designed to promote healthier lifestyles for employees and improve the overall social, physical, mental and financial health of your workforce. If you’re considering launching a workplace wellness program, here are some helpful tips to get started:

●        Start small: Pick one or two programs and build from there.

●        Get employees’ input: Survey your workforce to find out what they want and what would be
most helpful.

●        Make it fun: Prizes and competition can help encourage participation.

●        Promote the program to boost engagement: Send regular reminders and updates about
wellness activities and let employees know how they can get involved.

●        Get leadership buy-in: Leaders must be on board for wellness programs to succeed.

 Take the first step towards creating a culture of wellness by requesting information on our retirement plan services.

1 MetLife. “20th Annual U.S. Employee Benefit Trends Study.” 2022.

2 MetLife. “20th Annual U.S. Employee Benefit Trends Study.” 2022.

3 TIAA. “2022 Financial Wellness Survey. 2022.

4 Employee Benefit Research Institute and Greenwald Research. “2022 Workplace Wellness Survey.” 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Is Financial Education on Company Time Worth It?

Financial education is becoming increasingly important in today's world, but is it worth the company's time and resources to provide such a service? Helping employees reduce financial stress can help improve wellness, retention and productivity – and cost a fraction of the time lost from overwhelmed employees. 

 

Financially stressed employees may be costing you more than you think. Not only do financial issues affect employee productivity, they can also impact your ability to retain staff.

A recent survey found that more than half of stressed employees (55%) are distracted by their finances at work. Additionally, they spend an average of three hours per week dealing with their finances – likely during the workday.1

Comparatively, if companies offered just one hour of financial education to workers per quarter to help alleviate financial stress, the savings and bottom-line results could be significant.

 

Financial Education vs. Productivity Losses

Financial stress affects almost every aspect of an employee’s life including mentally, socially,

physically and in the workplace. Notably, one quarter of stressed employees say that financial worries over the past year have had a severe or major impact on their work productivity.2

Companies can help reduce stress levels of employees at a relatively low expense – and impact the bottom line – by offering quarterly financial education taught by a qualified financial advisor.

For example, using the Bureau of Labor Statistics, the average hourly pay for a worker in the private sector is $32.82:3

·         $32.82 x 3 hours spent by employees on financial matters each week x 52 weeks = $5,120 in
lost wages annually per employee.

·         Conversely, if a company offers one hour of financial education per quarter the annual cost
per employee would be just about $130 per employee.

Outcomes will vary, but that’s a potential internal cost reduction of $4,990 per stressed employee.

The Link Between Retention and Financial Stress

While trying to increase worker productivity by alleviating financial stress is an important outcome, employee retention is also a critical factor.

Many businesses are still reeling from the effects of the Great Resignation and research shows that financially stressed employees are twice as likely to look elsewhere for a job. One survey found that three-quarters of stressed employees are attracted to other companies that care more about their financial well-being.4

According to experts, the average cost per hire is nearly $4,700. However, employers say that the total cost to hire a new employee can be three to four times the position’s salary. So, if the salary is

$60,000 annually, a company could spend upward of $180,000 to fill that position.5

Keeping in mind the high cost of employee turnover, including recruiting and training plus the loss of institutional knowledge, it pays to take care of your team. By promoting benefit programs that make it easier for employees to manage their money, employers can boost morale while saving time and resources in the long run. That's a win-win situation everyone will appreciate.

How Financial Education Can Unburden Employees and Employers

Financial education in the workplace may create numerous benefits including reducing financial stress, increasing productivity and contributing to happier employees.

For a company size of 25 employees, if you were to offer quarterly financial education during work hours, it would cost around $3,250 in payroll expenses. Compare this to the estimated yearly average of $128,000 in wages for the weekly hours that employees spend on personal financial matters each week.

The question is: Can you afford not to offer a financial education program to your employees?

1 PwC. “2022 PwC Employee Financial Wellness Survey.” May 2022.

2 PwC. “2022 PwC Employee Financial Wellness Survey.” May 2022.

3 Bureau of Labor Statistics. “Average Hourly and Weekly Earnings.” 06 Jan. 2023.

4 PwC. “2022 PwC Employee Financial Wellness Survey.” May 2022.

5 Navarra, Katie. “The Real Cost of Recruitment.” SHRM. 22 Apr. 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

Financial Stress Has More Impact on Your Company Than You Think

In today’s economy, financial stress is having a profound impact on working Americans. Stressed employees are feeling the pinch; this can affect productivity, retention and engagement at work. Financial education could be an easy solution that helps your employees and overall business.

  

Employees are financially stressed. Weathering the last several years – a pandemic, geopolitical tensions and economic uncertainty – has only exacerbated their stress levels.

Unsurprisingly, elevated stress carries into the workplace impacting operational costs including retention, mental health expenses, productivity and the company’s bottom line.

 

Inflation, Debt and Economic Uncertainty

Over the past year, inflation has been a significant source of stress. Its effects reach far and wide – from influencing spending decisions to impacting retirement security.

This is evident in revolving credit card debt. American consumers seem to be reaching for the plastic with more gusto. Between 2021 and 2022, the average credit card debt rose by 15%, the highest rate of increase in more than 20 years.1 This brings the average credit card debt per person to $5,525.2

As an alternative to credit cards, a new debt source, “buy now, pay later” services are gaining popularity. Online shoppers may be drawn in by the attractive promise of interest-free payments. But this may be a trap. Users may end up paying more for their purchases as fees are added to late payments, sometimes leading to a much steeper cost than anticipated.

Americans also feel their retirement savings affected by the current state of the economy. More than half say they are not where they need to be for retirement with one-third indicating they are “significantly behind.” They overwhelmingly point to inflation as the reason.3

 

Financial Issues Follow Employees to the Workplace

One thing is certain: financial stress does not stay at home. Employees have long brought money issues into work. Terms such as “quiet quitting” and “the Great Resignation” have entered the business lexicon, seeking to explain recent worker trends and employment changes.

A recent survey found that employees say that financial stress and money worries over the past year have had a severe or major impact on their mental health, company loyalty and overall work performance. Financially stressed employees are:4

·         2x as likely to look for another job

·         6x more likely to say stress has reduced their productivity

·         7x more likely to say stress has impacted their attendance

·         less likely to feel valued at work

Financial security has a powerful impact on employees within the workplace. There seems to be an undeniable connection between financial worry and employee satisfaction, indicating that managing finances is critical for job concentration and success.

 

Financial Wellness and Education for the Win

Introducing or enhancing your company’s financial wellness program can be a great way to help ease the financial strain on employees and bolster loyalty. Since money management skills are often the root cause for financial stress, a financial wellness program could help employees where they need it the most.

More than ever, lowering your employee’s financial stress is not only important for their mental well- being but also for their contributions to the workplace, your business and beyond.

1 Federal Reserve Bank of New York. “ Total Household Debt Reaches $16.51 trillion in Q3 2022; Mortgage and Auto Loan Originations Decline.” 15 Nov. 2022.

2 Hanson, Savannah. “Average Credit Card Debt in the U.S.: Statistics for 2022.” Annuity.org. 5 Dec. 2022.

3 Royal, James. “Survey: 55% of working Americans say they’re behind on retirement savings.” Bankrate. 24 Oct. 2022.

4 PwC. “2022 PwC Employee Financial Wellness Survey.” May 2022.

 

CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.

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.

FIDUCIARY PLAN GOVERNANCE EDITION: News and Information for Employers

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CURTIS S. FARRELL, CFP®, AIF®
949.455.0300 x222
cfarrell@fmncc.com

ARAN SAHAGUN, CRPS®
949.455.0300 x210
asahagun@fmncc.com

Investment advisory services are offered by Financial Management Network, Inc. (“FMN”) and securities offered through FMN Capital Corporation, (“FMNCC”), member FINRA & SIPC.