When a 401(k) plan includes an automatic enrollment feature, eligible employees must be automatically enrolled at a preset contribution rate unless the employee elects a different rate. The SECURE 2.0 Act of 2022 (SECURE 2.0) requires new 401(k) plans established on or after December 29, 2022 to implement an automatic enrollment feature in 2025 unless an exception applies. Employers must know whether the SECURE 2.0 mandate applies to their 401(k) plan, and if so, how to implement and administer a compliant automatic enrollment feature properly in 2025. Otherwise, a costly correction could bec ..read more

The SECURE 2.0 Act of 2022 (SECURE 2.0) created a new type of automatic enrollment 401(k) plan called the “starter 401(k) deferral-only arrangement.” More commonly called a starter 401(k) plan, they are meant to be an entry-level option for small businesses who do not already offer a retirement plan. A starter plan is not subject to annual testing like a traditional 401(k) plan or mandatory employer contributions like a safe harbor 401(k) plan. The trade-off is lower contribution limits for plan participants. Small businesses can adopt a starter 401(k) plan starting January 1, 2024 ..read more

Over the past decade, several high-profile 401(k) fee lawsuits and DOL efforts to implement a fiduciary standard for professional investment advice have put 401(k) fiduciary responsibilities in the national spotlight. Unfortunately, this attention has done little to clarify these responsibilities for employers. This confusion is a big problem when you consider their important purpose – to protect the interests of 401(k) plan participants ..read more

The SECURE 2.0 Act of 2022 (SECURE 2.0) allows 401(k) participants to designate their matching or nonelective contributions as Roth contributions when allowed by their plan. Prior to SECURE 2.0, only elective deferrals could be designated as Roth. The change took effect on December 29, 2022, but key implementation details were unclear until the IRS published Notice 2024-02 on December 20, 2023. 401(k) providers and payroll companies are currently adapting their systems to properly administer Roth employer contributions based on the recently clarified rules ..read more

The SECURE Act of 2019 (SECURE) and SECURE Act of 2022 (SECURE 2.0) made sweeping changes to 401(k) plans – particularly plans sponsored by small businesses. Among the changes are more flexible deadlines for adopting a new 401(k) plan or amending a traditional plan into a safe harbor plan. All of these deadlines are available to employers today ..read more

On December 20, the IRS released some important clarifications to Section 332 of SECURE 2.0 in Notice 2024-02. These rules took effect on January 1, 2024. They allow employers to terminate a SIMPLE IRA at any time during a calendar by replacing the plan with a safe harbor 401(k) plan. Previously, employers could only terminate a SIMPLE IRA on December 31 ..read more

Happy Holidays from the Frugal Fiduciary! As 2023 comes to a close, we looked back through this year’s blogs to find the most read. It turns out our most popular blogs related to the following topics ..read more

When 401(k) fees are paid from plan assets, they reduce participant returns dollar-for-dollar. These fees must be disclosed to participants in annual fee notices, but these notices are only obligated to disclose the amount deducted. Much more costly to 401(k) participants is usually the compound interest the fee amounts would have earned had they remained invested instead. This “cumulative effect of 401(k) fees” can cost a worker hundreds of thousands of dollars in retirement ..read more

On November 24, 2023, the Internal Revenue Service (IRS) released a proposed regulation that provides long-awaited guidance regarding the SECURE Act’s long-term part-time (LTPT) employees rules for 401(k) plans. The rules require employers to let LTPT employees join their 401(k) plan, regardless of the plan’s normal eligibility requirements. These rules take effect January 1, 2024. They are complicated. Employers with part-time employees need to prepare now ..read more

The mega backdoor Roth strategy is an advanced retirement savings technique that allows high-income individuals to contribute significantly more money to a Roth IRA or 401(k) account than IRS contribution limits would typically permit. The catch? The strategy requires access to a 401(k) plan that allows voluntary contributions. Because voluntary contributions tend to fail nondiscrimination testing, few plans offer them. Solo 401(k) plans are exempt from nondiscrimination testing, making them the perfect fit for the Mega Backdoor Roth strategy ..read more