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  • The Automatic IRA Act of 2024, introduced by Representative Richard Neal, D-Mass., aims to significantly enhance retirement security for millions of U.S. workers. This groundbreaking legislation proposes a mandatory enrollment of employees in individual retirement accounts (IRAs) or other automatic-contribution arrangements if their employers, with more than 10 workers, do not offer a retirement plan. Let’s explore the specifics and potential impact of this proposed act.

    Expanding Retirement Coverage

    The primary objective of the Automatic IRA Act is to extend retirement coverage to employees, gig workers, and independent contractors, addressing the existing gaps in retirement savings. By leveraging automatic enrollment, the legislation seeks to ensure that a larger segment of the workforce can benefit from retirement savings opportunities. It’s designed to complement and safeguard employer-sponsored plans while also building upon and protecting state-facilitated automatic IRA retirement saving programs.

    Key Provisions Of The Legislation

    Under the proposed legislation, there are a handful of key provisions, including the following:

    Mandatory automatic enrollment

    Employers with more than 10 workers not offering a retirement plan would be required to automatically enroll employees in IRAs or other automatic-contribution arrangements, such as 401(k) plans.

    Tax credits for small employers

    The act proposes a new tax credit of $500 per year for three years for employers of up to 100 employees that offer enrollment in either a state or national automatic IRA.

    Contribution requirements

    The legislation mandates that all automatic contribution plans default at a minimum contribution of six percent, with an annual automatic annual increase of one percent until reaching 10%.

    Lifetime income options

    401(k)-type plans with more than 100 participants would need to permit participants to elect to receive at least 50% of their vested account balance in the form of lifetime income, with exceptions for participants with balances of up to $200,000. Lifetime income refers to a steady stream of income that lasts throughout an individual’s lifetime. This is often associated with retirement planning, where the goal is to ensure a consistent flow of money during retirement years. Examples of lifetime income include the following:

    • Social security 
    • Pensions
    • Annuities 

    Investment options

    Automatic IRAs must offer employees a target date fund as the default investment, along with a principal preservation fund, a balance fund, and any additional options designated by the Treasury Department in the future.

    Implications And Considerations

    The Ways and Means Democrats highlighted that automatic IRAs have been instrumental in narrowing coverage and savings gaps across racial, ethnic, gender, and income lines, emphasizing the potential impact of the act on promoting retirement security for traditionally underserved demographics. In addition, workers could decline participation or opt-out at any time after enrollment, ensuring individual autonomy in retirement planning.

    Exceptions And Safeguards

    The legislation would allow several exceptions, including companies with 10 or fewer workers, those already offering a qualified plan, those in business for less than two years, or those with governmental plans or church plans. In addition, it would not affect workers currently enrolled in a state-sponsored plan.

    The Assistance Of A PEO

    In navigating the intricacies of the Automatic IRA Act of 2024, business owners may find value in partnering with a professional employer organization (PEO) like GMS. A PEO can offer comprehensive support in managing retirement plans, ensuring compliance with the new legislation, and facilitating the seamless implementation of automatic enrollment and contribution requirements. By leveraging the expertise of a PEO, business owners can navigate the complexities of the act with confidence, streamline administrative processes, and ultimately prioritize the financial well-being of their employees while staying ahead of regulatory changes. Contact our 401(k) experts today!

  • If you’re like most Americans, you’ve probably changed jobs several times in your career. And each time, you may have left behind a small retirement account with your former employer. But what happens to those accounts when you move on? Do you keep track of them? Do you roll them over to your new employer’s plan or an Individual Retirement Account (IRA)? Or do you cash them out and spend the money?

    According to the U.S. Department of Labor (DOL), millions of workers lose track of their retirement savings when they change jobs. This can result in lower retirement income, higher fees, and more taxes. To address this problem, the DOL recently proposed a rule that would facilitate automatic portability of retirement accounts for workers who switch jobs.

    What Is Automatic Portability?

    Automatic portability is a feature that allows your retirement savings to follow you from one employer to another without any action required from you. It works like this:

    • When you leave a job with a retirement plan with savings totaling $7,000 or less, the plan can automatically roll the money into a Safe Harbor IRA if the plan document allows it and you do not take action after receiving the required notices.
    • When you start a new job with a retirement plan, the Safe Harbor IRA provider can automatically transfer your savings to your new employer’s plan if the plan document allows it and you do not opt out after receiving required notices.

    The DOL’s proposed rule would allow vendors to charge reasonable fees for processing these transactions, which are currently prohibited by law. It would implement provisions of the federal SECURE 2.0 Act that allow automatic portability providers to receive reasonable fees in connection with executing automatic portability transactions through a new exemption in the Internal Revenue Code. In addition, the rule would also impose certain safeguards to protect workers’ interests, such as disclosure of fees, fiduciary responsibility, data security, and record keeping.

    What Are The Benefits Of Automatic Portability?

    Automatic portability can help you save more for retirement by:

    • Keeping your retirement savings consolidated in one place, making it easier to manage and monitor your investments
    • Reducing the risk of losing track of your retirement accounts or forgetting your passwords and login information
    • Avoiding the temptation of cashing out your retirement savings and paying taxes and penalties
    • Saving on fees and expenses that may be higher in Safe Harbor IRAs than in employer-sponsored plans
    • Taking advantage of the higher contribution limits and employer-matching contributions that may be available in employer-sponsored plans

    How Can You Take Advantage Of Automatic Portability?

    To benefit from automatic portability, check with your current and former employers to see if their retirement plans offer this feature. If they do, you must ensure you receive and read the notices informing you of your rights and options. You’ll also need to update your contact information with your current employer and IRA provider so they can reach you when necessary.

    If your current employer doesn’t offer automatic portability, you can still take action to consolidate your retirement accounts on your own. You can either roll over your old accounts to your new employer’s plan or an IRA of your choice. This way, you can avoid the drawbacks of having multiple small accounts and enjoy the benefits of having a larger retirement nest egg.

    Remember, your retirement savings are your future. Don’t let them get lost or forgotten. Take advantage of automatic portability or rollover your accounts today. Your future self will thank you.

    Actions For Employers

    As a business owner, the first step in supporting your employees is determining whether your retirement plan currently allows automatic portability transactions. If it doesn’t, decide what steps you need to take to make that feature available in your plan. Or, you can partner with a professional employer organization (PEO) like GMS. Our retirement experts at GMS ensure seamless transitions for employees when transitioning to our retirement plan. No more burdens associated with managing employees’ retirement benefits. Partner with GMS to unlock opportunities for your business and your employees. Get a quote from us today!

  • The constant climb of health care expenses in the United States is causing increasing concern, particularly as inflation continues to impact the nation. The Nationwide Retirement Institute Health Care Cost in Retirement recently released a survey that paints a worrying picture of Americans’ financial confidence as they approach their retirement years.

    Decreasing Confidence In Facing Health Care Costs

    The survey shows Americans’ doubts about their ability to manage health care expenses as they grow older. 59% of respondents express uncertainty about their capacity to meet these financial burdens, and 57% are anxious about the costs associated with caregiving for their partner or spouse.

    Further complicating financial planning is the anticipation of medical advancements driven by artificial intelligence (AI), which could potentially extend lifespans. 26% of respondents expect AI to grant them an additional 10 years of life, with different generational expectations. Gen Z envisions 15-year extensions, while millennials anticipate 12 years, Gen Zers expect eight years, and boomers foresee a 9-year extension. This implies that Americans may need to financially prepare for health care costs over a more extended period, emphasizing the need for a robust financial strategy.

    Kristi Rodriguez, Senior Vice President of the Nationwide Retirement Institute, noted, “Advances in AI and health care technology are moving at an unprecedented pace, offering hope for treating chronic diseases and other health concerns. However, longevity demands enhanced planning. Therefore, it’s vital to consult a financial professional to devise a comprehensive plan that caters to immediate and potentially extended health care needs.”

    Managing Health Care Expenses

    As Americans grapple with the prospect of an extended lifespan, current economic uncertainty is straining their finances and forcing them to make difficult decisions with long-term implications for their health care. Studies show that 18% of adults admit to delaying essential health care actions such as medical procedures, physical exams, or prescription renewals in the past year to save money. In addition, 10% of Americans are contemplating downgrading their health insurance plans due to high inflation, including 19% of Gen Z, 11% of millennials, and 14% of Gen Xers. In their quest for more manageable monthly premiums, 60% of adults opt for health insurance policies with lower premiums but higher deductibles, potentially leaving them unprepared to cover unexpected out-of-pocket health care expenses.

    The Role Of Financial Professionals In Health Care Planning

    With inflation and soaring health care costs causing widespread anxiety, consulting a financial professional is the most vital step individuals and business owners can take. These experts can help tailor financial plans to ensure people are well-prepared for the rising health care expenses without compromising their overall financial stability.

    Conversations with financial professionals are pivotal, particularly in understanding complex issues such as Medicare coverage. The survey underscores a substantial knowledge gap among respondents, with 72% expressing a desire for a deeper understanding of Medicare.

    In addition, Americans significantly underestimate the average cost of health care in retirement, estimating it at $55,343, while the actual 2022 cost stood at nearly triple that figure: $172,500 for an individual and $315,000 for a typical 65-year-old retired couple. This highlights the need for Americans to seek greater knowledge, guidance, and ongoing support for informed financial planning.

    Nationwide’s Health Care Cost Assessment tool is an invaluable resource that helps financial professionals and clients estimate future medical and long-term care expenses by considering individual health risks and facilitating comprehensive planning for the impending rise in health care costs.

    Have You Considered Partnering With A PEO?

    In the face of mounting health care costs and economic uncertainties, it’s clear that thoughtful financial planning is essential for safeguarding our well-being. Financial professionals, like those found within a professional employer organization (PEO), are pivotal in guiding us through these complex financial landscapes. They offer tailored solutions to bridge the gap between our goals and financial reality. By consulting with a PEO like GMS, business owners can pave the way for a secure, confident future, free from unmanageable health care expenses. Remember, preparation is the key to not just surviving but thriving in the ever-evolving world of health care and finances. Contact us today to learn more.

  • In today’s world, financial wellness has become a growing concern for employees. A survey showed that 59% of employees said financial matters are the most significant source of stress in their lives. As a result, employers are now trying to help their employees achieve financial wellness.

    Business owners can help their employees achieve financial wellness by leveraging the Secure 2.0 Act. This Act was signed into law in late 2022 and developed dozens of new retirement-related provisions. It addresses additional issues related to retirement and savings that were not part of the original Secure Act of 2019. The Secure 2.0 Act creates new flexibility and accessibility to help individuals plan for a more secure future.

    The Benefits Of Leveraging Secure 2.0 

    By using the Secure 2.0 Act, employers can offer their employees access to financial advisors who can help them with everything from creating a budget to investing in their retirement accounts. Consider the following benefits of the Act:

    1. Offering financial planning and advice services

    One of the critical ways Secure 2.0 can help improve employee financial wellness is by offering financial planning and advice services. These services can help employees make better financial decisions by giving them the information they need to make informed decisions.

         2. Encouraging savings

    Secure 2.0 helps improve employee financial wellness by encouraging savings. The platform can help employees set up automatic contributions to their retirement accounts and provide tools and resources to help them save for other financial goals.

         3. Provides debt management resource

    Debt is one of the biggest barriers to achieving financial wellness. With Secure 2.0, employers can offer their employees resources to help them manage their debt. This can include debt counseling services, debt consolidation options, and debt management tools.

         4. Educating employees on financial wellness

    Finally, Secure 2.0 also educates employees on the importance of financial wellness. Employers can offer financial wellness workshops and webinars covering various topics, from budgeting to investing.

    Why It Matters

    The Secure 2.0 Act can be a valuable tool for employers looking to improve their employees’ financial wellness. If you’re a small business owner looking to help your employees save more, you’ve come to the right place. While Secure 2.0 is an excellent resource, partnering with a professional employer organization (PEO) such as GMS is another excellent option.

    Offering a retirement plan to your employees helps you with the following:

    • Recruit more qualified employees 
    • Offers you additional opportunities for tax savings
    • Retain valuable employees

    However, retirement plans come with a lot of complexity and risk. Fortunately, GMS helps cut costs, reduce stress, save time, and offer the benefits your employees need. GMS is here to provide guidance on the best plan for your employees. At GMS, we offer our clients a profit-sharing 401(k) plan. This gives small business owners flexibility in how much they contribute to their employees’ 401(k) accounts. By implementing a profit-sharing plan, you show your employees that they’re critical to your company’s success by rewarding them for their hard work. Contact us today to learn more.

  • Are you a small business owner who has found yourself asking if you should offer a retirement plan as part of your employee benefits package? Now more than ever, it’s important to stand out from competitors to attract and retain top talent. There are various retirement plan options available, including a traditional IRA, 401(k), ROTH IRA, Simple IRA, and many more.

    In recent legislation, The Secure Act 2.0 package included a proposed Starter 401(k), as well as new and expanded tax credits to small businesses offering retirement plans. The Starter 401(k) plan aims to allow small businesses to offer retirement plans while streamlining regulations and lowering costs. Under this bill, eligible employers – those that do not already offer a plan – are not required to provide matching contributions. In addition, it would also create a safe harbor for the non-discrimination and top-heavy testing requirements for defined contribution plans. Annual contributions would be limited to:

    • $6,000
    • Indexed to inflations
    • Additional catch-up contribution for those at least 50 years of age

    If the bill is passed, the Starter 401(k) plan will aim to eliminate common barriers to plan sponsorship. If the bill is passed, it will be effective after 2023 and include the following provisions:

    • Small businesses with no 401(k) plan in place can offer either a Starter 401(k) plan or a Safe Harbor 403(b) plan. 
    • Eligible employees would automatically enroll at the minimum default level of 3% of their income. 
    • Employer contributions are not required, therefore lowering costs for employers. 
    • Year-end testing is not required, saving time and reducing stress. 
    • Limits on annual contributions would be the same as the current IRA contribution limit, which in 2020 is $6,000 with an additional $1,000 in catch-up contributions beginning at age 50. 

    Traditional 401(k) Plan 

    The most common type of retirement plans small businesses provide their employees with is a 401(k) plan. A 401(k) plan is a retirement savings plan many employers offer that has tax advantages for the employee enrolled in the plan. Employees who sign up for a 401(k) agree to have a percentage of each paycheck paid directly into an investment account.

    The following are benefits for your business when you provide a 401(k) plan to your employees:

    • Lower tax liability
    • Improved work ethics
    • Business tax credits
    • Attractive benefits
    • Business tax deductions

    A small business 401(k) plan is designed as a multi-purpose tool for business owners. Employers can use a 401(k) plan to lower this taxable income, grow savings for retirement, and to even manage the future of their business. Ultimately, a 401(k) plan plays a significant role in making your vision for the future a reality. From a cost standpoint, this type of plan is typically one of the more economical benefits for small business owners.

    Get Started Before The New Year!

    As a small business owner, you wear multiple hats at once. So, adding an additional hat to your plate may not sound too appealing to you. However, offering retirement plans is essential to recruiting and retaining quality employees. Tom Smith, GMS’ Director of Retirement Services, expresses, “Offering a retirement plan is a great benefit for business owners. A 401(k) plan gives business owners flexibility in terms of plan design options to meet the needs of your employees.” GMS offers its clients the option of a profit-sharing 401(k) plan. This gives business owners flexibility in how much they contribute to their employees’ 401(k) accounts. With this option, instead of a standard employee-match program where the employer will match the employee’s contribution up to a certain amount, the employer has more flexibility and control over the contribution. Allow your employees to enroll in a retirement plan before the new year starts. Contact GMS today.  

  • Earlier this year, the U.S. House of Representatives passed a new retirement bill called Secure 2.0, designed to build off Secure Act 2019. The new bill aims to make it easier for workers to prepare for retirement. This version of Secure Act 2.0 passed by the House requires most employer-sponsored retirement plans to enroll new employees automatically. This makes it easier for student loan borrowers to save and lower retirement plan administration costs for small businesses.

    Currently, the Senate is working on two separate pieces of legislation that should be combined into one package. The Senate’s effort would ultimately reconcile with the House bill. Multiple provisions in the Senate bills overlap with the House’s. However, a handful of additional provisions include access to an emergency fund in your 401(k).

    Secure Act 2.0 

    The following explains how Secure Act 2.0 would allow individuals to save more: 

    • It expands automatic enrollment in retirement plans
    • It promotes the Saver’s Credit
    • It raises catch-up contribution limits
    • It offers extra assistance to student loan borrowers

    In addition, this act would improve current retirement plans by:

    • Delaying required minimum distributions 
    • Making it easier to buy annuities 

    Finally, Secure Act 2.0 would lower costs for employers by:

    • Granting tax credits for small businesses 
    • Supporting small 403(b) plans
    • Easing up on plan paperwork

    Diving Deeper Into The New Law

    When looking at the provisions both the House and Senate have made, it would certainly help retirees. However, it ultimately avoids the heart of the retirement crises – half of Americans don’t save for retirement. Secure Act 2.0 doesn’t support workers who slip through the cracks or move from job to job where they go months or even years without saving for retirement. Retirement savings plans aren’t universally covered, which accounts for a large part of the ongoing American retirement crisis.

    What You Can Do As A Business Owner

    It is more common for individuals to contemplate getting a procedure that will benefit them now rather than saving that money for retirement. While others think they can’t afford to save for retirement. GMS is here to provide guidance on the best plan for your employees. Offering retirement plans is essential for recruiting and retaining quality employees. However, it’s a benefit that comes along with a lot of complexity and risk. GMS helps cut costs, reduce stress, save time, and offer the benefits your employees need. Contact us today to learn more.

  • California passed a program known as CalSaver in 2016, which stated that employers who don’t sponsor an employee-retirement plan must participate in a state-run retirement program. CalSavers is a retirement savings program for private sector workers whose employers do not offer a retirement plan. It gives employers an easy way to help their employees save for retirement without employer fees, no fiduciary liability, and minimal employer responsibilities.

    If you’re an employer who sponsors or participates in a retirement plan, including a 401(k) or pension plan, you are not required to participate in CalSavers. Eligible employers are defined as a “person or entity engaged in a business, industry, profession, trade, or another enterprise in the state, excluding specified federal, state, and local governmental entities, with five or more employees and that satisfies certain requirements to establish or participate in a payroll deposit retirement savings arrangement.”

    What The New Plan Means

    Governor Gavin Newsom recently signed Senate Bill (SB) 1126, expanding the definition of an eligible employee. Expanding eligibility will reduce complexity for employers and expand access to CalSavers to small businesses with one to four employees currently not covered. Ultimately, this bill will improve employee recruitment and retention across California. In addition, it’s estimated that SB 1126 will expand access to CalSavers to approximately three-quarters of a million California workers.

    A payroll deposit savings arrangement is required for employers with five or more employees that do not offer a retirement savings plan within 36 months of the board opening the program for enrollment. In addition, all eligible employers with one or more employees would need a payroll deposit savings arrangement by December 31st, 2025, if they don’t provide a retirement savings program.

    GMS Is Here To Help!

    Implementing a 401(k) retirement plan will help attract and retain great employees. It shows employees they are critical to your company’s success by rewarding them for their hard work. So, how does a PEO help you? PEOs such as GMS can leverage group buying power to reduce plan costs for small businesses and take on the fiduciary burden to ensure you remain compliant with your 401(k). GMS can help you set up fully customizable retirement savings plans that make your company more attractive to quality employees. Contact us today to learn more.