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  • As a small business owner, you may think offering a retirement plan to your employees is too costly or complicated. However, there are many benefits to providing a retirement plan, especially a 401(k) plan, that can help you attract and retain talent, save on taxes, and secure your own future. Of the 34% of small business owners offering retirement plans, 63% said they offer the plans because it’s the right thing to do, while another 53% said their employees appreciate and expect the benefit, and 51% said the plan helps recruit employees. Let the statistics speak for themselves. However, if you still don’t feel compelled to offer your employees a benefit they want and need, we’ve compiled a list of advantages. But first, let’s start with the basics.

    What Is A 401(k) Plan?

    A 401(k) plan is a type of retirement plan that allows employees to contribute a portion of their salary to a tax-deferred account, where it can grow over time. Employers can choose to match some or all of the employee contributions or make profit-sharing contributions to the plan. There are different types of 401(k) plans, such as traditional, safe harbor, SIMPLE, and solo 401(k) plans, that have different rules and requirements.

    Why Offer A 401(k) Plan?

    There is a plethora of benefits to offering a 401(k) plan to your employees. Beyond being a cornerstone of financial security for employees, a 401(k) plan serves as a beacon of loyalty, attracting and retaining top talent in today’s competitive job market. Let’s get into the benefits:

    • Employee retention: Offering a 401(k) plan can enhance employee retention by providing a valuable benefit that encourages loyalty and long-term commitment to the company.
    • Competitive advantage: A comprehensive benefits package, including a 401(k) plan, can make your company more attractive to top talent, giving you a competitive edge in recruitment efforts.
    • Tax advantages: Both employees and employers can benefit from tax advantages associated with 401(k) contributions. Employees can enjoy tax-deferred growth on their investments, while employers may be eligible for tax deductions on contributions made to the plan. In addition, there are tax credits resulting from SECURE 2.0 legislation that may help lower the cost for some employers starting a new 401(k) plan.
    • Employee financial security: A 401(k) plan helps employees save for retirement, fostering financial security and peace of mind. It empowers them to take control of their future and plan for a comfortable retirement.
    • Employee engagement: Providing a 401(k) plan demonstrates a commitment to employee well-being and financial literacy. It can lead to increased employee morale and overall satisfaction, which can positively impact productivity and workplace culture.
    • Flexible contribution options: 401(k) plans typically offer flexible contribution options, allowing employees to contribute a percentage of their salary and adjust their contributions over time to suit their financial goals and circumstances.
    • Employer matching contributions: Many employers offer matching contributions as part of their 401(k) plan, providing employees with an additional incentive to participate and save for retirement.
    • Automatic enrollment features: Some 401(k) plans offer automatic enrollment features, making it easier for employees to start saving for retirement without taking proactive steps to enroll.
    • Investment options: 401(k) plans allow employees to tailor their investment strategy based on their risk tolerance, investment objectives, and time horizon.
    • Portability: 401(k) plans are portable, meaning employees can typically roll over their account balances into another qualified retirement plan if they leave the company, providing continuity in retirement savings.

    Offering a retirement plan to your employees is not only a smart business decision but also a way to show them that you care about their well-being and future. By providing a 401(k) plan, you can help your employees achieve their retirement goals while also benefiting your own business and personal finances.

    401(k)s For Small Businesses With A PEO

    To recruit and retain quality employees, retirement plans are an essential benefit; however, they come with a lot of complexity and risk. At GMS, we understand that’s probably the last thing you want to worry about. That’s why when you partner with us, we take on that administrative burden. As a small business owner, you can finally offer that retirement plan you’ve debated adding to your benefits package for years.

    By partnering with us, we cut costs, reduce stress, save time, and offer benefits your employees want the most. Contact us today to learn more about our retirement plan offerings so you can attract and retain the top talent you want and need.

  • In a welcome development for both plan sponsors and employees, the retirement landscape in the United States has recently witnessed a significant shift. The Internal Revenue Service (IRS) announced a game-changing extension, granting an additional two years for compliance with a pivotal provision under the SECURE 2.0 Act. This transformative legislation, passed in December 2022, introduced a series of changes aimed at reshaping the retirement savings landscape. One of its cornerstones, the Roth catch-up contribution requirement, was initially scheduled to go into effect on January 1st, 2024, impacting workers earning $145,000 or more annually. However, due to the complexities and challenges of implementation, this requirement has now been deferred until 2026.

    The SECURE 2.0 Act

    The SECURE 2.0 Act, short for “Setting Every Community Up for Retirement Enhancement,” represents a landmark legislation seeking to revolutionize how Americans approach retirement savings. At the heart of this Act is the provision requiring high-income workers earning $145,000 or more per year to divert their catch-up contributions to Roth accounts within their employer-sponsored retirement plans, such as 401(k)s. Originally scheduled to take effect in 2024, this provision stirred both anticipation and hesitation within the financial and retirement planning sectors.

    IRS Extends The Compliance Deadline

    Recognizing the legitimate concerns voiced by taxpayers, the IRS has taken a strategic step to extend the compliance deadline for this crucial provision. IRS Notice 2023-62 stipulates that the Department of the Treasury and the IRS have noted the challenges faced by taxpayers in promptly adhering to the new requirement. As a result, an administrative transition period has been implemented, allowing for a smoother and more orderly shift toward compliance. The extension, which pushes the deadline to 2026, affords employers, plan providers, and employees ample time to adapt to the changes and ensure a seamless transition.

    A Win-Win For All Parties Involved

    Extending the Roth catch-up contribution requirement presents a win-win scenario for plan sponsors and employees. Employers and plan providers who faced the daunting prospect of establishing new Roth plans within a tight timeframe can now breathe a sigh of relief. The extra time will enable them to plan and execute the necessary administrative and procedural adjustments without compromising on the quality of implementation. In addition, employees who fall into the high-income bracket will benefit from a more gradual and planned transition, reducing the potential for financial disruptions during the adjustment period.

    The Path Forward

    This extension underscores the government’s commitment to fostering a retirement landscape that is fair, flexible, and conducive to the financial well-being of all citizens. The additional time granted will undoubtedly pave the way for a smoother transition, allowing plan sponsors and employees to navigate the changes confidently and clearly. As we move toward 2026, the horizon of retirement savings stands poised for transformation, offering new opportunities and fresh pathways toward a secure and prosperous retirement future.

    Embracing Change With Confidence – How A PEO Can Be Your Strategic Partner

    As the retirement landscape evolves and the extended deadline for the Roth catch-up contribution requirement approaches in 2026, businesses find themselves at a crossroads of adaptation. Navigating the intricacies of compliance, administrative adjustments, and employee communication demands a holistic approach that aligns with your business’s unique needs. This is where a professional employer organization (PEO) like Group Management Services (GMS) steps in as your strategic partner.

    With expertise in HR, benefits administration, and compliance, a PEO can help you seamlessly transition into the new retirement model. GMS ensures a smooth and successful implementation by guiding you through the technical intricacies of establishing Roth plans to communicate changes to your employees effectively. As you prepare to embrace future opportunities, a PEO empowers your business with the resources, knowledge, and support needed to thrive in an ever-changing landscape.

    Tom Smith, GMS’ Director of Retirement Services, expressed, “Although the deadline for the Roth catch-up contribution deadline has been extended, there are still other provisions that the Secure Act 2.0 requires to be in place starting in 2024 and 2025. A benefit of working with the GMS Multiple Employer Plan is that we ensure your plan complies with the new rules and regulations. We’re also a resource to discuss and answer questions regarding the optional provisions a company may want to implement.”

    Together, we can ensure that your business and your employees are well-equipped to embark on this transformative journey toward a secure and prosperous future in retirement. Contact us today to learn more!

  • The impact of inflation extends beyond immediate price increases and into long-term, far-reaching consequences for individuals and families. The current surge in inflation rates, particularly in the wake of the COVID-19 pandemic, has created financial strains and challenges that may not be apparent yet.

    What Is Inflation?

    Inflation is the rate at which the cost of a good or service increases. The cost of food, housing, gasoline, utilities, and other goods have skyrocketed by 7.7% over the past 12 months – nearly a 40-year-high. Rising inflation rates directly affect the purchasing power of individuals and families. As the cost of goods and services increases, it becomes more difficult for households to maintain their standard of living. This can lead to reduced discretionary spending, limited savings, and a need to prioritize basic necessities over other financial goals or aspirations.

    While inflation is hitting almost everyone, low-income households are experiencing a harsher impact than others as employee wage increases fail to keep up with inflation. This has forced families to shift their budgets to cover the necessities to survive during these challenging times.

    Cutting Back On Retirement Savings

    Inflation’s economic influence is so strong that it doesn’t stop at budget adjustments; it also affects Americans’ retirement savings habits. With the rising cost of living, individuals and families find it increasingly difficult to allocate funds toward retirement savings. A recent survey found that half of U.S. adults saving for retirement had to pause their saving efforts in 2022 because of inflation. On top of that, 32% withdrew from their retirement savings, and 41% indicated they stopped contributing to their retirement funds altogether. The strain on household budgets due to inflation is providing a real challenge to set aside money for long-term financial goals.

    For those already nearing retirement, the increased cost of living poses a significant threat to their retirement savings. Higher prices for essential goods and services can erode the purchasing power of their retirement funds, potentially requiring them to adjust their retirement plans or dip into their savings sooner than anticipated. Furthermore, individuals still in the earlier stages of their careers may face difficulties prioritizing retirement savings amidst the current inflationary environment. When faced with higher costs for daily necessities, there may be less available income to contribute to retirement accounts or invest in long-term financial vehicles.

    While inflation may appear to be slightly winding down, it’s not going away anytime soon. Kelly LaVigne, VP of Consumer Insights, Allianz Life, expressed, “While we all hope that the pace of inflation will slow, it will take time to moderate. Consumers need to prepare themselves by talking to a financial professional and incorporating ways to help fight the effects of inflation into their portfolio so that long-term inflation doesn’t affect retirement.”

    Tom Smith, Director of Retirement Services at GMS, stated, “With inflation increasing and the cost of living rising, it’s essential you are saving in your 401(k), especially if your company offers an employer match. You’re leaving free money on the table if you stop contributing altogether. If you’ve exhausted all options for cutting back on spending and are still looking to dial back your deferral amount, try and take full advantage of the employer match. This means if you’re contributing eight percent right now, but the match requires you to contribute at least five percent, don’t decrease your contribution to less than five percent. If you want to retire at some point, you need to have a variety of sources to draw income. It’s important to pay yourself first, and a 401(k) is a great option to do that with convenient payroll deductions and tax advantages.”

    How Can You Step In As An Employer 

    As we all remain concerned about the economy and how it could affect us, it’s essential as a business owner to ensure you take every step to help your employees. Offering a retirement plan is a great way to provide long-term financial security and demonstrate a commitment to their future. By providing a plan, you empower employees to save for retirement and establish a foundation for their financial stability.

    Matching program

    Furthermore, implementing an employee matching program can significantly enhance the attractiveness of your business’s retirement plan. By matching contributions, employers contribute a percentage or dollar amount corresponding to the employee’s contributions. This approach not only motivates employees to save more for retirement but also amplifies the growth of their retirement savings over time.
    Plus, matching programs have several advantages for your business. Firstly, they help attract top talent by positioning your company as one that values employees’ financial well-being. It differentiates your business from competitors and becomes a valuable tool in recruitment efforts. Additionally, these programs contribute to higher employee retention rates, as employees are more likely to stay with a company that offers robust retirement benefits.

    Retention bonuses

    Retention bonuses refer to a one-time payment or reward given to an employee apart from their regular salary. This is given as an incentive to keep a valuable employee in their job, and it can be an effective strategy to help reduce the financial impact of inflation on employees. These bonuses are typically reserved for employees who have been with the company for a specific period, incentivizing them to remain loyal and committed. By offering retention bonuses, you can provide financial relief to employees without directly increasing their base pay.

    This approach allows you to address the challenges posed by inflation while maintaining flexibility in their overall compensation structure. There are various ways to structure retention bonuses. For example, they can be a one-time lump sum payment or distributed over a defined period. The bonus amount can factor in tenure, job level, or performance metrics.

    Financial education and planning

    Additionally, you can offer financial education and planning resources. Financial education programs can cover various topics, including budgeting, saving strategies, debt management, investment basics, and retirement planning. These programs can include workshops, seminars, online courses, or one-on-one sessions with financial experts. Equipping employees with the knowledge and skills to make sound financial choices can positively contribute to your employees’ economic resilience and stability.

    By offering retirement plans with matching programs, retention bonuses, financial education, and planning tools, you demonstrate a commitment to your employees’ economic well-being beyond their working hours. These initiatives not only help employees navigate the challenges of inflation but also contribute to reducing financial stress, improving productivity, and fostering a positive work environment.

    Let Us Help 

    If you’re unaware of where to start, contact Group Management Services (GMS). GMS is a professional employer organization (PEO) that helps small businesses by taking on the administrative burdens you don’t have the time or expertise to handle. We help in all areas of your business, whether it be risk management, HR, benefits, or payroll; we do it all. We can help you set up a fully customizable retirement savings plan that makes your company more attractive to quality employees. When you partner with GMS, you can easily establish the following for your business: 

    • 401(k) eligibility requirements 
    • Vesting schedules 
    • Tax-deductible matching 
    • Profit-sharing 

    Contact us today so you can begin helping your employees during these challenging times. 

  • The Internal Revenue Service (IRS) has recently announced a 90-day pre-audit window to correct retirement plan errors. The program will allow for plan sponsors to be notified that the IRS has selected them for an upcoming examination and to allow them to correct errors they may have made.

    The 90-day window will allow plan sponsors to fix errors, so they do not have to pay a penalty fee or pay a lower fee for voluntarily correcting any errors. If the plan sponsor doesn’t respond, the IRS will commence with an examination.

    If a business makes changes and the documents support those changes, the IRS will issue a closing letter ending the investigation. The IRS could conduct a limited or full-scope examination if they still have reason to believe there are issues. Some mistakes are not eligible to be self-corrected, but a closing agreement can be requested. The Voluntary Correction Program fee structure will be used to determine the amount a business will pay under an agreement.

    Before this program, the ability to fix errors prior to an IRS judgment was typically not available. Errors found by the IRS resulted in much higher fees and were less predictable than they are under this new pilot program.

    The IRS states that the “goal with this program is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations.” Once the pilot is over, the IRS will determine if it should become a new policy as part of its overall compliance strategy.

    How GMS Can Help

    While this policy helps businesses by giving them a window to correct errors, a professional employer organization (PEO), like GMS, can help eliminate these errors in the first place. That way, you don’t have to spend more money working with attorneys and advisors to conduct the self-audit after receiving a notification. Not only will it save you money to partner with GMS, but it will also save you valuable time that you can focus on operating the key facets of your business. Contact GMS today.