A Retirement Plan Design Isn't Just About Checking Boxes

What is your company’s current approach to providing a great retirement plan that benefits both your employees and your company’s bottom line? When it comes to securing the financial future of your employees and ensuring the success of your business, the design of your retirement plan plays a critical role. A well-thought-out retirement plan can attract and retain top talent, reduce employee turnover, and enhance overall job satisfaction. At the heart of a successful retirement plan is the alignment of the plan’s design with your company’s goals, balanced with the needs of your employees.

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Employers recognizing they lack the knowledge necessary to manage 401(k) plans outsource their plan to professionals. We are known as Third Party Administrators or TPAs. The retirement plan industry has investment companies, benefits companies, actuaries, accountants, lawyers, third party administrators, banks, and trust companies providing services to 401(k) sponsors (employers). As a group, providers of retirement plan services are referred to as “providers”.

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The IRS and Treasury Department have released new guidelines to help people understand when they can take money from their retirement accounts early, but without paying an extra 10% tax. These exceptions apply to situations like personal emergencies and domestic abuse.  

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Clarifying the unique relationship between a cash balance and defined benefit plan

A Cash Balance Plan is a type of defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan, such as 401k. A cash balance plan defines the promised benefit in terms of a stated account balance.

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In the year 2019, congress passed the SECURE Act, one of the many changes that allowed long-term, part-time (LTPT) employees to join 401(k) plans starting January 1, 2024.

Under this long-term, part-time employee rule, part-time employees who work at least five hundred hours, during three consecutive 12-month periods, must be eligible to participate in the plan for purposes of elective deferrals (employee funds only). The 12-month period began as of January 1, 2021, however the first time an employee could become eligible under this rule is January 1, 2024.

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