Profit Sharing Plan

A profit sharing plan is a type of retirement plan in which an employer contributes a portion of its profits to a pool of funds that is distributed among eligible employees. This type of plan is designed to incentivize employees to work towards the success of the company, as they stand to benefit from the company's profits.

In a typical profit sharing plan, the employer determines how much of the company's profits will be contributed to the plan, and then allocates that amount among eligible employees based on a predetermined formula. The formula may take into account factors such as an employee's salary or length of service with the company.

The funds contributed to the plan are typically invested, and employees may be able to choose from a selection of investment options. The funds grow tax-deferred until the employee withdraws them, typically at retirement.

Profit sharing plans can be a valuable tool for employers to attract and retain talented employees, as well as to motivate them to work towards the success of the company. For employees, profit sharing plans can provide a valuable source of retirement income, as well as a sense of ownership and investment in the success of the company.

Safe Harbor Plan

A safe harbor plan is a type of retirement plan designed to help employers comply with certain non-discrimination requirements set by the IRS. These requirements prohibit highly compensated employees (HCEs) from receiving disproportionate benefits or contributions compared to non-highly compensated employees (NHCEs) in a 401k or other qualified retirement plan.

By adopting a safe harbor plan, an employer can automatically satisfy certain non-discrimination testing requirements and avoid costly penalties that can arise from failing to meet these requirements. Safe harbor plans offer several benefits, including:

1. Enhanced contribution limits for HCEs: In a safe harbor plan, HCEs can make larger contributions to their retirement accounts without worrying about violating non-discrimination rules.

2. Reduced administrative burden: Safe harbor plans typically have fewer administrative requirements than traditional 401k plans, which can save employers time and money.

3. Greater employee satisfaction: Safe harbor plans can be designed to provide generous matching contributions, which can help attract and retain talented employees.

Overall, safe harbor plans can be an effective way for employers to offer a valuable retirement benefit to their employees while minimizing their own administrative burden and legal risk.

Several New Programs Will Begin to Enroll Workers, Some Begin Implementation Planning for 2023 Launch, While Others Consider Legislative Proposals and Partnership Opportunities

2022 STATE PROGRAM STATUS

Georgetown University

States will continue to lead with new, innovative programs and proposals during the 2022 legislative sessions. For access to the most up-to-date, interactive 2022 state map, with detailed tracking of implementation status, legislative action, and summaries of bills introduced at the state and local level, visit State Programs and Legislation (log in required).

As 2021 ended, more than 20 states and cities had introduced legislation to establish new programs or form study groups to explore their options. Since 2012, at least 46 states have acted to implement a new program, study program options, or consider legislation to establish state-facilitated retirement savings programs. Today, there are 15 states and 2 cities that have enacted new programs for private sector workers.

17 Programs (15 states and 2 cities)

To date, new programs have adopted one or a combination of these four models:

• Auto-IRA(employer participation required if no plan is already offered)
• Payroll deduction IRA (voluntary)
• Multiple Employer Plan (MEP)(voluntary)
• Marketplace(voluntary)

There are now 17 enacted retirement savings programs (15 states and 2 cities**) for private sector workers.

*The new Hawaii program is a variation on the auto-IRA model.  Eligible employers must notify their employees about the program and, if employees choose to opt-in to the program, employers must then facilitate contributions to the programs.

**New York City’s program is expected to merge into the New York State program. The Seattle, WA program is on hold indefinitely pending state legislative action.

As of April 1, 2022, 6 states of these 15 state programs (4 auto-IRA – OR, IL, CA and CT and 2 others – MA and WA) are open to employers and workers.

For an overview of all the state programs (with hyperlinks to state program websites and additional information), see State-Facilitated Retirement Savings Programs: A Snapshot of Plan Design Features (21-02, October 31, 2021 UPDATE)

For more information and a breakdown by state, please visit https://cri.georgetown.edu/states/

Did you miss our latest webinar featuring Mark Lewis with MAP Retirement? If so, check out the replay and learn how to help your small business clients save on their year-end taxes.

In case you missed this week's webinar regarding 401K plan setup for small business clients, please find our replay below.  Jerrod Weiss with LT Trust helps explain how there is still time to help your small business clients set up 401K plans for 2021?

State Retirement Plan Mandates: What States Have Them and When Do They Take Effect?

 

CONTRIBUTOR

Vestwell

 

PUBLISHED

JAN 13, 2022 1:37PM EST

 

Currently, there are 14 states with retirement plan mandates to help individuals save for retirement. In this article, explore program mandates, structure, and roll-out plans for each of the 14 states to understand how (and if) this applies to you and your small business.

California

Name: CalSavers

Mandate: Companies with 5+ employees must offer a plan or face a fine of $250 per eligible employee after 90 days of noncompliance and an additional fee of $500 per eligible employee after 180 days of noncompliance.

Timing: As of September 30, 2020, anyone with 100+ employees must have complied; as of June 30, 2021, those with 50+ employees must have complied, and by June 30, 2022, those with 5+ employees must comply.

Colorado

Name: Colorado Secure Savings Programs

Mandate: Companies that have been in business for 2+ years with 5+ employees must offer a plan or face a fine up to $100 per eligible employee per year (up to max of $5,000 annually).

Timing: The pilot program begins in October 2022, enrollment begins in 2023.

Connecticut

Name: MyCTSavings

Mandate: Companies with 5+ employees paid more than $5K each in the calendar year (unless the business already offers a qualified, employer-sponsored retirement plan). Non-compliance may result in an investigation and penalties.

Timing: Pilot launched in November 2021, with full launch slated for early 2022.

 

Click here to view additional states.

 

Did you miss this week's Small Market webinar featuring American Trust? If so, don't miss the replay to learn how the partnership between BidMoni and American Trust can help advisors build their business!

BidMoni Small Market Solution Webinar Replay

BidMoni has partnered with five national Recordkeeping firms and one national TPA firm to create the first ever fully digital 401K marketplace.  We have worked with advisors across the country to remove the friction points in selling smaller plans, including:

• Identifying opportunities
• Generating proposals
• Running plan comparisons
• Plan onboarding

What is a 3(16)? Why should advisors be partnering with independent 3(16)'s to grow their practice? View our webinar replay with guests Jim Sharp and Russell McNorton to learn more!

How do you really grow your 401(k) practice? Do you buy leads? Do you cold call? If you're looking for tips, view the replay from our March webinar series featuring tips from 401JA(k)E, Jake Rushton. 

Jake will help you change your mindset and approach to winning plans!