A 401k plan sponsor is an employer or organization that establishes and maintains a 401k retirement plan for the benefit of its employees or members. The plan sponsor is responsible for selecting the investment options available in the plan, determining the plan's administrative and operational features, and ensuring that the plan complies with applicable laws and regulations.
The plan sponsor may also hire third-party service providers, such as recordkeepers and investment advisors, to assist with the administration and management of the plan. However, the plan sponsor retains ultimate responsibility for the plan's operation and fiduciary duties.
Plan sponsors have a legal obligation to act in the best interests of plan participants and beneficiaries and to fulfill their fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA). This includes ensuring that fees and expenses associated with the plan are reasonable and disclosing all relevant information to plan participants.
Can I Make Roth Contributions in a 401k Plan?
Yes, some 401k plans offer a Roth option that allows you to make after-tax contributions. These contributions are then invested and grow tax-free, and you won't have to pay taxes on the money when you withdraw it during retirement.
However, not all 401k plans offer a Roth option, so you should check with your plan administrator to see if it's available. Also, there are limits to how much you can contribute to a Roth 401k each year, just like with traditional 401k contributions. In 2023, the annual contribution limit for both traditional and Roth 401k contributions is $22,500, with an additional catch-up contribution of $7,500 for those age 50 and older.
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:
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.
Reduced administrative burden: Safe harbor plans typically have fewer administrative requirements than traditional 401k plans, which can save employers time and money.
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.
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?
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!