Now is the time to take action if you wish to implement a new safe harbor 401(k) plan or make changes to your existing safe harbor structure for 2021. To satisfy the participant notice requirements, companies should install or amend calendar-year plans by the end of November. If your plan has historically struggled to pass its annual compliance test, a safe harbor plan may be an appropriate solution for you.
The IRS announced that the 2021 retirement plan limits for 401(k) deferrals ( $19,500) and catch-up contributions ($6,500) remain unchanged. The eligible compensation limit increases to $290,000, up from $285,000 in 2020. The compensation threshold to determine highly compensated employees remains unchanged at $130,000. To read the IRS notice, click here.
Pay close attention to simple payroll processing errors, such as:
Review your plan provisions with your payroll administrator to ensure that your plan is operating in compliance with its terms.
The Department of Labor finalized a rule which makes it more difficult for plan sponsors to utilize Environmental, Social and Governance (ESG) investments in their retirement plans. The rule requires plan sponsors to evaluate investments based solely on their financial factors, including risk and return characteristics, and states that plan sponsors may not sacrifice investment returns or take additional investment risk to promote non-financial goals.
If you hold ESG investments in your plan or have questions about any of the topics covered in this article, please contact us.