Video: jeff kuzmich - Migrate_Safe_Harbor_401_k_05212025_4931245 | Duration: 1600s | Summary: jeff kuzmich - Migrate_Safe_Harbor_401_k_05212025_4931245

Transcript for "jeff kuzmich - Migrate_Safe_Harbor_401_k_05212025_4931245": My name is Stephanie Schifano and welcome to today's presentation. This is Safe Harbor four zero one ks, Right for Your Business. Before we get started, let's review a few housekeeping items. First, please note that the primary audio connection for today's session is streaming via your computer and there is no dial in option. Be sure to check your speaker volume to ensure your computer audio is turned on and set to an audible level. To refresh or reload your webinar browser, on a PC press the F5 key or on a Mac press the Command R key. Let's take a closer look at some of the other important features. To download and print a copy of today's deck for future reference and to access additional resources, refer to the files and resources window at the top right of your console that is available at any time during this event. If you have questions during the event, you can send them via the Ask Us a Question window. To submit a question, simply type it in and click Submit. We have a great team of experts behind the scenes ready to answer your questions. Please note this presentation does not constitute legal advice and is for informational purposes only. And now I'd like to introduce you to today's presenter. Andrew currently serves as district sales manager for Paychex Retirement Services, overseeing District 59, covering North California and Nevada. He has been in a leadership role with Paychex for eight of his ten years with the company. With his ten year background in the industry, he is passionate about educating and helping business owners and their employees retire with dignity. And with that, Andrew, I'm going to go through our agenda, and then I'm going to turn it over to you. So as we get started today, we're going to introduce you to or excuse me, I introduce you to the Q and A widget on your console. We're going to be covering some terms that you may be unfamiliar with, and we'll do our best to define them as we go. However, if you missed one or if we go a little too fast, please feel free to ask us about it in the Q and A widget. Andrew has a fantastic retirement compliance partner who's behind the scenes and ready to answer our questions. So today we're going to go over what is Safe Harbor four zero one ks, why do businesses choose one, how do they work, what does this mean for your business, and then we'll share some additional resources you can utilize. And if there's time at the end we'll do some question and answer. Andrew, are you ready to go? I'm ready. Thank you, Stephanie. Hello everyone. Once again, my name is Andrew Giannuzzi, Retirement district sales manager for paychecks here out of Northern California. I think the first thing I want everyone to know on the call is I'm extremely passionate about retirement, but not just the retirement part. It's more about helping others find their road to retirement. And with the four zero one ks or a safe harbor four zero one ks of any kind, there's so many benefits that come with that. I'm excited to share those with you today. Let's go ahead and jump right in. Okay. So we're gonna talk a little bit about a few things, but one thing we're really going to focus on is safe harbor. And what is a safe harbor and how is that going to be able to help your business? So safe harbor refers to a provision in the law that allows the four zero one ks plan to be exempt from most annual non discrimination testing. We'll explain what we mean by non discrimination testing here in just a moment. Safe Harbor is an element of the plan design and it is compatible with all paychecks four zero one ks plan types. And also the biggest difference between a safe Harbor and a standard or traditional four zero one ks plan is that with the safe harbor employers must provide a contribution back to the employees. We'll get into more on that in a second. Non safe harbor plans or a traditional type of four zero one ks they do not require an employer to make any kind of matching or non elective contribution. Now, if you've been interested in starting a four zero one ks plan, maybe you're just not ready to match your employees yet, we hope you stick around. Although this webinar is mostly focused on safe harbor, we do have a lot of really good information here that can help you choose the right four zero one k plan for your business. And so we'll make sure that you leave here today, with a much better understanding and even the questions that you guys have to get answered. Alright, let's jump right into the non discrimination testing. So this is a test commonly referred to as ADP or ACP testing and these tests are conducted on an annual basis. The IRS actually requires four zero one ks plans to be tested to ensure that the plan doesn't discriminate against ranked and file employees. How could a plan discriminate? You might be wondering one way is if a highly compensated employee puts more money into a four zero one ks plan than a non highly compensated employee. That person may be benefiting from the plan a little bit more. And I'm gonna walk you guys through exactly how that works. So the guidelines that define a highly compensated employee, you're also gonna see the term HCE, just the abbreviation for that. They were established by the IRS with two tests. And so I'm gonna walk through both of those tests. The first one is the ownership test. So this test says if somebody is a 5% owner at any time during the current plan year or the twelve month period immediately preceding the determination year, that person would be considered an HCE or a highly compensated employee. First, the test. This test says if someone received compensation from the employer of more than a $155,000 in 2024, so that would be last year, and then this year expecting a 160,000 in 2025, those employees would be labeled as HCE. So basically anyone that's making over a 160,000 ownership or not, they will be considered a highly compensated employee. Now, if a plan was to fail that non discrimination testing, things can get a little bit complicated. And so there's really two possible remedies. The first one is we would refund some of the contributions made by that HCE through what's called corrective distributions or return of excess. Now those refunded amounts would then become taxable to those employees. The company would also face a 10% excise tax if they do not make the refunds by the annual deadline. Second, we can fund a qualified non elective contribution. We call that a QNEC to the highly or excuse me to the non highly compensated employees in the amounts that are needed to actually pass the test. What is a QNEC? A QNEC is a contribution that employers can make to the four zero one ks plan on behalf of some or all employees. They are typically calculated based on a percentage of the employee's compensation. QNEXT must be immediately 100% vested when allocated to the participants account. So that means when the participants do receive the money, the money is a 100% theirs right from the get go. Now, there are many benefits to a safe harbor plan and so let's explore what some of those are. It's not just about passing the non discrimination testing, but the process of conducting non discrimination testing can also be complicated and time consuming for our employers. Also, everyone in the plan can contribute the maximum IRS limit. Even owners and highly compensated employees without the risk of making the plan unbalanced. So in layman's terms, if you were to set up a safe harbor plan, there is no non discrimination test that happens. And so maybe we only have HCEs that are participating in that plan. That is absolutely okay. That's why safe harbors were invented. Safe harbors also promote high levels of engagement in the plan among the non highly compensated employees, investing in your employees by making contributions to their accounts is only going to accelerate their ability to save. And also it's going to make them feel a little bit more secure about their retirement and maybe the retirement's a little bit more in reach than what it would have been. Finally, your business still gets the same advantages as any standard four zero one ks plan, which we're to discuss in more in detail here in a few minutes. Okay. So these are the four types of safe harbors. On the next slide, I'm going to show they'll actually show the match. And so we'll get more into that, but I kind of wanted just to talk about exactly what they are. And so any one of these matching formulas will qualify your plan as a safe harbor. The first one is what we call a non elective contribution. So this is where the company makes a 3% contribution for all eligible participants, of whether they choose to put their own money into the plan. Contributions must be a 100% vested immediately. That means as soon as the employees get the money, the money is theirs. Non elective contribution. Think of it like this. My employees don't have to participate in the plan with their own dollar. However, the company will be giving 3% to every eligible employee, whether they participate or not. The next one we call a quacker. It's qualified automatic contribution arrangement. So this does require automatic enrollment onto the plan and the company match is as follows. So the company usually will match a 100% of the first 1% of contributions and then 50% of deferrals between one and six. So a total match would be three and a half percent. Again, I'm going show you what that's going look like on the next slide. The third type of a safe harbor would be just our standard match. And so employers would match a 100% up to 3% of employees compensation and then 50% of employees additional contributions up to 5% of their pay. The total match being 4%. Lastly, we have our enhanced match. So this is where a company would match a 100% up to 4% of an employee's contribution. Again, total match at 4%. Let me show you what that looks like. So here's what it looks like just with the numbers. So again, the first box, the non elective contribution, that's where everyone gets to be all eligible employees get 3% regardless if they are participating in the plan or not. The QACA you can see there with automatic enrollment, it's one to one, two to two or two to one and a half, three to two, four to two and a half, five to three. And then finally it would be six to three and a half. So the employee would have to put in 6% to get the full match of the three and a half percent coming from the business. Now the standard match kind of similar, but it's one for one up to three. So one to one, two to two, three to three, and then it's 50% for the next two. So it's gonna go from three and a half and then three and a half to four. And so the employee puts in 5%, the business puts in 4% and that would be the maximum match allowed. Now the enhanced it's pretty simple. It's just one to one. So one to one, two to two, three to three, four to four, pretty simple. The employee puts in up to four percent. The business will then put up to 4% along with that. So it doesn't matter which one we pick. All of these will qualify as a safe harbor plan and will help benefit not only you and your business, but your employees as well. Let's take a little bit of a closer look at a side by side so you guys can kind of see the key differences between a standard four zero one ks plan and then also a safe harbor four zero one ks plan. Now, what you're going to notice as we review this is a lot of them, a lot of it's the same. Okay. So for example, the first two lines, the maximum employee deferral. Okay. Both of those limits are exactly the same, whether it's a traditional type of a four zero one ks or we're using a safe harbor. And so what this chart is really going to show us is the difference between doing a PEP type of plan or a safe harbor type of plan. The only real differences you're going to find on here are first starting with the employee, excuse me, the employer contribution. Now remember on a traditional type of four zero one ks plan, we, the business owner does not have to match the employees. Now, if the business would like to put a match in place, absolutely no problem. You're also able to do that on a traditional type of four zero one ks where on safe Harbor, as we just covered on the previous slide, one of those four matching formulas, that's what creates the safe harbor plan. So if we don't use one of those matching formulas that again, I referenced on the slide before this, the plan will not become a safe harbor. So safe harbor, we have to match using one of the matching formulas, a traditional plan, a little bit more flexible. If you want to match, you can, if you don't want to match, you don't have to. Something that I would like everyone to keep in mind though, it doesn't matter what kind of traditional plan you set up. Even if my traditional plan has a match on it, I'm still going to be held to the non discrimination testing. And so let's move forward here. If we move down to the vesting line, options are available on a traditional type of plan. And the word best really just means how long do my employees have to wait before the money's actually theirs. And that's anything coming from the business. When it comes to a safe harbor, most of the time that vesting period is going to be immediate, but there are options available through plan design with automatic enrollment and some things like that to put a vesting schedule on those plans as well. So it kind of just depends on the conversation you're having and what's gonna be best for your business. Both sides can take loans. So a traditional four zero one ks or a safe harbor four zero one ks both of them will allow loans to the participants. Now here's the other difference, right? We talked about the ADP ACP testing. Now that again, that's going to happen on a traditional plan. It doesn't matter what kind of traditional plan you have match, no match. You're still going be held to that non discrimination ADP ACP testing. Now you can see for a safe harbor though, there's no need for that. And that's exactly what safe harbor did, right? Is it got rid of that. The top heavy testing again for a traditional plan that is going to be required for that plan. But for a safe harbor plan, that's generally going to be satisfied. So again, things that we don't have to worry about. As far as investment providers, both exactly the same, right? We have choice of many different partners and then also compatible with profit share. And so both plans allow to do it end of the year profit share, or for pay period or however you got, however the business would like to set that up. And so again, the only big differences between a traditional type of four zero one ks and a safe Harbor four zero one ks is just those matching formulas. As long as you choose one of the safe Harbor matching formulas, your plan would be a safe Harbor at that point. Alright, so there's never been a better time to consider starting a four zero one ks plan for your business. Not just your business, but your employees as well. And here are some of the reasons why. So it helps you and your employees safe for tomorrow. I like to tell people retirement's coming for everyone. And the question that we should all be asking ourselves as individuals is, is that something that I'm going to be ready for? And so it helps you and your employees safer tomorrow. Paychex actually recently conducted a survey and this was by far the number one reason businesses of any size choose to start a plan. It's because people are interested in saving for tomorrow. People have recognized that it's important to get onto the road of retirement. Four zero one ks plans are also a preferred benefit for many job seekers, helping you attract and retain your key people, right? A big challenge, you know, for most businesses is finding a quality employees. Well, with a low cost benefit like a four zero one ks, it might allow us to attract some of that higher talent. Not just that, a lot of businesses have employees that have been with them for many, many years and we want to keep those people. And so offering again, a cost effective benefit like a four zero one ks will allow many employers to retain those key people. Another survey that was actually published by Transamerica Center for Retirement Studies back in March found that 83% of workers strongly or somewhat agree that retirement benefits offered by a prospective employer will be a major factor in their final decision making when hunting for a new job. So that's really important, right? We want to be able to go out there and attract the best talent. Now, a couple of other things. A plan would fulfill any kind of state retirement savings mandate requirements. I'm in California. I know that we have CalSavers right now. Also keep in mind that the numbers that I share with you, it could change on a frequent basis. But at the time that we were writing our presentation for you all, there were 13 States with an active program. There's eight States with a program in development and nine States that have proposed programs with their state legislator. So at the end of the presentation and also in the learn more widget, you can find a link to our state mandate retirement savings program resource center, where you guys are able to look up any state in The United States. You can see what mandate they have, how that might impact your guys' business and then make the best decision for yourself moving forward. Plans may also allow for individuals and business savings, including tax credits. And finally eligible business may pay zero for the startup costs in the first three years. Thanks to the new law, the secure act two point zero. And so what that is, is the federal government is incentivizing businesses through a federal tax credit to start retirement plans. And that could cover the costs up to the first three years there. And so those are just mainly the benefits of why a four zero one ks plan is going to be so important there. So let's look at some options that could be available to you guys. Paychecks are pooled employer plan. Okay. Also known as PEP. PEP pooled employer plan. And so paychecks were actually one of the, an industry leader in the PEPs. It's something that we're really proud of and it's an extremely robust product that is not only good for our business owners and our clients, but also their employees. And so the pooled employer plan has many flexible plan options. It's fully integrated into our payroll service. And so no extra administrative tasks. We can absolutely build you a safe harbor plan on that platform. It does feature a Roth contribution. So some contributions can be Roth, some are pre tax. And so your participants have both options available and then automatic enrollment as well. Let's talk a little bit more about that. So what are the main benefits really of the pooled employer plan? And one of the biggest things and we hear this all the time from our clients is I just don't want any more tasks. Well, this is good news for you because this is gonna massively reduce any kind of administrative tasks that maybe you would once perform. We're gonna reduce fiduciary liability, simplified plan management. Everything is available right through our paychecks flex site. So any kind of changes or you want to look at your balances, anything like that. It's right at the tip of your fingertips. Plan trustee services, again, potential tax credits under the secure act and much, much more. Now maybe when we're deciding, should we do it more of a traditional type of plan or should we go with maybe paychecks pooled employer plan? I think there's a couple of things to consider. Number one is cost, right? So want to make sure that, you know, this is going to fit with inside of your budget for your business. The second would be setup. Okay. So the pooled employer plan, it significantly is going to reduce the plan setup responsibilities. And that's mostly because Paychex is going to take on most of that work. Now, if we were to go with a traditional type of four zero one ks, as the plan sponsor, the employer is involved in the setup much more. Now, as far as the plan sponsors, the paychecks pooled employer plan is the plan sponsor and we are also the named fiduciary. Now on a non pet plan, the employer would then become the plan sponsor and then also the named fiduciary for their own plan inside of their own business. As far as the annual form 5,500, the paychecks pooled employer plan is going to assume all responsibility for that. We will sign and file that on behalf of your business. And then we will make sure that that gets submitted every single year. Safe Harbor. We can do safe Harbor either which way, right? So it's, you don't necessarily have to pick one or the other. We can build specific plan designs on whatever platform that you guys feel confident in and make sure that we put you guys in the best possible position. And then lastly, the tax credits. I talked about that. So it doesn't matter what kind of four zero one ks plan you're setting up PEP or non PEP, safe harbor traditional. It doesn't really matter. Businesses are eligible to collect the tax credit. And that tax credit is up to 16,500 for the first three years. And it really depends on how many participants are eligible to participate in the plan there. All right, let's look at some dates because we're coming up to safe harbor season right now. We like to call it safe harbor season. And so timing is everything, right? With just with most things in life. And so a little bit of a timeline for you. July to mid August, I consider your options, right? Determine what plan type is best for your business. No later than September 1, contact your local paychecks representative to begin your plan set up. Any last minute questions you have, we can help design your plan, but it's really important that on October 1, prior to October 1 is the safe harbor deadline. And so we cannot start a safe harbor plan after October 1. And so we want to make sure that we get into that safe harbor deadline. That way you guys can start enjoying the benefits of your retirement plan. And so with that said, I'm going to pass it back to Stephanie. Thank you all for having me today. I really appreciated that. And Stephanie, back to you. Andrew, you absolutely crushed this presentation. Loved all the information you shared and the last slide specifically with regards to those deadlines is perfect. What I want to do is we got some lot of great questions as we were going through the presentation. And some of them were additional resources, and how can I download those items? So a quick look on screen are some of the resources that can help you assess if a safe harbor plan is right for your business. You're going to find links to articles, downloadable PDFs, and more in the Files and Resources window of the Console, and I believe that's also where you'll find a link to this presentation. Again, we gave you some information, but we might not have answered every single question you had. So with that, you should see a pop up on your screen, and it's going to ask you, would you like to speak with a Paychex professional about starting a safe harbor four zero one for your business? You can mark your response and hit submit. If you click yes, we will have somebody reach out to you and answer any additional questions you may have. And hopefully the pop up is there. Just giving it a moment because I don't like passing past it and having you not have an opportunity to answer question. And so with that, thank you again for joining us to learn more about our Safe Harbor four zero one solutions. You can click the button on the blue card on your screen to connect with a Paychex professional to review the retirement service options that may be the best fit for you, your employees, and your business. As a quick reminder, the printable version of the slides is in the Files and Resources window. I love the reminders they give me because sometimes I'm ahead of schedule with them. But I'm just going to go through these again, along with all the helpful articles, info sheets, and the links related to the content. If you can spare a few extra moments, at the end of this event, you will have a pop up with a survey to give feedback for, A, the content, and then B, how Andrew and I both did to assist you in meeting your business needs. So with that, thank you again for joining us, and we hope you have a great day.