Strongpoint Partners 10/28/25 Strongpoint Partners 10/28/25

Upcoming Compliance Deadlines for Calendar-Year Plans

It All Begins Here

September 15

Required contribution to defined benefit plans, money purchase pension plans and target benefit pension plans. Contribution deadline for deducting 2024 employer contributions for those sponsors who filed an extension for Partnership or S-Corporation tax returns to extend the March 15, 2025, deadline. Due date for 2025 PBGC Comprehensive Premium Filing for defined benefit plans.

September 30

Deadline for certification of the Annual Funding Target Attainment Percentage (AFTAP) for Defined Benefit plans for the 2025 plan year.

October 15

Extended due date for the filing of Form 5500 and Form 8955-SSA for plan years ending December 31, 2024.Contribution deadline for deducting 2024 employer contributions for those sponsors who filed a tax extension for C-Corporation or Sole-Proprietor returns for the April 15, 2025, deadline.Due date for non-participant-directed individual account plans to include Lifetime Income Illustrations on the annual participant statement for the plan year ending December 31, 2024.

This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.

Strongpoint Partners 10/28/25 Strongpoint Partners 10/28/25

Divorce and the Retirement Plan

When a participant in a qualified retirement plan undergoes a divorce, the participant’s account balance may be an asset that is split with the former spouse. As the plan exists for the exclusive benefit of its participants, a court order is required to transfer the participant’s benefits to the ex-spouse. Once approved by the plan administrator, this court order is called a Qualified Domestic Relations Order (QDRO).

The QDRO is a judgment, decree or order that must be issued by a state authority (usually a court). It can be part of the divorce settlement or it may be a separate document. Because of the serious nature of separating the participant’s account balance, the QDRO is more than just an agreement made by both parties — it must also be signed by a judge.

A QDRO will describe how to divide the participant’s account balance between the participant and the ex-spouse, referred to as the alternate payee. In some cases, a set dollar amount will be allocated; in others, a percentage of the account may be designated. In the latter case, the amount assigned to the alternate payee represents the given percentage of the participant’s total vested account balance as of a specified valuation date. This percentage will apply to all sources — such as deferrals, matching or profit sharing — unless specified by the QDRO. Any interest and investment gains/losses that accrue between this valuation date and the date the funds are separated into an account for the alternate payee are often factored into this final calculation. If the participant has outstanding loans, the QDRO will usually indicate how the loans are handled.

Contributions such as deferrals and employer matching made after the valuation date are credited to the participant’s account. Earnings and losses are applied to the account balances. Once the division is complete, the alternate payee’s portion (either dollars or shares) is transferred to an account in the alternate payee’s name.

If the plan allows, the alternate payee may be paid out in a cash or rollover distribution. Not all plan documents allow the alternate payee to receive a distribution before reaching normal retirement age, so it’s important to follow the terms of the plan. In addition, the QDRO cannot violate the provisions of the plan document by requiring a plan to provide an alternate payee or participant with any type or form of benefit not otherwise provided under the plan.

Although the most common situation for a QDRO is a divorce, it can be issued in other situations, such as to a dependent in the case of child support. If the alternate payee is a minor child or legally incompetent, the order can also require payment to the individual with legal responsibility for the alternate payee. If a participant or their attorney provides you with a copy of a divorce decree that references the plan or a QDRO, please contact us immediately, and we will work with you to ensure it meets the requirements of the plan.

Important note for defined benefit plans: For 2025 plan years, PBGC premiums are due one month earlier than usual, specifically on the 15th day of the ninth month after the beginning of the plan year. For calendar year plans, this means the premium is due on September 15, 2025, instead of the usual October 15. This accelerated deadline is due to a provision in the Bipartisan Budget Act of 2015.

Strongpoint Partners 10/28/25 Strongpoint Partners 10/28/25

Addressing the Challenge of Uncashed Distribution Checks

Uncashed distribution checks present a persistent and often overlooked challenge for retirement plan sponsors. Despite the best efforts of plan administrators, some participants fail to cash their distribution checks, leading to administrative burdens, fiduciary concerns and potential compliance issues. A recent publication by Retirement Management Services (RMS) sheds light on this issue and offers practical guidance for employers seeking to manage and mitigate the risks associated with uncashed checks.

Uncashed checks can arise for various reasons. Participants may have moved without updating their contact information, may not recognize the check as legitimate or may simply forget to deposit it. Regardless of the cause, the responsibility for addressing these uncashed funds ultimately falls on the plan sponsor. This creates a fiduciary obligation to act in the best interest of the participant while ensuring compliance with IRS and Department of Labor (DOL) regulations.

Sponsors are encouraged to maintain up-to-date contact information for all plan participants and to follow up promptly when checks remain uncashed. This may involve sending reminder letters, making phone calls or using certified mail to confirm receipt. In some cases, plan sponsors may also consider using electronic payment methods to reduce the likelihood of checks going uncashed in the first place.

The IRS and DOL have issued guidance on how to handle these situations, including the use of forfeiture accounts and escheatment to state unclaimed property programs. However, these options come with their own set of rules and potential pitfalls. For example, using a forfeiture account may require the plan document to explicitly allow for such treatment. Escheatment laws, which allow the government to assume control of unclaimed property, vary by state. As such, plan sponsors must carefully evaluate their options and consult with legal or compliance experts as needed.

Another important consideration is the documentation of all the efforts made to contact participants and resolve uncashed checks. Maintaining a clear audit trail can help demonstrate fiduciary prudence and protect the plan sponsor in the event of an audit or legal challenge. It is extremely important to have a written policy in place that outlines the steps to be taken when a check remains uncashed beyond a certain period.

By taking a proactive, well-documented and compliant approach, employers can fulfill their fiduciary duties, reduce administrative burdens and ensure that participants receive the benefits they are entitled to.

Source: Retirement Management Services – “Uncashed Distribution Checks” https://www.consultrms.com/Resources/59/Plan-Sponsor-Tips-and-Help/212/Uncashed-Distribution-Checks

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En Garde! The Challenge with Forfeitures

You may have been reading in the news about the recent uptick in ERISA class action lawsuits relating to the use of forfeitures. This article will be relevant to your plan if you have employer contributions and apply a vesting schedule to those funds.

What is a Forfeiture?

An Employer may design its retirement plan so that contributions it makes for its participants are subject to a vesting schedule. The vesting schedule means that the participant earns the right to those contributions over a period of employment, based on that schedule. For example, a plan may apply a five-year vesting schedule, where a participant earns 20% of their benefit for each year of service (i.e., becomes 20% vested after one year, 40% vested after two, etc.) The longest permissible vesting schedule is six years. A “year of service” is usually a plan year in which the participant is paid for 1,000 or more hours of service. If the participant stops working for the company prior to earning 100% vesting on the schedule, then the unvested portion is called a “forfeiture.” The forfeiture is removed from the participant’s account and placed into a forfeiture account. The forfeiture account acts like a suspense account for these funds until they are later used within the plan for certain purposes, based on the terms of the plan document.

How May Forfeitures be Used by the Plan?

There are three ways that forfeitures may be used within the plan:

To pay administrative fees;
To reduce employer contributions; and/or
The forfeiture may be allocated to eligible participant accounts to increase their benefits.

The plan document may state a specific use for the forfeitures from this list, or it may grant complete discretion to the Plan Administrator to select how (among the three options) the forfeitures will be used.

Forfeitures must be used by no later than 12 months following the end of the plan year in which they arose. For example, suppose you have forfeitures that arose in 2024 when a participant terminated employment and took their vested interest. That forfeiture must be used no later than the end of 2025. If the plan provides that forfeitures are used to pay plan expenses, the plan can use them to pay for the annual Form 5500 preparation or the 2024 Form 5500 audit, even if those invoices are paid in the summer of 2025.

Why Are Employers Getting Sued?

There are a few variations of the lawsuits that have been filed, but participant-plaintiffs are essentially arguing that Plan Administrators, as fiduciaries to the Plan, are violating their duty of loyalty and prudence by using the forfeitures in a way that indirectly benefits themselves. In particular, when the plan permits the Plan Administrator to choose whether to use forfeitures to pay for plan expenses (which would otherwise be paid by participant accounts) or reduce employer contributions, the employer that uses forfeitures to reduce its contribution is prioritizing the employer’s financial interests over the best interests of the plan and its participants.

Although the Internal Revenue Service has long approved the language permitting discretionary forfeiture use, and the language mentioned above is consistent with the historically permissible options outlined in the Internal Revenue Code, these new claims by the participant-plaintiffs have had some success in the courts. However, courts in different areas of the country are ruling differently, and none of the cases has yet been decided by an appeals court.

To avoid being a possible target for these often frivolous lawsuits, many employers are amending their plans or adopting a written administrative policy that clearly states how forfeitures will be used. The idea: remove the discretion, and you remove the potential for the claim of fiduciary breach for making the “wrong” choice.

What Should a Plan Sponsor Do Now?

Plan Sponsors should talk to their third-party administrators (“TPA”) or service providers to determine what the language of their plan document currently says. In some plan documents, the language permits the Plan Administrator to “elect to use any portion of the Forfeiture Account to pay administrative expenses incurred by the Plan.” It may go on to say that forfeitures may also be applied at the direction of the Plan Administrator in any of three different options. This type of language is fully discretionary and open-ended, which is precisely what the lawsuits are trying to prevent.

Plan Sponsors may request that their TPA or document service provider prepare an amendment to the Plan to formalize a mandatory use for forfeitures in the future, removing the discretionary language. This has the best chance of avoiding a claim that the sponsor has improperly used the forfeitures. Even if this language dictates that forfeitures are used first to reduce employer contributions and are only used to pay expenses thereafter, the lack of discretion eliminates the potential for courts to find that there was a choice made that constitutes a fiduciary breach.

If you have any questions about the use of forfeitures or about how you can alter your plan document to clearly state the intended use, let us know. Remember: we are your ERISA solution!

Used with permission of author Alison J. Cohen, Esq. of Ferenczy Benefits Law Center. This article recently appeared in their Flash in the Plan! series. You can subscribe to their newsletters here: https://ferenczylaw.com/flashpoint-sign-up/.

Strongpoint Partners 5/20/25 Strongpoint Partners 5/20/25

Upcoming Compliance Deadlines for Calendar-Year Plans

May 15

Quarterly Benefit Statement - Deadline for participant-directed plans to supply participants with the quarterly benefit/disclosure statement, including a statement of plan fees and expenses charged to individual plan accounts during the first quarter of 2025.

June 30

EACA ADP/ACP Corrections - Deadline for processing corrective distributions for failed ADP/ACP tests to avoid a 10% excise tax on the employer for plans that have elected to participate in an Eligible Automatic Enrollment Arrangement (EACA).

July 28

Summary of Material Modifications (SMM) – An SMM is due to participants no later than 210 days after the end of the plan year in which a plan amendment was adopted.

July 31

Due date for calendar year-end plans to file Form 5500 and Form 8955-SSA (without extension).

Due date for calendar year-end plans to file Form 5558 to request an automatic extension of time to file Form 5500 or Form 9855-SSA.

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How Government Staffing Cuts Could Impact the Plan

Many different Federal agencies affect the operation of retirement plans. First, Congress enacts the laws that govern plans; then, various entities such as the Internal Revenue Service (IRS), Department of Labor (DOL), Pension Benefit Guaranty Corporation (PBGC), and the Employee Benefits Security Administration (EBSA) interpret and carry out those laws.

The most important thing to note is that any recent reduction in workforce experienced by these government agencies will not impact the daily operation of your plan. Instead, because these agencies provide guidance on how to apply retirement plan laws, any future changes to laws that are passed by Congress could take longer to implement.

Additionally, if you need to contact these agencies with a question or to submit information for approval, you will most likely see an increase in wait times. On the other hand, much of the actual processing of forms—such as the Form 5500—is handled electronically and should be unaffected by these events.

If you need anything related to the plan, or if you have any questions, please feel free to reach out to us. We will work with you to resolve any issues.

Strongpoint Partners 5/20/25 Strongpoint Partners 5/20/25

Planning Ahead for 2026 Catch-Up Contributions

Effective for plan years beginning on or after January 1, 2026, catch-up contributions for certain participants in a 401(k), 403(b), or governmental 457(b) plan could be affected by proposed regulations by the Department of Treasury and Internal Revenue Service. The proposed regulations would require that high-income earners who are aged 50 or older make catch-up contributions as Roth contributions rather than pre-tax contributions. In this case, a high-income earner is defined by prior-year FICA wages exceeding $145,000. This requirement, introduced in the SECURE 2.0 Act in December 2022, was delayed to allow for an administrative transition period. With the rules expected to be finalized in 2025, some review steps now can help minimize any last-minute uncertainty.

Catch-up contributions allow participants who are age 50 or older to contribute above the standard IRS deferral limit, which is $23,500 for 2025. The standard catch-up contribution limit for 2025 is $7,500, with a higher catch-up contribution limit of $11,250 for those aged 60-63. If permitted by the plan document, catch-up contributions can currently be withheld as either pre-tax or Roth deferrals.

Since the regulations are not yet finalized, the important action now is to simply be aware of the possible requirement and consider if the plan and participants will be affected so you can be prepared. Here are a few items to consider:

Identify which employees will be age 50 or older in 2026. Likewise, determine if they are eligible during the 2026 plan year.
Review estimated annual 2025 FICA wages for these employees. Income from other employers is not considered in this case; only the income paid by the employer who sponsors the plan is applicable to the $145,000 threshold.
Does the plan permit Roth deferrals? If not, based on the proposed regulations, the higher-income earners won’t be able to make catch-up contributions unless the plan is amended to allow for Roth deferrals.

Understanding which participants may be affected will ensure timely communication as soon as the regulations become final. When 2025 comes to a close, it will be important to gather year-end census data promptly so these participants can make the proper deferral elections for 2026. We can look at these details with you and help plan ahead together.

Strongpoint Partners 5/20/25 Strongpoint Partners 5/20/25

Could Immediate Vesting be a Win-Win for Your Plan?

As a plan sponsor, you may be using vesting schedules to encourage employee retention, but new research from Vanguard reveals that this strategy may not be as effective as you think. In reality, vesting schedules do little to keep employees from leaving – and they might actually be creating unnecessary administrative costs for your company.

What is a vesting schedule? While the funds that an employee contributes to the plan as an employee deferral are always fully vested, you are permitted to establish length-of-service requirements that employees must meet to be fully vested in the employer contribution portion of their account balance. The schedule may be a cliff schedule, such as 100% vested after 3 years, or a graded schedule, such as 20% per year until fully vested after 5 years. If a participant terminates employment before reaching normal retirement age and takes a distribution prior to becoming fully vested, the non-vested portion remains in the plan as a forfeiture. Provisions in the plan document define how forfeitures can be used, with options including using the funds towards certain plan expenses, reducing employer contributions, or adding to employer contributions.

Vanguard’s analysis of 4.7 million job separations from 2010-2022 found that vesting schedules do not significantly impact employee retention. In fact:

30% of job separations involved forfeited, unvested contributions.
Employees who hit a key vesting milestone were no less likely to leave than those who hadn’t yet reached a milestone.
Only 33% of participants know whether their plan has a vesting schedule, making it unlikely to influence their decisions.

While forfeitures from unvested contributions can reduce costs, the financial gain is modest, recouping roughly 2.5% of employer contributions. If vesting schedules do not significantly boost retention or cut costs, why keep them?

Switching to immediate vesting could offer stronger benefits for both your employees and your organization.

For participants: Immediate vesting strengthens retirement security by allowing employees to keep the full value of their employer contributions, which is often a substantial portion of their savings. This can improve financial well-being and promote greater engagement with the plan.
For plan sponsors: Immediate vesting simplifies plan administration and reduces compliance risks presented by possible distribution overpayments. It could also help you qualify for safe harbor status, potentially exempting your plan from annual nondiscrimination testing if you opt for a fully vested contribution.

Data from a 2023 Vanguard study indicates that 1 in 4 participants were deferring less than 4%. This not only affects their employee contribution balance but also limits the amount of employer matching contribution they are eligible to receive. For participants with low deferral rates, a discussion with them may help determine the reason behind the election. Maybe the plan has a matching contribution but they forgot or maybe they have questions about how the vesting schedule works for the account balances. Understanding the participants’ perceptions of the plan is helpful in knowing where changes would be beneficial.

Vesting schedules are not without merit, but may not be the retention tool they were once thought to be and might come with additional downsides. Immediate vesting, on the other hand, could provide a win-win scenario for both plan sponsors and plan participants. We are always happy to discuss the impact that each can have on your plan.

Vanguard studies: https://corporate.vanguard.com/content/dam/corp/research/pdf/does_401k_vesting_help_retain_workers.pdf

https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2023/how-americans-can-save-more-for-retirement.pdf

Strongpoint Partners 5/20/25 Strongpoint Partners 5/20/25

Keeping the Lines of Communication Open

In our last issue, we discussed the benefits of communicating with plan participants. Now let’s talk about keeping in touch with us.

Whether the concerns are small or large, a discussion with us can save you from making corrections later.

Retirement plans have many deadlines, and Congress often enacts laws that impact how your plan can be operated. For us to be able to keep you dutifully informed and keep your plan in compliance, we need to be notified of any updates to your company address, phone number, or email address. In addition, if you have a change regarding your staff, investment advisor, or accountant, we should be made aware so we can ensure we are speaking about your plan with the appropriate individuals. We take care to keep your confidential data safe and can only discuss private matters with authorized personnel. As such, whenever there is a change in how we can reach you or who we can talk to, it is important to inform us.

There are other reasons to reach out to us, too. Much of the compliance testing we perform compares benefits for highly compensated employees (HCE) to non-highly compensated employees (NHCE). HCEs include owners and family members of the owners, such as a spouse, parents, grandparents and children. Therefore, whenever there is a change in ownership or a family member of an owner joins or leaves the company, notify us as soon as possible. Being aware of these changes will allow us to determine if there are any potential impacts so adjustments can be made to your plan before they become costly.

In addition, when there is an ownership change or a merger or acquisition, the impact to the plan should be considered in advance. Depending on the situation, a plan may need to be terminated before the date of transfer to avoid the compliance risks associated with sponsoring multiple plans. While it’s possible to take advantage of a transition period during this time, it’s better to review all of your options before the transaction so that you can do what’s best for you and your plan participants.

In the event that an owner of your company also owns part or all of another business, a determination will need to be made whether a controlled group exists. In addition, when two or more organizations have a service relationship, they may constitute an affiliated service group. In either of these cases, your retirement plan may need to include the employees of the other business in the discrimination testing. If the plan is found to be discriminatory, contributions may need to be made to the employees of the other business. If it’s possible that a controlled group or affiliated service group could exist, such a determination will need to be made every time there is a change in ownership. Before your current owner purchases shares of another business or a new owner joins your company, let’s see how that will impact the plan.

As businesses change and grow, the plan may need to adapt with the plan sponsor. However, much of the plan’s operations are determined by the plan document. Before any adjustments are made to the administration, processes, or procedures of the plan, we need to be involved. We’ll confirm that the changes won’t impact the plan’s qualified status. We’ll also advise when the changes can be implemented, as some amendments can only be made effective at the beginning of the next plan year. Any changes to the plan document require an amendment to keep the plan in compliance.

Mistakes happen, and—in most cases—the sooner the correction is made, the lower the cost to correct it. Such mistakes can include late deposits, incorrect deposits, or missed deferrals. If you find an error, let us know as soon as possible. In our role as your consultant, we’re here to help you stay in compliance. In return, we ask that you keep us informed of any changes in your situation so we can help to keep your plan qualified and best suited to your goals as plan sponsor.

Strongpoint Partners 3/4/25 Strongpoint Partners 3/4/25

Upcoming Compliance Deadlines for Calendar-Year Plans

February 28

IRS Form 1099-R Copy A – Deadline to submit Form 1099-R Copy A to the IRS for participants and beneficiaries who received a distribution or a deemed distribution during the prior plan year. This deadline applies to scannable paper filings. For electronic filings, the due date is March 31, 2025.

March 15

ADP/ACP Corrections – Deadline to process corrective distributions for failed ADP/ACP tests without a 10% excise tax for plans without an Eligible Automatic Contribution Arrangement (EACA).

Employer Contributions – Deadline for employer contributions for amounts to be deducted on 2024 S-corporation and partnership returns (unless extended).

April 1

Required Minimum Distributions – Deadline to distribute a required minimum distribution (RMD) for participants who attained age 73 during 2024.

April 15

Excess Deferral Correction – Deadline to distribute salary deferral contributions plus related earnings to any participants who exceeded the IRS 402(g) limit on salary deferrals. The limits for 2024 were $23,000, or $30,500 for individuals age 50 and over if the plan allowed for catch-up contributions.

Employer Contributions – Deadline for employer contributions for amounts to be deducted on 2024 C-corporation for filers with a calendar fiscal year end and sole proprietor returns (unless extended).

Strongpoint Partners 3/4/25 Strongpoint Partners 3/4/25

Which Bond is Best?

Winter 2025 – Benefit Insights Newsletter

Retirement plans can be covered by three types of bonds: fidelity bonds, fiduciary bonds and cyber bonds. As a plan sponsor, you will be asked for the fidelity bond coverage amount during the year-end data collection process because the amount is reported on the plan’s Form 5500 each year. Although only the fidelity bond is required for most plans, the fiduciary and cyber bonds offer additional protection for the plan—and therefore, the participants. Let’s review each option to help ensure you have the coverage you need.

As mentioned, the fidelity bond is required for most plans due to the Employee Retirement Income Security Act (ERISA). The fidelity bond, or ERISA bond, must cover at least 10% of the beginning-of-year plan assets. There is a $1,000 minimum bond amount and a $500,000 maximum. If the plan holds employer stock or securities, the maximum required value increases to $1,000,000. Some assets may also require additional coverage. When the asset balance is $0 during the first year of the plan, the bond is still required and should be purchased based on the estimated asset balance for that year. Some policies offer an inflation clause or an automatic escalation to increase in value as the plan’s assets increase, which can help simplify maintaining the required coverage amount.

While the fidelity bond protects the plan’s participants from losses due to fraud or theft, the fiduciary bond protects against losses caused by breaches of fiduciary responsibility. A fiduciary is anyone who exercises discretionary control or authority over a plan’s management, administration or assets. Even a trusted fiduciary that acts in good faith may inadvertently violate the laws outlined under ERISA. The fiduciary bond is not required but may be desirable to protect both your company and the fiduciary in these situations.

The cyber bond is also available to protect the plan from financial losses caused by cyberattacks or data breaches. Cybersecurity is a major concern for all institutions, and retirement plans are no different. For those who are apprehensive about the threat of cyberattacks, the cyber bond can be a valuable option.

To ensure peace of mind for you and your participants, the cyber bond and fiduciary bond can be worthwhile companions to the required fidelity bond. If you have questions about what is necessary for your plan, we can talk about the available options to find the best fit.

Strongpoint Partners 3/4/25 Strongpoint Partners 3/4/25

Lost but Not Forgotten

On December 27, 2024, the Department of Labor (DOL) launched the Retirement Savings Lost and Found Database of terminated participants who still have a benefit in a qualified retirement plan and are at least age 65. While the database is now active and available for use, it is in the early stages of development and is still being worked on to become the comprehensive source that it’s intended to be.

Participants may leave employers without realizing that they have vested benefits in a retirement plan or may choose to leave the money in the plan but forget about the balance as they change jobs or move. The plan is required to report terminated participants who possess a balance on Form 8955-SSA. In the past, the burden was on the Social Security Administration to notify the former participant about the possible benefits once the participant reached the Social Security normal retirement age. The DOL Lost and Found Database is intended to assist participants who have lost track of prior account balances to reunite with plans from their past.

For more information about the database, visit lostandfound.dol.gov.

Strongpoint Partners 3/4/25 Strongpoint Partners 3/4/25

Keep on Talkin’

hen it comes to your retirement plan, keeping your participants engaged is a must.

Not only is providing participants with enrollment opportunities in a timely manner critical to keeping your plan in compliance, it is also an important step in their retirement success story. Although the matter of when to provide enrollment materials to a participant will depend on the plan’s eligibility and entry requirements, continuing the conversation over time is also a component that cannot be overlooked.

If your plan allows new employees to participate on their first day of employment, the plan enrollment paperwork can be included in the new hire materials. Care should be taken so the plan paperwork doesn’t get lost among the rest of the onboarding information. If you use an online checklist to go through the various types of new hire forms, a link to the plan enrollment should be provided as well.
If your plan has monthly or quarterly enrollment, provide the enrollment material and Summary Plan Description (SPD) with enough time for the employee to review the information and make an informed decision. In most cases, the SPD must be distributed within 90 days of the employee becoming a participant. However, giving it to them before entry can help them better understand the plan.
If one of the plan’s entry dates corresponds to your company’s annual benefit enrollment, include the plan information with the rest of the benefits material. Although some of those employees may already be enrolled, this is a great time to remind staff of what’s available with the retirement plan, which may lead to them increasing their contributions.

Once the initial enrollment period is completed, communication should continue with employees regardless of whether or not they chose to participate by contributing to the plan. A decision made in the past may not represent where an individual is now. Reminders as time goes on will benefit all plan participants.

Employees who opted out of participation in the past may now be ready to start saving for retirement.
Participants who stopped deferring based on their financial situation may be persuaded to start again.
As plan compensation increases, participants may be encouraged to increase their plan contributions.
Participants might increase their contributions if they realize they are not deferring at a high enough percentage to take full advantage of a matching employer contribution.

There are natural times to communicate with your participants about plan participation. Those times include when communicating updated limits, sending annual notices, and completing performance reviews.

The Internal Revenue Service (IRS) updates retirement plan limits every year on January 1. When you inform your staff of the updated annual limits, be sure to include instructions for beginning and increasing contributions.
Most plans are required to provide annual participant notices, along with the Summary Annual Report (SAR). Any time that you share plan communications with the participants is a great time to re-emphasize the benefits of the plan. Encouraging them to meet with the plan’s investment advisor will provide a great resource for questions about investing in the plan. The more that they are encouraged on an ongoing basis to understand the accumulated benefit of contributions to the plan—rather than just at the start of being eligible—the better prepared they will be.
Performance reviews can also include a review of retirement readiness. If the participant is not contributing to the plan, that one-on-one conversation can go a long way towards helping the employee and their financial health. Additionally, consider the needs of both remote and in-office staff to ensure they all receive the necessary information and the opportunity to ask questions.

The more often you communicate with your staff about the retirement plan, the more successful your plan can be. The more successful your plan is, the more your participants will be prepared for retirement.

Strongpoint Partners 11/27/24 Strongpoint Partners 11/27/24

Upcoming Compliance Deadlines for Calendar-Year Plans

December 1st

Participant Notices – Annual notices due for Safe Harbor elections (note that some plans are no longer required to distribute Safe Harbor notices), Qualified Default Investment Arrangement (QDIA), and Automatic Contribution Arrangements (EACA or QACA).

December 31st

ADP/ACP Corrections – Deadline for a plan to make ADP/ACP corrective distributions and/or to deposit qualified nonelective contributions (QNEC) for the previous plan year.

Discretionary Amendments – Deadline to adopt discretionary amendments to the plan, subject to certain exceptions (e.g., anti-cutbacks).

Required Minimum Distribution (RMD) – The first RMD may be delayed until April 1, 2025. The 2nd RMD, as well as subsequent distributions for participants already receiving RMDs, is due by December 31, 2024.

Contribution Funding – Final funding deadline for 2023 plan year end. See your tax advisor for the year of deductibility.

January 31st

IRS Form 945 – Deadline to file IRS Form 945 to report income tax withheld from qualified plan distributions made during the prior plan year. The deadline may be extended to February 10th if taxes were deposited on time during the prior plan year.

IRS Form 1099-R – Deadline to distribute Form 1099-R to participants and beneficiaries who received a distribution or a deemed distribution during the prior plan year.

IRS Form W-2 – Deadline to distribute Form W-2, which must reflect the aggregate value of employer-provided employee benefits.

Strongpoint Partners 11/27/24 Strongpoint Partners 11/27/24

RMD Reminder

Required Minimum Distributions (RMD) should be paid by December 31 each year to participants who have reached age 73. However, a participant may elect to delay their first distribution until April 1 of the following year. If the first distribution is delayed, two distributions will be paid in the same year.

The plan document may allow participants who are currently employed to delay distributions until termination of employment, although participants who own more than 5% of the company that sponsors the plan are required to take their RMD regardless of employment status. If the participant has died, the distributions could be subject to grandfathered rules and distributions may be required even though the participant hadn’t reached age 73.

RMDs are calculated by combining a life expectancy factor with the account balance on December 31 of the prior year. While the RMD is the minimum distribution that’s needed, more can be withdrawn if requested by the participant and allowed by the plan document.

Retirement plans allow for the delayed taxation of money so that participants can save for retirement. While the intention of the plan is to benefit the participant directly, some individuals may incorporate them into estate planning to reduce their tax liability. For this reason, RMDs force money to be withdrawn from the plan so the government can collect the taxes that had been deferred. As of 2024, RMDs from Roth accounts are no longer required.

If the RMD isn’t taken, excise taxes will need to be paid by the participant, and the plan could be subject to disqualification. For this reason, it’s very important to identify when distributions are required and ensure they are issued on time. Please contact us if you have any questions regarding RMDs for your participants

Strongpoint Partners 11/27/24 Strongpoint Partners 11/27/24

Higher Catch-Up Contribution Available in 2025

A catch-up contribution is available for plan participants starting in the year age 50 is reached. For these participants, the annual deferral limit can be exceeded by the catch-up amount. Keep the following in mind:

The annual deferral limit is based on the participant’s tax year; this is a calendar year limit, even if the plan year is an off-calendar plan year end.
In order for a plan to accept a catch-up contribution, it must be permitted in the plan document.

For 2024, the deferral limit was $23,000 and the catch-up contribution limit was $7,500, for a total of $30,500. For 2025, the deferral limit is $23,500 and the catch-up contribution limit is $7,500, for a total of $31,000.

As part of SECURE 2.0, a higher catch-up contribution will be available beginning on January 1, 2025, so long as a plan has chosen to adopt the new provision. To take advantage of the higher contribution, a participant must be age 60 to age 63. This contribution stops being available during the calendar year in which the participant reaches age 64.

This means a participant aged 60-63 would have the option to defer $34,750 in 2025 ($23,500 deferral limit plus $11,250 catch-up. If you decide to include this new provision for 2025, it’s important to ensure the payroll provider can track this information and that the participants are aware of the option and complete the necessary election forms.

Those participants aged 50-59 and over 63 are still able to take advantage of the standard catch-up and can defer $31,000 ($23,500 plus $7,500) for 2025.

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Preventing Late Deposits

As the time approaches to complete your annual data collection, you may be asked if any deposits to the plan were not made in a timely manner.

Money withheld from a participant’s paycheck as pre-tax deferrals, Roth deferrals or loan repayments must be contributed to the 401(k) or 403(b) plan within the time frame specified by the Department of Labor (DOL). Although the exact requirements can vary depending on the plan, deposits must be made as soon as it is administratively feasible to do so.

What does “as soon as administratively feasible” mean?

Essentially, this is the earliest date the money can be separated from company assets. Once you can access the withholdings, they should be deposited. Often, this is the actual pay date. While this is the go-to rule in most cases, smaller plans that start the year with fewer than 100 participants can take advantage of a safe harbor provision in which deposits can be considered timely so long as they are made within 7 business days of withholding. The best practice is to deposit your employees’ deferrals and loan repayments as soon as possible and to be consistent about what that entails. For example, if your processes and procedures allow the deposit to be made on the Monday following a Friday pay date, be sure to follow these same processes every pay period.

Do these late deposit rules also apply to employer contributions?

No, employer contributions have different deposit rules. Check with your accountant for tax deduction timing.

Why is this important?

Once the money is withheld from a participant’s pay, it becomes a plan asset. The plan exists for the exclusive benefit of the plan participants. When the money stays in the company’s account, it benefits the company instead of benefiting the participants. This is a prohibited transaction because it violates the exclusive benefit rule.

Should I deposit deferrals before the pay date?

No, the deferrals and loan payments don’t become plan assets until being withheld from the employee’s paycheck. If the money is contributed to the plan prior to the pay date, the contribution is considered an employer contribution rather than an employee contribution. In addition, the employee contribution will need to be funded in a timely manner. An exception can be made when the individual who usually makes the deposit will be out of the office when the deposit is scheduled, but the situation should be well-documented in case questions arise in the future.

How do I prevent late deposits?

The best way to prevent late deposits is to establish procedures and follow them. This should include comparing the amount withheld from payroll to the amount remitted to the plan, as sometimes participants are accidentally left off the contribution upload. In these cases, a simple reconciliation to payroll will prevent a late deposit. If you find you lack the necessary staff to consistently make deposits to the plan, it may be worthwhile to consider services provided by your accountant or payroll company which could handle this on your behalf.

What happens if I make a late payment?

The participants will need to be made whole, as if the deposit was never late. The plan sponsor will need to compensate the appropriate participant account(s) with the lost earnings; and for 401(k) plans, a 15% excise tax on the lost earnings will need to be paid. In addition, the late deposits are listed on the Form 5500 and could trigger an audit. There is no minimum limit here, so even if the correction and excise tax are small amounts, the correction still needs to be made.

In summary, even when the correction itself is minor, the effects of a late deposit can be enormous. To avoid the possibility of repercussions, consider your current processes for making deposits to the plan and determine if any adjustments are needed to ensure that your deposits are timely.

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Cost of Living Adjustments for 2025 are here!

On November 1, 2024, the IRS announced the Cost of Living Adjustments (COLAs) affecting the dollar limitations for retirement plans for 2025.

In October, the Social Security Administration announced a modest benefit increase of 2.5%. Retirement plan limits also increased over the 2024 limits. COLA increases are intended to allow participant contributions and benefits to keep up with the “cost of living” from year to year. Here are the highlights from the new 2025 limits:

The calendar year elective deferral limit increased from $23,000 to $23,500.
The elective deferral catch-up contribution remains $7,500. This contribution is available to all participants aged 50 or older in 2025. An additional $3,750 is available in 2025 for participants aged 60-63.
The maximum available dollar amount that can be contributed to a participant’s retirement account in a defined contribution plan increased from $69,000 to $70,000. The limit includes both employee and employer contributions as well as any allocated forfeitures. For those over age 50, the annual addition limit increases to include catch-up contributions.
The maximum amount of compensation that can be considered in retirement plan compliance has been raised from $345,000 to $350,000.
Annual income subject to Social Security taxation has increased from $168,600 to $176,100.

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Upcoming Compliance Deadlines for Calendar-Year Plans

September 15th

Required contribution to defined benefit plans, money purchase pension plans and target benefit pension plans.

Contribution deadline for deducting 2023 employer contributions for those sponsors who filed an extension for Partnership or S-Corporation tax returns to extend the March 15, 2024 deadline.

September 30th

Deadline for certification of the Annual Funding Target Attainment Percentage (AFTAP) for Defined Benefit plans for the 2024 plan year.

October 15th

Extended due date for the filing of Form 5500 and Form 8955-SSA for plan years ending December 31, 2023.

Due date for 2024 PBGC Comprehensive Premium Filing for defined benefit plans.

Contribution deadline for deducting 2023 employer contributions for those sponsors who filed a tax extension for C-Corporation or Sole-Proprietor tax returns for the April 15, 2024 deadline.

Due date for non-participant-directed individual account plans to include Lifetime Income Illustrations on the annual participant statement for the plan year ending December 31, 2023.

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Plan Ahead for 2025 Long-Term, Part-Time (LTPT) Employees

As a reminder, eligibility requirements went into effect for Long-Term, Part-Time (LTPT) employees as of January 1, 2024. However, additional changes that affect who is considered a LTPT employee will be coming for 2025. Please see the information below to plan ahead and ask us if you have any doubts!

• 2024

Plan Type: 401(k) Only

Years of Service Required*: 3 Years

Disregard Years Prior to: 2021

• 2025

Plan Type: 401(k) and ERISA 403(b)

Years of Service Required*: 3 Years

Disregard Years Prior to: 2021 for 401(k) / 2023 for ERISA 403(b)

*Minimum 500 hours/year over consecutive years.