Frost Quarterly Retirement Plan Resources and Reminders
A quarterly communication with compliance reminders, information and resources to help you successfully manage your company's retirement plans for your employees.
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Q4 KEY REMINDERS
Important 2025 Updates for Retirement Plan Contribution Limits
Each year, the IRS adjusts retirement plan contribution limits and benefit caps based on cost-of-living adjustments (COLA). Below are the new limits for 2025.
| COLA Limits | 2025 | 2024 |
|---|---|---|
|
The maximum amount of pre-tax and Roth deferrals that can be contributed to the plan. |
$23,500 | $23,000 |
|
The additional amount that an individual, who attains age 50 before the end of the calendar year, can contribute to the plan. |
$7,500 | $7,500 |
|
The total contribution limit to the plan including employee deferrals, employer contributions and forfeitures allocated to a participant account. |
$70,000 | $69,000 |
|
The total contribution limit to the plan. |
$280,000 | $275,000 |
|
The amount of compensation that once reached in the preceding year defines a HCE. |
$160,00 | $155,000 |
|
The compensation limit for purposes of allocating employee and employer contributions. |
$350,000 | $345,000 |
|
The maximum annual contribution amounts to an HSA. |
$4,300 single coverage, $8,550 family coverage |
$4,150 single coverage, $8,300 family coverage |
|
The additional amount an individual age 55 or older can contribute to their HSA. |
$1,000 | $1,000 |
|
The maximum amount an individual may contribute to individual retirement accounts each year. |
$7,000 | $7,000 |
|
The additional amount an individual age 50 or older can contribute to individual retirement accounts beyond standard contribution limits. |
$1,000 | $1,000 |
Additional information to help you prepare for 2025:
- REMINDER: The IRA contribution deadline for the 2024 tax year is April 15, 2025.
- SAVE: The SECURE 2.0 provisions include larger catch-up contribution limits into an employer-sponsored retirement plan. For employees nearing retirement (ages 60-63), the catch-up limits increase to $11,250.
- REVIEW: See the phase-out details for traditional and Roth IRAs for 2025. Full details here.
National 401(k) Day is Friday, September 6!
Our Frost team has rounded up our top helpful tips for 401(k) plans for you to share with your plan participants to help them maximize their retirement savings and get the most out of planning for the future.
- Start contributing early
This is key to successful retirement savings. The longer an employee's money is invested, the longer it can benefit from compound interest (when investment returns earn returns of their own). - Take advantage of retirement plan matching dollars – it’s free money
A match is a special benefit companies may contribute to employees' retirement plans. Matching formulas, if available, vary by company. Our team suggests contributing at least enough to ensure a full match. - Work toward saving 15% for retirement
15% can seem like a significant amount to save toward retirement, especially if they are just starting out. This 15% may also include any amount the employer contributes. We recommend starting with a percentage they're comfortable with and working toward the goal of a total of 15%. - Keep track of previous retirement plans
A common mistake we see is people forgetting about retirement plans from previous employers. Keeping track of previous plans will help employees get the most out of the money they've already saved and can be helpful when they roll funds from a previous account into their current plan. - Consider Roth contributions
Most employers offer Roth retirement plan options, but we often see employees not choosing or taking advantage of these benefits. Roth benefits include tax-free growth, no income limit, higher contribution limits than a Roth IRA, and avoids required minimum distributions. Employees who might benefit from a Roth 401(k) include:- If they are newer in their career and have a longer retirement horizon and more time to accumulate tax-free earnings
- Employees who aren't eligible for Roth IRAs but want a pool of tax-free money to draw on in retirement
- Employees who want to leave tax-free money to their heirs
- Contribute the catch-up amount
If an employee is 50 or older, they can contribute up to $23,000 to their 401(k) with an additional catch-up contribution of $7,500. These contributions must be made by December 31, 2024.
Q1 KEY REMINDERS
Timely 401(k) Deposits
Did you Know?
Failure to make timely deposits into 401(k) plans is the most common error in audited plans. Participant deferrals and loan payments must be made promptly.
When Should Deposits be Made?
The Department of Labor (DOL) states a general rule that the deductions from employees’ paychecks for contributions to the plan must be deposited with the plan as soon as reasonably possible, and no later than the 15th business day of the month the amounts are withheld from employees’ pay.
The DOL emphasizes that should an employer be able to deposit sooner, they are required to do so. The DOL will review an employer’s deposit history to capture their deposit timing.
For example, an employer with a bi-weekly payroll has a history of making contributions by the fifth business day after payroll. However, in the current payroll period, the employer takes 10 business days to deposit withheld amounts into the plan. Even though it is within the 15-business-day window, the DOL may flag it as unreasonable given the employer’s history.
For plans with fewer than 100 participants, the DOL created a ‘Safe Harbor standard’ which states any deposits made within seven business days of the payday are considered timely.
Mistakes Happen
If certain deposits are found late, prompt action can help minimize the financial impact and exposure to the plan. Read more on the IRS 401(k) Fix-It Guide.
Q1 KEY REMINDERS
Long-Term Part-Time Employee Eligibility Changes
As a result of the SECURE 2.0 Act, effective Jan. 1, 2024, plan sponsors must allow long-term part-time (LTPT) employees to participate in their retirement plans.
What is a LTPT employee?
A LTPT employee is any employee who works 500-999 hours in three consecutive plan years (beginning with the 2021 plan year). LTPT employees can no longer be excluded based on categories like part-time, temporary or seasonal.
How does this affect your plan?
- Only plans with eligibility provisions that exclude LTPT employees are affected by the new regulations.
- If you do not have part-time employees, then these changes do not apply to your plan.
- If your plan eligibility is less than one year, then these changes do not apply unless you are excluding part-time employees.
- If an eligible full-time employee reduces their schedule to part-time, they met the normal eligibility rules of the plan and are not considered a LTPT employee.
- You are not required to make employer contributions (match or profit sharing) to LTPT employees.
- To avoid the administrative updates to comply with the new regulations, you can amend your plan to have a shorter waiting period and/or remove service-based exclusions. In this case, all LTPT employees will receive the same employer contributions as all other eligible employees.
What is your next step?
- Determine if you have any LTPT employees who are now eligible based on the new legislation.
- Review your enrollment process. If you identify any LTPT employees, you must offer them the opportunity to make employee contributions beginning in the 2024 plan year. For non-calendar year plans, consult your recordkeeper or TPA to discuss when this change will be effective.
- Ensure your payroll systems are updated to track LTPT employees. If you decide to not provide employer contributions to LTPT employees, make sure your payroll is set up accordingly.
Please reach out to your Frost wealth advisor with any questions or if you would like to learn more about our retirement advisory services call us at (888) 263-6480 or send an email to retirementservices@frostbank.com.
Q4 KEY REMINDERS
Cost-of-Living Adjustments for Retirement Plans
The tax law places limits on the dollar amount of contributions to retirement plans and the amount of benefits under a pension plan. IRC Section 415 requires the limits to be adjusted annually for cost-of-living adjustments (COLA). The below is a guideline to the COLA limits and their respective updates for 2024.
| COLA Limits | 2024 | 2023 |
|---|---|---|
|
The maximum amount of pre-tax and Roth deferrals that can be contributed to the plan. |
$23,000 | $22,500 |
|
The additional amount that an individual, who attains age 50 before the end of the calendar year, can contribute to the plan. |
$7,500 | $7,500 |
|
The total contribution limit to the plan including employee deferrals, employer contributions and forfeitures allocated to a participant account. |
$69,000 | $66,000 |
|
The total contribution limit to the plan. |
$275,000 | $265,000 |
|
The amount of compensation that once reached in the preceding year defines a HCE. |
$155,00 | $150,000 |
|
The compensation limit for purposes of allocating employee and employer contributions. |
$345,000 | $330,000 |
|
The maximum annual contribution amounts to an HSA. |
$4,150 single coverage, $8,300 family coverage |
$3,850 single coverage, $7,750 family coverage |
|
The additional amount an individual age 55 or older can contribute to their HSA. |
$1,000 | $1,000 |
Please reach out to your Frost wealth advisor with any questions or if you would like to learn more about our retirement advisory services call us at (888) 263-6480 or send an email to retirementservices@frostbank.com.
Q3 KEY REMINDERS
SECURE 2.0 Act and Retirement Plan Impact
In December 2022, the SECURE 2.0 Act was established to build upon the SECURE Act of 2020 and improve retirement saving options. It includes 92 new provisions, both required and optional, to help promote savings, offer more flexibility and boost incentives for businesses.
What is Required?
When the act passed, catch-up contributions starting in 2024 for participants with FICA wages of more than $145,000 (indexed) for the prior year were required in the form of Roth contributions. On August 25, 2023, the IRS released guidance granting a two-year delay in the provision’s effective date.
How Can it Impact Your Plan?
Effective in 2026, plans must have a Roth source if they wish to allow catch-up contributions.
What is Optional?
- Employers are no longer required to provide intermittent ERISA or Code notices to unenrolled participants
- Employers can rely on employee certification of hardship distribution conditions from their retirement plan
- Plans can allow participants to elect employer-matching or non-elective contributions to a Roth versus pre-tax
- After December 31, 2023, force-out amount may be increased from $5,000 to $7,000
- Employers can match via a 401(k) plan, 403(b) plan, SIMPLE IRA, or governmental 457(b) plan to “qualified student loan payments”
How Can This Impact Your Plan?
Plans will need to be updated with any optional provision added.
How Can We Help?
As your advisor, we can work with you, your recordkeeper and your payroll provider to help amend the plan(s) with optional provisions and help answer questions about SECURE 2.0 Act.
Please reach out to your Frost wealth advisor with any questions or if you would like to learn more about our retirement advisory services call us at (888) 263-6480 or send an email to retirementservices@frostbank.com.
Q2 KEY REMINDERS
FILE YOUR FORM 5500
Form 5500 is a report detailing a company’s employee benefits, and employers are required to file it each year for their retirement plan. This filing is an important compliance, research and disclosure tool for the Department of Labor, and a disclosure document for plan participants and beneficiaries. It gives information about your plan qualifications, investments and financial condition.
- Form 5500 is for companies with 100 or more plan participants. If your company had less than 100 plan participants at the start of the year, you will file a Form 5500-SF. Learn more about Form 5500.
- In addition to the Form 5500, an 8955-SSA should be filed each year to report retirement plan assets that have not been paid out to terminated participants.
- Important deadlines for calendar year plans:
- July 31 – Submit Form 5500 / 8955-SA or prepare and mail Form 5558 for extension
- October 16 – Final deadline to submit Form 5500
- If your plan is not a calendar year plan, the above dates will require adjustment.
REPORT FIDELITY BOND
All retirement plans must report the dollar amount of their fidelity bond on the Form 5500.
- ERISA requires that a fidelity bond cover all plans to insure them against fraud or dishonesty by those handling the assets.
- The fidelity bond should cover 10% of the plan assets or $500,000, depending on which is less.
- The bond is generally a rider on your firm’s insurance policy so you should contact your insurance provider each year to ensure you have the correct bond amount for your plan.
PREPARE LARGE PLAN AUDIT
Generally, if the retirement plan has over 100 eligible participants (large plan) at the beginning of the plan year, it is required to have an independent audit report prepared by a CPA to attach to the Form 5500 filing. *Note, in certain circumstances, if the retirement plan had less than 120 participants at the beginning of the plan year, you may be able to avoid the large plan audit.
- If you haven’t already, we suggest you engage a CPA firm today.
Please reach out to your Frost wealth advisor with any questions or if you would like to learn more about our retirement advisory services call us at (888) 263-6480 or send an email to retirementservices@frostbank.com.