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.
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.
