Q: I read your recent Ask the Experts column explaining true-up contributions. The column states that such contributions “would be made at year-end.” However, as a 403(b) plan sponsor administering this provision, it does take us some time to calculate all of our true-up contributions. Is there a deadline for such contributions to be made?
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
A: Excellent question! The contribution deadline for true-up contributions is the same deadline as for employer contributions in general, so it does allow for some time to calculate and allocate true-up contributions. We covered the employer contribution deadline in another recent column; in general, to be considered an annual addition for 415 limit purposes, contributions must be made to the 403(b) plan no later than the 15th day of the 10th calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year (typically calendar year) ends.
Thus, if the 2024 limitation year ends December 31, 2024, and the employer fiscal year aligns with the calendar year, 2024 employer contributions, including true-ups, must be made by October 15, 2025, to count as an annual addition for 2024.
NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.
Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issmarketintelligence.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.
How Plan Sponsors Can Reevaluate Total Rewards in 2025
Employers can improve their offerings by enhancing the automatic 401(k) deferral rates and offering ‘must-have’ benefits to employees, according to a new Fidelity report.
As employers continue to experience tighter budgets and cost pressures due to rising inflation, a new Fidelity Investments report addresses how plan sponsors can think strategically about their total rewards strategies.
Fidelity’s 2025 workplace outlook report highlighted certain plan design improvements that plan sponsors can consider, especially with an eye toward helping underserved groups that lack financial education and struggle to save for retirement.
According to the report, 51% of Black employees, 45% of Latino employees and 43% of multiracial employees are missing out on achieving the full retirement match from their employers. These employees exhibited the highest likelihood of remaining at a plan’s default deferral rate for extended periods, Fidelity found, as this may be viewed as their employer’s “suggested” savings amount.
Kirsten Hunter Peterson, vice president of thought leadership at Fidelity, says a way for employers to address this issue would be to automatically enroll participants at the full match rate.
“For example, if an employer’s plan offers a 6% match, they should consider auto-enrolling participants at 6% to start,” Peterson says. “Instead, what often happens is that participants are auto-enrolled at, say, 3% or 4%, even if their match is higher, and participants don’t proactively go in and increase that deferral on their own or enroll in an automatic increase program. … They’re effectively leaving money on the table.”
Peterson says if employers were to set the automatic deferral rate to the level at which participants would earn the full plan match, it would enable more than eight out of every 10 Black and Latino employees to earn the full match.
Must-Haves and Game-Changers
According to data from the third quarter of 2024, Fidelity found that the most common 401(k) match formula is a safe harbor design—a 100% match on the first 3% and a 50% match on the next 2% of pay. The second most common match formula was a 100% match on the employee’s first 4%. For 403(b) plans, the most common match formulas were 100% on the employee’s first 6%, followed by 100% on the employee’s first 5%.
In addition to evaluating the retirement match, the report suggested that employers think about the benefits that are “must-haves” for their organization, as well as “game-changing” benefits.
The top “must-have” benefits among employees surveyed included health insurance, dental insurance, paid time off, vision insurance, a workplace retirement plan, paid sick leave and an employer match. The top three “game-changing” benefits were remote/hybrid working, flexible working hours and a compressed workweek.
Peterson says employers with limited budgets should first evaluate if they offer these “must-have” benefits and ensure that they are of high quality. Peterson says they can then evaluate if they offer any “game-changers,” which are often less expensive or cost neutral.
“These flexible benefits are highly valued by employees,” Peterson says. “They’re less expensive or [more] cost neutral than adding a new benefit. They can be really helpful for employers that need to remain competitive or boost their competitiveness, while also being mindful of the budget limitations that it seems like everyone is dealing with right now.”
How to Handle Health Care
The rising cost of health care has also been a major strain on both employers and employees. Health care coverage continues to be the most expensive benefit for employers. Of the benefits leaders Fidelity surveyed, 61% said health care costs negatively influence their company’s business strategy and operations. Fidelity suggested that employers invest in: simplifying health care navigation, ensuring the health plan covers mental health services and helping employees pay for care through vehicles like health savings accounts.
The report also stressed that plan sponsors and human resources leaders should pay attention to the changing regulatory environment, including the potential extension of tax cuts from the first administration of President Donald Trump; new SECURE 2.0 Act of 2022 provisions going into effect; and rising health care costs.
“I would encourage plan sponsors to plan for that uncertainty and recognize that the legal and regulatory environment is fluid, and it looks like it will continue to be for the foreseeable future,” Peterson says. “[It] can feel overwhelming, but luckily, there are a lot of resources out there to help plan sponsors navigate forward.”
She says plan sponsors should lean on their recordkeepers, retirement plan providers and benefits providers who are used to dealing with changing legal and regulatory issues, as well as consulting with advisers to ensure compliance with SECURE 2.0.
