Products October 2, 2023

Guideline Launches Starter 401(k) Plan

The plan provider aims to gain greater market share of retirement 401(k) plans and has debuted a starter product for plan sponsors made possible by SECURE 2.0 legislation.

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Retirement plan provider Guideline Inc. has launched a 401(k) plan product for small businesses, offering a new kind of deferral-only retirement plan created in the SECURE 2.0 Act of 2022 to broaden retirement plan coverage, the company announced this week.

Guideline debuted what Congress called a starter 401(k) option for employers, supporting the law’s efforts to encourage plan sponsors to provide workplace retirement benefits.

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Guideline’s Starter plan is a “simplified, out-of-the-box plan … exempt from IRS non-discrimination tests, which means it has fewer compliance requirements, but more limitations, including lower contribution limits and no employer contribution [requirements],” according to the announcement. 

Starter 401(k) plans generally require that all the company’s employees are enrolled in the plan, according to information from the Groom Law Group about the SECURE 2.0 provision. The starter 401(k) plans also have a $6,000 employee contribution limit and exclude employer contributions. Guideline’s plan includes automatic enrollment with a contribution level of 3% to 15% and requires employers to connect with eligible payroll providers, including Gusto and QuickBooks.

Plan sponsors that adopt the Guideline plan receive automated plan administration, recordkeeping, custodial services and guided employee onboarding. Guideline also provides 3(38) and 3(16) fiduciary services, including filing IRS and Department of Labor reports and signing Form 5500s, and a mobile app for savers to set up and manage their account.  

Guideline estimates that starter 401(k)s could help provide retirement benefits to more than 19 million U.S. workers.  

For workers, the prevalence of employer-sponsored retirement plans are a significant factor to encourage the likelihood that workers will accumulate significant assets for retirement.  

BlackRock and Human Interest research found the retirement savings of workers are largely driven by—or, alternatively, blunted by—the availability of “intuitive and automated savings tools,” according to a September 14 retirement insights post.  

Compliance October 2, 2023

Retirement Contribution Limits, COLA Stay on Track With Continuing Resolution

The DC contribution limit was projected to be $23,000 for 2024, and the IRS should stay on track in implementing the change.

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President Joe Biden signed a continuing resolution into law Saturday night that will keep the federal government operating through November 17.

Per the legislation, government departments may spend: “Such amounts as may be necessary, at a rate for operations as provided in the applicable appropriations Acts for fiscal year 2023 and under the authority and conditions provided in such Acts, for continuing projects or activities.”

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Though departments cannot start new projects that have not been approved by a proper appropriations bill, they may continue with normally scheduled projects or projects that were already underway, according to the legislation.

Those approved projects include the obligation of the Bureau of Labor Statistics to track inflation. The BLS is currently scheduled to publish its inflation numbers for the month of September on October 12, which will in turn allow the Social Security Administration to use the Consumer Price Index for Urban Wage Earners and Clerical Workers to calculate the cost-of-living adjustment for 2024 benefits. Additionally, the Internal Revenue Service uses the Consumer Price Index for All Urban Consumers to calculate the limits on contributions to defined contribution retirement plans.

Lisa Featherngill, the national director of wealth planning at Comerica Bank, says the IRS usually announces its contribution limits in late October and, with the continuing resolution, “we should be able to get that data.”

The continuing resolution ends on November 17, but both the Social Security Administration and IRS will have the inflation data they need by then, so even if the government shuts down in November, the inflation adjustments for 2024 should stay on trac,k because “we should have all the info for 2024 before then,” Featherngill says.

A report by Mercer predicted that the limit for DC plan contributions will be $23,000, based on inflation numbers, but the “IRS usually announces official limits for the coming year in late October or early November,” according to the August report.

Without the resolution to continue government operations, the BLS would have furloughed all employees, according to its shutdown contingency plan. That would have halted the creation of key economic data needed to set the 2024 limits.

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