Managing retirement plans can be challenging for HR professionals, especially when it comes to boosting employee participation while ensuring compliance with evolving legislation. Fortunately, features like auto-enrollment and auto-escalation offer effective solutions that enhance both participation and compliance effortlessly.
Understanding Auto-Enrollment
Auto-enrollment is a feature that automatically enrolls eligible employees into their employer's retirement plan, typically at a contribution rate of 3-6%. This proactive approach helps employees overcome inertia and procrastination, ensuring they don't miss out on critical employer-matching dollars. Additionally, employees maintain full control, allowing them to opt out or adjust their contribution levels as they see fit.
The Benefits of Auto-Escalation
Auto-escalation takes the next step in retirement savings by increasing an employee's contribution rate by about 1% annually, usually capping between 10-15%. This gradual increase aligns with salary growth, preventing the need for employees to manually update their contribution levels. It supports long-term savings objectives and dovetails seamlessly with auto-enrollment to enhance overall savings outcomes.
Navigating Compliance
Upcoming mandates, effective for plans established on or after December 29, 2022, will require an initial contribution rate of 3-10%, escalating annually to reach 10-15%. Businesses under three years old or those with 10 or fewer employees are exempt. Furthermore, these features can unlock tax credits of up to $5,000 annually for three years, easing potential compliance burdens and offering valuable financial incentives.
Strategic Implementation
Incorporating auto-enrollment and auto-escalation into retirement plans goes beyond meeting requirements; they serve as strategic tools that enhance plan effectiveness and ease administrative burdens. Employers are encouraged to consult with their retirement plan providers to evaluate readiness and explore effective integration strategies, ensuring that these features benefit both the organization and its employees.
Investment Advisory services offered through Platinum Planning, Inc., which is a Registered Investment Adviser. Securities offered through Trade-PMR Inc., member FINRA/SIPC. Platinum Planning, Inc. is a Registered Investment Adviser located in Sarasota, FL. Platinum Planning may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Platinum Planning's web site is limited to the dissemination of general information pertaining to its investment advisory services. Accordingly, the publication of the Platinum Planning web site on the internet should not be construed by any consumer and/or prospective client as Platinum Planning's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. All information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
Check the background of our Investment Professionals on FINRA's BrokerCheck here.
All Rights Reserved | Platinum Planning Inc. | Privacy Policy
