Retirement Plan Check-Up

By: Chad Halbur

As your company grows and changes, your retirement plan should also grow and change to ensure the plan continues to meet the needs of the company and its employees. The most prudent thing a plan sponsor can do is review the retirement plan annually. We find the most popular time for plan sponsors to do this is at year end.

Some of the key things we review for our clients are the plan design, investment performance and fees paid to maintain the plan.

Plan design has many facets, and I would like to share with you the three F’s we look at in our review.

Funding Level
A key question is whether your plan type allows you to fund at a level necessary to reach your retirement goals. Current 2026 IRS annual contribution limits for common plan types are:

• IRA (Traditional and Roth): $7,000, with a $1,000 catch-up for participants age 50 or older.
• Simple IRA: Employee contribution of $16,000, with a $3,500 catch-up for participants age 50 or older, plus an employer contribution (typically 2 or 3 percent of compensation).
• SEP IRA: Employer contribution up to 25 percent of compensation, not to exceed $72,000.
• 401(k) Plan: Employee elective deferral of $24,500, with a $7,500 catch-up for participants age 50 or older. Total contributions (employer plus employee) can be as high as $75,500 depending on plan design and participant age.

Once you know the permissible limits, consider whether the plan itself imposes stricter limits on how much you, as an owner or highly compensated employee, can contribute. If your plan’s design limits contributions below IRS limits, you may be missing an opportunity.

Flexibility:
Does your plan provide you the ability to change the funding level for employer contributions? For example, in good years you might want to increase the employer contributions and in bad years you might want to suspend employer contributions and preserve cash.

Features:

• Has your plan adopted the Roth deferral feature?
• Does your plan offer employees the ability to take a loan? 
• Does your plan offer in-plan Roth Conversions?
• If not, would these features help attract or retain quality employees?

If you are considering changes to your plan, some of these changes can only be made at year end so now is a great time to review!