![]() ![]() However, "when you've got midcareer hires who unfortunately may not have had any coverage previously, or who may have cashed out those amounts, then having the ability to get those people escalated up to 15 percent is going to be extremely important." "The SECURE Act will help in a big way."Ī 10 percent cap may "sound like it's going to be sufficient when you're bringing employees in at a very young age," said Jack VanDerhei, director of research at the nonprofit Employee Benefit Research Institute. ![]() "Getting people there is the issue," he added. "But for people to be better positioned for retirement, it really needs to be 10 percent at a minimum and closer to 15 percent" on average throughout an employee's career. "Overall, the amount people are saving is starting to ratchet up," said David Reich, national president of retirement services for global insurance brokerage Hub International. The law stipulates that the 10 percent cap still applies through the plan year that begins after the employee's date of participation, and then the cap goes up to 15 percent for subsequent plan years. Under the SECURE Act, this change is effective for 401(k) plan years beginning Jan. Once participants in safe harbor plans are contributing 15 percent of their paycheck, auto-escalation ends-although employees can choose to increase their savings rate above 15 percent. Higher default contribution rates can prod workers to save more for retirement-if they can afford to do so. Signed into law at the end of 2019, employers offering a safe harbor 401(k) plan with an automatic increase (or auto-escalation) feature can raise plan participants' contributions until they amount to 15 percent of pay, unless participants opt out of these increases. Before the SECURE Act was passed, the cap on default contributions under an auto-escalation program was 10 percent for safe harbor plans. ![]() Thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, ![]()
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