Many employers struggle to get lower paid employees to contribute to the 401k. Even when they offer an employer match like a Safe Harbor Match!
Low contributions impact the company 401k: When this cohort of employees does not contribute to the 401k, it can negatively impact the annual plan testing ie, Average Deferral Test aka ADP (not to be confused with the payroll company).
This causes HR professionals to pull their hair out wondering why these employees “won’t take the free money or invest for their future”.
I’ve told all my clients and their employees about the Savers Credit. This federal tax credit gives lower income workers a tax credit when they contribute to an IRA or 401k.
Oh well, that’s all changed….
Savers Credit is now The Savers Match.
The Saver’s Credit is now called the Saver’s Match. The employee will get an actual match contribution rather than a tax credit. I like this very much because it puts more money in an employee’s account allowing them to save more for their future.
And they ran some studies to see who will be impacted most by this change… it’s black female workers age 25-34.
Reviewing my client list… it’s going to help a LOT of employees all across the country by helping them invest more for the future. This is great news.
Have questions? Book a consult today.
Here’s the entire article on the Saver’s Match. https://www.napa-net.org/news-info/daily-news/saver%E2%80%99s-match-could-have-major-impact-race-gender-savings-gaps
Retirement Partners of California Can Help!
We’ll design an Employee Financial Education Plan to help improve your 401k participant results.
Disclosures, Sources, and Footnotes
This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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