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What’s on Tap for 401(k) Plan Provisions for Growing Emerging Industry Companies in 2024, Part 1

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On Pointe – Wealth Management Edition

What’s on Tap for 401(k) Plan Provisions for Growing Emerging Industry Companies in 2024, Part 1

What’s on Tap for 401(k) Plan Provisions for Growing Emerging Industry Companies in 2024, Part 1

I was enjoying a frosty beverage at one of my favorite tech organization’s event the other week. The weather was absolutely gorgeous. Temps in the 70’s, beautiful blue sky, and humidity nearly non-existent, which is super rare for summers in Maryland!

What I like is I have a great network of successful executives and founders who frequent these tech council events. I’ve found that you can learn a lot from being around these folks and I make sure a little of their success finds me! Success breeds success…

A CPA whom I had met a few months earlier in Washington DC was the first person I spoke with. She also supports the tech industry with her services so naturally we had some similar experiences to share.

As we discussed our service models and the unique skills, we offer the industry we talked about 401(k) and what should she be aware of for 2024.

Some of her client’s concerns are keeping costs low and safeguarding employer contributions. Thus, some employers look to restrict eligibility to make sure full-time, loyal employees are rewarded. Eligibility may require employees to meet certain age and service requirements.

In 2024, plans will likely expand eligibility to include part-time and temporary employees.

While on the surface this may diminish the company’s ability to customize their plan. Looked at another way, it may help emerging industry companies tap into a broader talent pool. Especially when workforce issues seem to be at the top of almost everyone’s list.

What I do like about CPAs is they know their taxes, especially their client’s taxes! So, I positioned our conversation to focus on the next evolving provisions of 401(k)… auto-enrollment and auto-escalation.

Auto-enrollment and auto-escalation will become a standard feature in 401(k) plans. This means that employees will be automatically enrolled in the plan unless they opt-out.

Auto-escalation will allow automatic increases in contribution rates over time. This helps employees to save more without the need for active decisions.

To the excitement of my new CPA friend, there may be additional tax credits for starting this type of plan. Up to a max of $5,500! Also, these plans can help with testing so that your highly compensated employees can defer to their contribution limits.

While I was on a roll, I brought up another interesting point. Something our younger entrepreneurs aren’t thinking about, but you might be if you’re closer to age 59 1/2… the distribution of income.

To address the increasing need for retirement income security, 401(k) plans will offer more lifetime income options. These options will help employees manage their retirement savings. Lifetime income options help provide a steady income stream throughout retirement. For growing companies, this provision ensures their employees have a reliable source of income in their post-career years.

Of course, there are many options for distributions but having the lifetime income option should be another potential tool.

While I was about to share a few other items for 2024, another group of people wanted to join our conversation. We of course welcomed them into the conversation. Naturally, the topic changed back to tech, what’s new, and the excitement for innovation in Maryland. Which is another of my many favorite topics to talk about!

This means good friend; you’ll have to stay tuned for our next edition of On Pointe 401(k) to find out more!


Take care,

James S. Gibbons CPFA
Alpha Pointe Capital-Founder/Wealth Manager

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