While it came down to the wire, both the House and Senate have now approved the much-anticipated SECURE 2.0 Act of 2022 as part of the mammoth $1.7 trillion omnibus spending bill.

For months, it was anticipated that Congress would attach a final SECURE 2.0 package to a year-end spending bill, but that wasn’t confirmed until earlier this week, and even then, it wasn’t necessarily guaranteed. Congress had faced a Dec. 23 deadline to approve the legislation to fund the government for the remainder of fiscal year 2023 (which began Oct. 1) and prevent a government shutdown. And for a short while, it appeared that lawmakers might not beat the deadline and would punt the funding bill until next year, meaning the SECURE 2.0 would have to start over from scratch.

But the U.S. Senate approved the 4,000-page “Consolidated Appropriations Act, 2023” (H.R. 2617 as amended) on Dec. 22 by a vote of 68-29. The House followed suit, approving the legislation Dec. 23 by a near party-line vote of 225-201, with one member voting present and nine Republican members voting in support of the bill.  With final congressional passage now in hand, the legislation is cleared for presidential signature. In the meantime, Congress also approved another short-term continuing resolution (until Dec. 30) to give lawmakers time to prepare and enroll the final bill before sending it to the White House.

Retirement professionals will want to pay close attention to when the legislation is signed. As explained in our “What Else Is in the New SECURE 2.0?” post, the date that the legislation is signed into law will serve as the “date of enactment,” and several of the provisions contained in the legislation become effective on that date. Many other provisions have effective dates in 2023 or later years.

As a top priority of the American Retirement Association, enactment of the SECURE 2.0 Act, which builds off the 2019 SECURE Act, will further improve upon the success of the private employer-based retirement system by making it easier for businesses to offer retirement plans and for individuals to save for retirement.

A sampling of the key retirement provisions among the 90-plus contained in the final spending bill include:

• Establishing a new “Starter K,” supported by the ARA which will allow employers that do not currently sponsor a retirement plan to offer a starter 401(k) plan (or safe harbor 403(b) plan);
• Providing a 100% tax credit for the start-up of new retirement plans among small businesses;
• Requiring new 401(k) and 403(b) plans to automatically enroll employees in the respective plan upon eligibility, subject to certain conditions;
• Providing an enhanced Saver’s match that modifies the existing Saver’s Credit by changing it from a credit paid in cash as part of a tax refund to a government matching contribution that must be deposited into a taxpayer’s IRA or retirement plan;
• Allowing the establishment of new emergency savings accounts linked to individual account plans;
• Allowing employers to treat student-loan payments as elective deferrals for purposes of matching contributions;
• Implementing higher catch-up limits at age 60, 61, 62, and 63 (beginning after Dec. 31, 2024);
• Gradually increasing the required minimum distribution (RMD) age from the current 72 to age 75;
• Allowing 403(b) plans to participate in multiple employer plans (MEPs) and pooled employer plans (PEPs);
• Easing the current restrictions and expanding the current limits for qualified longevity annuity contracts (QLACs) and eliminating a penalty on partial annuitization;
• Allowing for the establishment of auto-portability arrangements and increasing the dollar limit for mandatory distributions;
• Establishing a Retirement Savings Lost and Found;
• Providing permanent rules for the use of retirement funds in connection with qualified federally declared disasters;
• Providing a safe harbor for corrections of employee elective deferral failures; and
• Expanding the Employee Plans Compliance Resolution System (EPCRS) to, among other things, allow more types of errors to be corrected internally through self-correction.

Original Article Provided By: SECURE 2.0 Headed for Enactment | AMERICAN SOCIETY OF PENSION PROFESSIONALS & ACTUARIES (asppa.org)

Announcement of the official limits is still a few months away, but early projections from Mercer suggest that nearly all qualified retirement plan limits will increase by unprecedented amounts next year.

The 2023 limits will reflect increases in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of 2021 to the third quarter of 2022. Using this measure, inflation is projected to reach its highest level since indexing began, causing 7%–11% increases for most limits, based on their rounding levels, according to benefits consultant Mercer, whose past projections have been rather accurate.

In addition, the non-SIMPLE plan catch-up limit—which has a large rounding threshold—will jump more than 15%, the firm notes.

Using the Internal Revenue Code’s cost-of-living adjustment and rounding methods, the CPI-U through June, and estimated CPI-U values for July, August and September, the firm projects that the contribution limits for 401(k), 403(b) and eligible 457 plan elective deferrals (and designated Roth contributions) will increase from $20,500 this year to $22,500 in 2023.

The 415(c) DC plan maximum annual addition is projected to increase from $61,000 to $67,000. Mercer notes that the limit will be $66,000 if inflation is less than 0.25% per month for July, August and September.

Additionally, the 414(q)(1)(B) highly compensated employee and 414(q)(1)(C) top-paid group limit is projected to be $150,000 in 2023, up from $135,000 this year.

Other 2023 projected increases include:

• the 414(v)(2)(B)(i) catch-up contribution limit (for plans other than SIMPLE plans) rises from $6,500 to $7,500 in 2023;
• the 415(b) DB plan maximum annuity limit rises from $245,000 to $265,000;
• the 401(a)(17) and 408(k)(3)(C) compensation limit rises from $305,000 to $335,000 (Mercer also notes that the limit will be $330,000 if inflation is less than 0.25% for July, August and September); and
• the 416(i)(1)(A)(i) officer compensation for top-heavy plan key employee limit rises from $200,000 to $215,000.

The estimates cannot be finalized until after September CPI-U values are published in October. The IRS typically announces official limits for the coming year in late October or early November.

Separate estimates by The Senior Citizens League (TSCL) published last month show that next year’s annual Social Security cost-of-living adjustment (COLA) could be 10.5% next year, the highest in more than four decades, based on the June CPI data.

Original Article Provided By: https://www.asppa.org/news/browse-topics/record-increases-projected-2023-retirement-plan-limits

As inevitable as retirement is, why is properly preparing for it so difficult?

It could be that participants are preoccupied with other concerns. Most (70%) of the respondents to a recent Schroders retirement survey said they don’t have enough savings to add to a retirement plan, while others reported that they have other financial priorities (60%) or that the future is too uncertain to plan for (50%).

And as industry professionals encourage participants to prepare for their future, many people are reluctant to add what they believe is an insufficient amount to their retirement plans. Instead of adding what they can afford to, they fail to add anything at all, the survey found.

To combat this, Juan Carlos Cruz, founder of Britewater Financial Group in Brooklyn, New York, suggests plan administrators work to simplify the retirement plan message by helping participants monitor living expenses and 401(k) contributions simultaneously.

“One way is to offer a monthly monitoring service to see how the employee is adjusting and handling their living expenses,” he recommends. “A more hands-on approach would help the saver make adjustments and will help the employee see that saving is not that difficult.”

Robert Dunn, president and managing partner of Novi Wealth Partners in Princeton, New Jersey, says plan sponsors should understand where their employees are financially. Especially during the pandemic, many are looking to grow their emergency savings rather than their retirement accounts, for example.

“Life is difficult, and in the face of COVID-19, certainly unpredictable,” Dunn notes. “But once someone has accepted their personal situation, they can begin to evaluate their options, whether it is attempting to earn additional income or spending less.”

While it can be difficult to plan during an uncertain period, Dunn suggests that participants look to their futures and understand what expenses may be required. One common example is preparing for any future college expenses, he says.

Cruz says many forego saving for retirement on the common belief that Social Security will provide enough retirement income. Others believe they’ll continue working well into their retirement years. The Schroders study found 53% of respondents believe they will continue working during retirement in order to cover basic living expenses.

On top of these common misconceptions, other financial responsibilities, including paying down student loan debt, are likely to take priority over retirement for some workers. These participants might also believe they’ll earn more in the future and can save more then, “but that is not always the case,” says Dunn. As participants grow their income, their spending needs are likely to increase as well, he contends.

Enabling plan design features, such as a “set-it-and-forget-it” options like automatic enrollment and automatic escalation, along with an emergency savings vehicle, can help participants gradually save over time, suggests Harry Dalessio, head of institutional retirement plan services at Prudential Retirement in Hartford, Connecticut.

Sponsors can also help participants manage short-term money stressors by providing a range of financial wellness tools and resources, including but not limited to student loan programs, debt and credit management tools and budget development programs, Dalessio adds.

Employer communication and education can also contribute to participants’ financial wellness. “Sponsors shouldn’t underestimate the value of offering communications on plan features, the long-term impact of compound interest and understanding the importance of transitioning their accumulated savings into a guaranteed income stream as they are approaching retirement,” Dalessio says.

Communicating with participants on the importance of savings and accumulation, if possible, is key, Cruz says. From there, employers and financial advisers can work with participants to adjust their savings goals.

Additionally, speaking to employees about the basics of retirement planning can ease any apprehensions they may have. He notes that many savers believe that once they save money into a defined contribution (DC) plan, the money is unavailable until retirement. But in the case of an off-chance emergency, the money is still accessible, though withdrawal penalties will apply.

“This can make people more reluctant to save, as they believe the money is gone and never to be seen again,” Cruz says. “Explain how these plans can be helpful in case of an unforeseen emergency, and how easily this money can be accessed. An explanation of the taxes and penalties and how withdrawing may impact their savings in the future must also be provided.”

Implementing a proper plan design is also imperative to creating a successful retirement income strategy, Dalessio says. Plan sponsors are responsible for enabling individuals with a mechanism to create a steady income stream that will last in retirement, he notes.

“Saving and accumulation should still be a key focus for participants,” Dalessio says. “But making sure they understand the importance of creating that income plan for later is also a critical component to successful financial planning.”

-Original Article Source: https://www.plansponsor.com/simplifying-retirement-planning-message/

Why Choose a Davis Bacon Pension Plan from Davis-Bacon Pension Plans, Inc

If you know anything about a Davis Bacon Pension Plan, you may know that it is a great option for a variety of reasons. It can be a difficult decision to understand the different legal regulations when it comes to retirement plans, which is why we do the work for you. At Davis-Bacon Pension Plans, Inc we specialize in these plans and offer a variety of different benefits.

Benefits of a Davis Bacon Pension Plan

• Labor burden
• General Liability Insurance
• Compliance services
• Flexible pension plans
• Calculate savings
• Workers compensation

Davis Bacon Pension Plan Options

401k Plan

These are qualified plans that are established by employers. In these plans, employees may make elective salary reductions, as well as contributions on a variety of tax bases.

Match Plans

Matching for a retirement plan is always incredibly important. With Davis Bacon Plans, an employer contribution that may match the employee’s elective salary reduction contribution. This is always up to a specific amount, or percentage of compensation.

Profit-Sharing

These plans allow you to create an equal contribution plan giving employers and employees access to the profits of the company. Then, employees are given a percentage of profits based on overall earnings.

Safe Harbor

There are two forms of Safe Harbor available. The first is mandatory for all eligible employees. This is something that is taken care of when obtaining a Davis Bacon plan through our services. Additionally, there is the Safe Harbor Match. This part of the plan includes a mandatory employer contribution for all eligible employees. If employees do not make a Salary Deferral then no contribution is made.

Contact us to Learn More

At Davis-Bacon Pension Plans, Inc we specialize in helping you access the most affordable Davis Bacon Pension Plan options on the market. Contact us today to learn more at (425) 889-8855!

Prevailing wage laws were put into place during the Great Depression. The purpose was to prevent unfair practices when it came to labor in non-union situations. Because of this, we have prevailing wage pension plans available.

Understanding the Prevailing Wage

Various laws surround this particular topic. This includes federal prevailing wage laws, state prevailing wage pension plans laws, and prevailing wage laws related to certain localities.

The Davis-Bacon Act

The Davis-Bacon Act is a federal prevailing wage law. This law applies to contractors who perform work on federal contracts. Any contractors that work on federal projects must be paid the prevailing wage for the project.

Although similar to a minimum wage, prevailing wage compensation is different. It is divided into two parts:

1. Prevailing wage
2. Prevailing wage fringe

Payment Options

In this case, the contractor can choose to satisfy the required Davis-Bacon obligation more than one way. These options include:

• Paying wage and fringe portions in cash
• Paying wage in cash and the fringe through a contribution to a benefit plan (such as a retirement fund)
• Combination of both methods

Profit-Sharing

To satisfy the prevailing wage fringe, most companies may choose to contribute to a retirement or profit-sharing plan. This is different from paying out in cash. If the fringe is paid in cash as compensation, the payment is subject to FICA and other payroll taxes. If the fringe is contributed to a benefit plan, it is not taxed.

Is it Right for You?

The prevailing wage fringe payment is also beneficial to the employer. The fringe payment can be used to avoid the required minimum contribution. Although there is no such thing as a “Davis Bacon Plan,” there are plans that work with the law. Overall, these prevailing wage pension plans have many benefits, and it would be good to look into whether or not it is right for you.

To learn more about prevailing wage pension plans, get in touch with us at Davis-Bacon Pension Plans, Inc. by calling (425) 889-8855 or filling out our convenient online contact form. We can discuss the advantages of discharging required prevailing wage fringe payments through a Davis Bacon pension plan. 

The Davis-Bacon Act is a federal prevailing wage law. It is governed by the Department of Labor and is applied to both contractors and subcontractors who perform work on various government projects. There are specifics in terms of this act, as these projects must be in excess of $2,000 for all of the construction, repair, or alteration. As an employer, this affects you because you are required to pay the prevailing wage rate, including fringe benefits. This is where prevailing wage pension plans come into play.

What Qualifies as Fringe Benefits?

Fringe benefits include retirement plans, health insurance, life insurance, any bona fide benefit, as well as vacation, holiday, and sick leave.

How to Satisfy the Requirements

As an employer, you benefit from prevailing wage pension plans, because it allows you to satisfy the Davis-Bacon requirement in alternative ways. These ways include:

• Paying both wage and fringe portions in cash
• Paying the wage portion in cash and the fringe portion by contributing to prevailing wage pension plans
• Combining both cash wages, along with bona fide fringe benefits

Other Advantages to Using a Prevailing Wage Pension Plan

Other advantages might include lowered general liability premiums in addition to lower worker’s compensation premiums. This is because fringe benefits are not considered part of payroll.

These plans are also beneficial to employees because benefits are purchased before taxes. This means that when the prevailing wage plan is combined with a 401(k) plan, employees will be able to pay less in taxes.

Be Sure That You Are in Compliance

Although there are many benefits to prevailing wage contributions to a qualified benefit plan, it is important to be aware of Davis-Bacon requirements. It is essential that these plans are in compliance.

Contact us at Davis-Bacon to learn more about prevailing wage pension plans and to learn how your company can benefit. You can call (425) 889-8855 for details!

Anyone that owns a business knows that along with it comes taxes, rules, and regulations. If you work in an industry where the government has ruled that you are required to pay a prevailing wage, then this is only one of the many costs you may accrue.

When running a business there are operational costs, along with payroll taxes, and hefty insurance premiums that may end up negatively affecting your bottom line. If you have employees on your payroll, then you might want to know about how you can guarantee their standard of living after they retire, but lower your overall costs as well. All of this can be done, with a David Bacon Pension Plan.

What is a Davis Bacon Pension Plan?

The Davis Bacon Pension Plan works according to The Davis-Bacon Act of 1931. This act  requires any contractor or subcontractor performing work on a federal government construction contract or federally assisted construction contract over $2,000, to pay their workers a specific fair and required prevailing wage. It also requires fringe benefits to be paid on similar projects. Having this form of pension plan ensures that you are following the law, and providing a safety net for your workers.

Lower Overall Costs

Because the Davis Bacon Act requires you to pay a specific wage, it often can require huge financial commitments on your behalf. This can be counterbalanced by taking advantage of the reduction in payroll taxes offered with the Davis bacon Pension Plan.

Additionally, this pension plan allows you to decrease your insurance premiums. For those who participate in the Davis Bacon pension plan, you will receive a reduced cost on your general liability premiums.

Overall both of these savings provide you to have a reduction in overall costs and save on your bottom line.

Offer Better Retirement Benefits and Attract Better Talent

Retirement benefits are something that skilled workers look at when choosing where they want to spend their time working. Although it is typically quite expensive to offer high-quality retirement benefits to your employees, if you are saving in payroll tax and insurance premiums, then you will be able to offer better benefits for your staff.

With a David Bacon pension plan, you will be able to pay your staff less than the prevailing wage, because you will contribute to the retirement income of your employees. This allows you to save while providing incredible benefits. Not only is this helpful for your employees, but it will draw higher quality talent to come work for you.

Become More Attractive to Customers

By saving on prevailing wage costs, insurance premiums, and payroll taxes you can lower your overall cost of overhead. In turn, this can allow you to decrease your total costs and offer more attractive rates to your customers. Especially if you work in a space where you must bid for construction contracts, having a lower bottom line will always bring you to the forefront.

Learn More About Davis Bacon Pension Plans

At Davis-Bacon Pension Plans, Inc., we offer the highest quality pension plans that can be beneficial to both you and your employees. By recommending the best options, we help you to reduce expenses and have more cash flow going in. Learn how our pension plans can skyrocket your business to success, call us at (425) 889-8855 today.

When establishing a 401(k) plan a business owner has a variety of employer contribution options that he or she may choose to make to the plan. These options range from no contribution to funding the maximum contribution for all employees. Whichever option the business owner chooses to go with can have a significant impact on the business’s profitability. Back in 2018 failure to adhere to prevailing wage guidelines set into play cost companies $304 million in back wages. Companies must pay 100% of the locally prevailing wage rate or suffer a major penalty. However, when enacting a prevailing wage pension plan, you may choose to pay the base rate to employees while contributing the fringe rate into a pension play. Doing this saves the amount you would have spent in payroll taxes, while simultaneously helping employees secure a comfortable state-of living for themselves upon retirement.

How to Make Davis-Bacon Plans Work For You

The Davis-Bacon Pension Plans are not one-size-fits-all. Business owners can customize a plan to best suit their business needs. Professionals at Davis-Bacon can help you determine which plan will work best for your company, as well as calculate how much this plan will save you in the long haul. 

Low-Risk, High-Pay Off Solution

Going with a prevailing wage pension plan is oftentimes the most low-risk solution for a company. When businesses pay 100% of the prevailing wage upfront, they are now forced to make riskier moves to try and garner bids. This in turn drives up other costs businesses must pay such as payroll taxes, labor, and liability insurance. It becomes a conundrum because when businesses bid more jobs are lost, but when they bid less they are losing out on profitability. The Davis-Bacon prevailing wage pension plans make it so that everyone is happy and secure in his or her role.

If you want your business to prevail above the rest, it’s time to contact our team at Davis-Bacon Pension Plans, Inc. We’ve helped countless business owners generate maximum profit at the lowest cost to employees and to their bottom line. Contact our office today for more information (425) 889-8855.

COVID-19 has caused economic pain for businesses throughout the United States. If you own or operate a company, you understand the challenges you’re facing to remain viable. If you’re hoping to find a solid way to survive COVID-19’s impact on the world, it’s time to consider methods for reducing your costs and improving efficiency.

Businesses that bid for government contracts must pay the prevailing wage to employees. This can increase the cost of labor for business owners seeking government work. Fortunately, using a Davis Bacon pension plan can reduce the cost of bidding on government jobs.

Increasing Competitiveness in a COVID-19 Economy

While reducing costs in a pandemic might seem impossible, using a Davis Bacon pension plan can help you access lower upfront wage costs. By using a specially-designed pension plan, you can reduce the initial wage you pay to your staff members by placing it in an arranged pension. In doing so, you can save money on your payroll taxes.

Your staff will still receive the prevailing wage via their pension plans, and you’ll be able to slim down your overall expenses. It’s an excellent way to remain competitive in a COVID-19 world. While you might not be able to reduce other business expenses, don’t leave your costs stagnant by paying the prevailing wage upfront.

Make Your Bid Attractive for Government Contracts

As government contract bids become increasingly competitive, it’s more important than ever to offer the most attractive bid possible to the government. If you want to remain a step ahead of your competitors in COVID-19, a Davis Bacon pension plan is a clear solution.

Contact Us to Discuss Davis Bacon Pensions Plans

Our team at Davis-Bacon Pension Plans, Inc. offers Davis Bacon pension plans to business owners. If you’re searching for new ways to improve your business in a COVID-19 world, it’s time to contact our office at (425) 889-8855.

If you run a business that relies on revenue from government contracts, you understand that federal regulations often impact your ability to generate profit. The government requires companies bidding on federal contracts to provide a ‘prevailing wage’ to their staff members. This means that businesses bidding on government contracts typically have higher operational costs than other businesses in similar industries.

Fortunately, Davis Bacon pension plans allow you to reduce your overall wage burden. In doing so, they can help you win more government contracts for your business. Let’s find out how!

How Davis Bacon Pension Plans Help You Lower Costs

Davis Bacon pension plans allow you to offset the amount you pay to staff by placing it into a pension plan program. In doing so, you can reduce the upfront wage you pay to staff and decrease the amount of payroll tax that your company is liable for. This means that you can shave serious money off your overall payroll tax bill each year.

Additionally, companies that have Davis Bacon pension plans can also take advantage of lower general liability premiums. This is yet another way that this type of pension plan program can help you reduce expenditure.

Lower Costs Mean More Competitive Bids

Depending on how your business is structured, wages are likely one of your highest costs. If you’re able to reduce the cost of employing your staff, you can offer more competitive bids than other companies seeking government contracts. Davis Bacon pensions plans make your business leaner, which is an excellent way to provide bids at lower prices.

Make Yourself More Competitive Today!

If you want to make your business more competitive, it’s time to contact our team at Davis-Bacon Pension Plans, Inc. We’ve helped countless business owners reduce their costs and win additional contracts. If you’re searching for a way to generate more revenue with government contracts, contact our office at (425) 889-8855.