Year-End Strategies for Business Owners: Making the Most of Your 401(k) Plan
As we approach year-end, it’s the perfect time for business owners to review their 401(k) plan to ensure they’re maximizing its potential.
By focusing on a few key areas, you can boost retirement contributions, enhance tax savings, and prepare for compliance.
1. Max Out Contributions
- Employee Contributions: Encourage employees to maximize their contributions, which reduces their taxable income and helps them grow their retirement savings.
The 2024 contribution limit is $23,000, or $30,500 for those over 50. - Employer Contributions: Ensure your business has met any planned matching contributions or profit-sharing commitments.
This is crucial, as employer contributions are tax-deductible and reduce your company’s taxable income.
2. Review Safe Harbor Requirements
- Why It Matters: If your 401(k) is a safe harbor plan, it automatically satisfies certain IRS testing requirements, as long as specific minimum contributions are met.
Conducting a review now ensures you’re meeting these obligations, which is critical for maintaining the plan’s tax-advantaged status and avoiding costly corrections.
3. Conduct Compliance Checks
- Avoiding Penalties: Conduct any necessary non-discrimination testing to ensure contributions don’t disproportionately favor higher-paid employees.
Year-end is also an ideal time to confirm that all required forms have been filed and all plan fees are reasonable.
Pro Tip: A proactive year-end review can identify areas for improvement, avoid potential penalties, and set the foundation for a successful new year.
Need help preparing your 401(k) for year-end? We’re here to guide you through each step to ensure you’re maximizing savings and staying compliant.
Disclosures: For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.