THIS COMMUNICATION IS INTENDED FOR ONLY U.S.-QUALIFIED PLANS. THIS IS NOT APPLICABLE FOR PLANS QUALIFIED ONLY IN PUERTO RICO.

Pension Services, Inc. always strives to provide you with the best plan designs and with compliance that has been recognized by IRS, as well excellent service. As such, please review the following information in this e-mail carefully so that you may plan accordingly for 2023.

For our clients and advisors with qualified retirement plans maintained in the mainland U.S.A., the Internal Revenue Service (IRS) announced recently the contribution limits for retirement plan participants for 2023. In this regard, please note the following:

• The elective deferral contribution limit for employees who participate in 401(k) and/or 403(b) plans increases to $22,500. If your intentions are to maximize contributions, please make sure to update your payroll records for the appropriate period.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k) and/or 403(b) plans increases to $7,500. If your intentions are to maximize contributions, please make sure to update your payroll records for the appropriate period.
• The 415 limit on total contributions to a defined contribution plan increases to $66,000. This amount consists of the total of both employer and employee contributions. For employees who are at least age 50 and who participate in a 401(k) plan and/or a 403(b) plan, this amount increases to $73,500 with the $7,500 catch-up amount added in.
• The 415 limit on total benefits that may be provided in a defined benefit plan on an annual basis increases to $265,000.

The annual compensation limit for plan purposes increases to $330,000.

The limitation used to determine who is a highly compensated employee increases to $150,000. Thus, an employee who earns more than $150,000 in 2023 will be considered a highly compensated employee in 2024.

Maximize Owners’

Tax Deductions & Administer your plan in compliance with the Law

 Other Deadlines

As you may be aware, our firm specializes in designing and administering customized retirement plans that are suited to maximize contributions and tax deductions to benefit owners/key employees.

Contrary to what many believe, there is no “one-size-fits-all” retirement plan. Every employer has a different company structure than the next. The one-size-fits-all strategy is suited for a “cookie-cutter” environment and not beneficial for the owner and key employees. Our prowess is in working directly with our clients to provide a custom design which best fits their needs and company structure. We utilize all areas of the Internal Revenue Code sections in order to design the best available plan tailored to your (or your client’s) specific retirement needs and goals.

Our plan design options include defined benefit, cash balance, 401(k) only, 401(k) combined with profit sharing, defined benefit/cash balance combined with 401(k) profit sharing plans, etc. Our 401(k) designs generally include a safe harbor provision which, depending on the design, allows the key employees to defer at the maximum level.

You should note that an employer who currently does not maintain a 401(k) plan can still establish a 401(k) plan for 2022 now and have designated employees maximize their contributions at the $67,500 limit (or, if at least age 50 in 2022, $61,000) for 2022. If you are interested in establishing a 401(k) plan for 2022 in order to maximize contributions, please contact us as soon as possible.

Below are some important deadlines for plan implementation:

Start up plans:

• For 2022, a defined benefit/cash balance plan/profit sharing plan can be started during 2022 or 2023, as long as the document is executed before the due date of the corporate tax-return for 2022 (including extensions).  For S Corps. and Partnerships (or LLCs taxed as such) this is 3/15/2023 or 9/15/2023 (on extension). For C Corps and Sole Proprietorship (or LLCs taxed as such) this is 4/15/2023 or 10/15/2023 (on extension).
• For 2022, for plans with salary deferrals, the plan documents must be executed before 12/31/2022. This is because 401(k) salary deferrals must be reported on the W-2s.
• For 2022, you cannot start a Safe Harbor Match 401(k) plan as the 10/1 deadline for executed documents along with the 9/1 deadline for Safe Harbor notices have passed.
• For 2023, you can start a Safe Harbor Match 401(k) plan so long as a Safe Harbor 30 day notice is sent out by 9/1/2023 and documents are executed by 10/1/2023. The plan would be effective 1/1/2023.

Existing plans:

• For 2022, 401(k) plans that do not have a Safe Harbor feature, the plan can be amended to include a Safe Harbor 3% Non-Elective feature as long as the necessary amendments are executed by 12/1/2022.
• For 2022, after 12/1/2022, for 401(k) plans that do not have a Safe Harbor feature, you can add a Safe Harbor 4% Non-Elective feature as long as the necessary amendments are executed before 12/31/2023.  In this case, the Safe Harbor 4% Non-Elective feature is applicable for the 2022 plan year.  For subsequent plan years, the Safe Harbor 4% Non-Elective feature can be lowered to a Safe Harbor 3% Non-Elective.
• For 2022, for 401(k) plans that do not have a Safe Harbor feature, you cannot add a Safe Harbor Match.
• For 2023, for 401(k) plans that do not have a Safe Harbor feature, you can add a Safe Harbor Match feature so long as a Safe Harbor 30 day notice is sent out and necessary amendments are executed by 12/1/2022. The feature would be effective 1/1/2023.

Deadline for Salary deferrals:

• Deadline to process payroll and record salary deferrals for the 2022 plan year is the last payroll before 12/31/2022.
• Deadline to deposit deferrals:
• Large plans (100 or more participants): deposits must be made as soon as administratively feasible on or after the payroll date as of which the deferrals were deducted. Generally, this means that deferrals should be deposited within one or two days after the payroll date at the latest.
• Small plan (fewer than 100 participants): deposits are always considered timely if made within seven business days from the date contributions are withheld from employee wages.

Finally, we wanted to close by thanking you so very much for your business – we truly appreciate your on-going confidence in our firm. It is important to us to ensure that our clients’ plans not only provide the best design for each plan sponsor, but also that all of our clients’ plans continue to satisfy Internal Revenue Service and Department of Labor rules. In fact, our firm has been recognized by the IRS for our compliance efforts.  Our reports are being used to train Revenue agents in compliance matters. This is because bundled providers and most TPAs pass the burden of compliance to the plan sponsor by not preparing trust accounting and by not verifying employee census information. While they provide sponsors with reduced services (at the expense of qualification and penalties), we remain proud of our extremely strong dedication to compliance for all of our clients and their retirement plans.

Should you have any questions or comments, please do not hesitate to contact us.

Robert.penafiel@pensionnetwork.net

305-595-5500 ext. 210

newbusiness@pensionnetwork.net

305-595-5500 ext. 225

3150 SW 38^th Ave Suite 900

Miami, FL 33146

Phone 305-595-5500

www.pensionnetwork.net