More than ever, companies are taking action to improve the financial well-being of employees and providing them with tools and information to better prepare them for retirement and financial literacy. A credit union relationship and information sessions about investing and retirement planning are great solutions. Offering a company-sponsored 401k plan gives employees a way to saving for retirement. Did you know that fifty-one percent of small business companies with 10 or more employees have researched offering a 401(k) plan, according to the Millennium Trust Small Business Retirement Survey? Due to the rising economy, Fidelity announced that retirement savings rates among employees is rising. The average 401(k) contribution rate is 8.8% (excluding employer match) – which is the highest percentage ever. In addition, employers are contributing an average of 4.7% to employees as match, bringing the total contribution to 13.5%.
In early November, the IRS announced that employees in 401k plans will be able to contribute up to $19,500 in 2020, a $500 increase from the 2019 limits. The IRS announced this and other changes in Notice 2019-59 (PDF), posted today on IRS.gov. This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.
The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500. The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019. However, the annual contribution limit for IRAs will remain unchanged at $6,000.
Interested in setting up a 401(k) plan for your small business? Check out the Department of Labor’s Information booklet for establishing a 401(k) plan. Download it today.