newsletter

RetireReady NJ

by: Kristin Tocket, CPC, QPA, QKA, TGPC

Following the lead of several other states, New Jersey implemented its own mandated retirement program: RetireReady NJ. This program went into effect on June 30, 2024, and is mandatory for businesses that have been established for at least two years, have more than 25 employees and do not offer one of the following types of retirement plans:

● 401(a) - Including a 401(k) plan
● 403(a) - Qualified annuity plan
● 403(b) - Tax-sheltered annuity plan
● 408(k) - Simplified Employee Pension plan (SEP)
● 408(p) - SIMPLE IRA plan
● 457(b) - Governmental Deferred Compensation Plan 

Employers with 40 or more employees were required to comply by September 15th, 2024, while employers with 25 to 39 employees had a deadline of November 15th, 2024. To be in compliance, an employer must either implement the RetireReady NJ program by their respective deadline or certify their exemption here by visiting the RetireReady website (Employer Verification).  

They will need their EIN and the Access Code provided in the notices mailed by the NJ Department of the Treasury. If an Employer did not receive a notice, or cannot locate their Access Code, they can retrieve it by visiting the 

RetireReady website (Request Access Code).  

It’s important that employers subject to the mandate certify their exemption in a timely manner. Businesses with 40 or more employees that do not comply by June 15th, 2025, or businesses with 25-39 employees that do not comply by August 15th, 2025, will receive a written warning from the NJ Department of the Treasury. Each subsequent year of non-compliance will result in the following penalties:

● 2nd calendar year: $100 per employee
● 3rd and 4th calendar year: $250 per employee
● 5th calendar year and any subsequent calendar year: $500 per employee

 For more information on the state-mandated program and the advantages of adopting a qualified retirement plan instead, please refer to our article from August: RetireReady New Jersey: Ready or Not, Here It Comes! 

Combo Plan Design Considerations

A 401(k) plan with a new comparability profit sharing feature is a great way to contribute to retirement savings. But what if you want to contribute more than the legal limit available in a defined contribution plan? A combination of a 401(k) and a cash balance plan can be a potent tax-advantaged savings vehicle. But there are some considerations to be aware of.

If you have a 401(k) plan that uses a safe harbor match, you may want to consider changing it to a safe harbor non-elective contribution. In a combo plan, all NHCEs must generally receive a "gateway minimum" contribution of up to 7.5% of compensation. The safe harbor non-elective contribution counts towards this gateway minimum, but the safe harbor matching contribution does not. Therefore, a sponsor who wishes to minimize the total contribution for NHCEs may prefer the SHNEC.

It simplifies administration for both plans to have the same normal retirement age. In a 401(k) plan, the attainment of normal retirement age as defined in the plan entitles a participant to full vesting and usually to a distribution of their account. For a cash balance plan, however, the choice of normal retirement age can affect the amount that may be accrued in the plan and is therefore vital to the overall plan design. If the definition of normal retirement age in the 401(k) plan does not match with the normal retirement age desired in the cash balance plan, the 401(k) plan should be changed. Note that if the change would result in a later normal retirement date for any participants, any rights to vesting or distributions must be preserved.

Under the SECURE 2.0 Act, long-term part-time employees must be allowed to participate in their employer's 401(k) plan. Although they do not need to be covered by the profit sharing or match portions of the plan, some employers may choose to cover them anyway, to simplify plan administration. If your plan covers or excludes certain classes of employees, consider whether those exclusions should or shouldn't apply to the cash balance plan as well.

These are only some of the many considerations that should be taken into account when adopting a new cash balance plan. For more information, contact your plan consultant. Or come hear our own Corey Zeller, MSEA, CPC, speak about this topic at the ASPPA Annual Conference in Orlando, FL on Sunday, October 20!

If Your Company Sponsors A Retirement Plan, What Records Do You Need To Keep?

If your company sponsors a retirement plan, such as a 401(k) plan or a cash balance plan, you know there are frequent reports, forms, notices, and other documents that are sent to you. Which of these records must you retain?

There’s a long list of records, but you do not have to be the one keeping and organizing all this information yourself – that’s why you hire professionals, which may include a pension administration firm, actuary, financial advisor, lawyer, payroll company, recordkeeper, or other service providers. You need to know who has each of the required records, and how you can access them if you ever need them. The amount of time these documents must be retained varies, and that is beyond the scope of this article.

Why might you need these records? Here are a few examples:

  • If a former employee claims they were never paid a benefit, or claims they weren’t paid in full, but you know they were paid, could you prove it?

  • If you change service providers, the new provider may need some or all of the plan records in order to service your plan.

  • Very important: if the IRS or other government agency requests information or conducts an audit, they may request any or all plan records.

While you don’t need to keep all these records yourself, if you don’t have them, you need to make sure that you know who has them, and what the arrangements are if you ever need them. Some service professionals charge a document retrieval fee, especially if they have already sent the information to you. If you change service providers, it’s a good idea to make sure you get the records pertaining to your plan forwarded to the party taking over that role at the time of the change. If you try going back to a former provider years after you’ve left them, there’s a good chance they will no longer have the records you need, especially if some time has passed since you worked together.

The list below is not a complete list of plan information that must be able to be accessed, and not all the information applies to every plan. This list will give you a good idea of the large amount of data that is involved with respect to your retirement plan.

Plan Documents

  • Plan documents (which may include an IRS opinion letter, basic plan document, adoption agreement, trust agreement, and adopting resolutions, all possibly in separate documents). All plan documents since inception of the plan must be retained indefinitely. Documents must be signed and dated.

  • Plan amendments also must be signed and dated.

  • Summary Plan Description and Summary of Material Modifications

Government Filings (proof of filing or distribution must be retained for all items)

  • Form 5500 Series, including all extensions, schedules, and attachments

  • PBGC Comprehensive Filing (for defined benefit plans covered by PBGC)

  • Summary Annual Reports or Annual Funding Statements

  • Forms 1099-R and W-2P (for benefit payments)

  • Forms 5329 or 5330 (if any excise taxes were payable)

  • All other government forms filings on behalf of the plan

Compliance testing

  • Results of compliance tests, such as top-heavy, coverage, participation, nondiscrimination, maximum deferral, ADP/ACP, maximum benefit and annual additions

  • Corrections of any failed tests

  • EPCRS filings

Valuation results

  • Census and payroll data

  • Enrollment, participation, and vesting records

  • Minimum required contribution and maximum tax-deductible contribution calculations

  • Participant account balance and benefit statements and proof of distribution

Financial records

  • Statements from the asset provider (e.g., bank, brokerage account, mutual fund, insurance company)

  • Annual accounting of plan assets

  • Verification of dates and amounts of all contributions to and distributions from the plan

Fiduciary records

  • Fidelity bond

  • Documentation of the process of hiring and monitoring service providers

  • Service agreements and fee schedules from service providers

  • Investment policy statement and monitoring of plan investments

  • Fee disclosure statements

  • Participant notices (e.g., safe harbor, automatic contribution, QDIA, QPSA)

  • Minutes of meetings with service providers and investment committee

As always, when in doubt contact your trusted pension professional.