What is 401(k)?
A 401(k) is a type of retirement savings plan sponsored by an employer. It lets employees save and invest a portion of their paychecks either before taxes are taken out (traditional) or after taxes (Roth). The plan allows employees to save for their future without having to rely on an employer offering a pension. Additionally, you, as an employer, may elect to match employee contributions towards their accounts.
Making the maximum annual contribution
The IRS has an annual contribution limit for anyone participating in a 401(k) plan.
- If you’re under 50, the maximum annual contribution amounts for 2023 is $22,500 ($20,500 in 2022)
- If you’re 50 or older, the maximum annual contribution amount for 2023 is $30,000 ($27,000 in 2022). You also qualify for the catch-up contribution amount of $7,500 for 2023.
Justworks automatically caps the limit as long as all of the contributions took place through Justworks payroll.
These limits are specific to employee contributions only, employer profit sharing and matching contributions are not included in this amount.
Keep in mind that the $22,500 ($30,000 age 50 and over) can be a mix of pre-tax (traditional) and/or after-tax (Roth) regardless of income threshold.
Please refer to this IRS article on the contribution limits.
Why should I offer 401(k) to my employees?
Offering a 401(k) can be leveraged to recruit and retain top talent for your organization. If your company decides to include employer matching as well, the match amount provided to employees can be deducted from the employer’s federal income tax.
Is employer matching required?
It all depends on your plan set up; some plan options require your contribution, others don’t. In some cases, it may be recommended that the employer offer a certain type of match to avoid potential compliance testing failures. Generally, Employer matching is optional for the 401(k) plan - ultimately it is the employer’s decision to offer a match.
Justworks and Slavic401k
Justworks’ valued 401(k) provider is Slavic 401k
Slavic401k has been in the retirement business for over 30 years. Through Slavic401k your employees will be able to invest into reputable funds managed by Fidelity and Vanguard. Through the Justworks integration, employee deductions will be automatically sent over to Slavic401k so you won’t have to worry about providing a file to your 401(k) provider yourself.
How much will the 401(k) plan cost me through Slavic401k?
All companies on the Justworks platform can choose to have the 401(k) plan available to their employees. As an employer there is no additional cost to offer Slavic401k to your employees.
The Justworks 401(k) Plan has a flat annual fee per employee. This fee is broken out into equal quarterly payments and is charged directly to the participant’s account balances. As the employer, you have the option to cover this fee for your employees and can do so at any time.
Account balances may be subject to additional fees depending on the investments selected and actions taken such as distributions and rollovers. For a detailed fee disclosure please reach out to Slavic401k.
To request a fee disclosure or to change the way your company is paying fees for employees please contact Slavic401k directly.
How do I set-up my Slavic401k plan?
Please visit your Benefits under HR in your Justworks account to access the enrollment flow.
Click the 401(k) tile to learn more and begin your enrollment process.
Learn about our partner, Slavic401k, explore fees, and read other FAQs before getting started.
Enter your contact and enrollment information and Slavic401k will reach out with the next steps.
Once you have completed the form available in your account, a Slavic401k plan consultant will reach out to you within 2 to 3 business days. You will work with your assigned plan consultant to set up your 401(k) plan.
This process can typically take 30 to 60 days. Once your plan has been set up, Slavic401k will send the plan information to Justworks and then your plan will be available in your company Justworks account.
Some things to keep in mind in your plan set up:
Eligibility requirements for employees
Please note: In order for employees to begin contributing to their 401(k) account, they must set up an account via Slavic401k.
Who is eligible for Slavic 401k?
All employees are eligible to participate in the company’s 401(k) plan once they have met the applicable waiting period. This includes full time employees, part-time employees, interns (required after 90 days), nonresident aliens (provided they have an SSN), and paid and unpaid owners. Please note that unpaid owners are only eligible to participate in Slavic 401(k) as long as they sign an addendum form provided by Slavic.
Contractors, vendors, and any employees under a labor union are not eligible to enroll in Slavic 401(k). These eligibility requirements are mandated under the plan documents and ERISA.
What investment options are available?
The Justworks 401(k) plan has several investment options available. There is a core lineup of mutual funds, a self-directed brokerage account, as well as Slavic-managed investment portfolios.
The mutual funds do not have any additional transaction fees to buy or sell, they do however have expense ratios. These range from 0.01% to 0.80%, for a full list of available options and expense ratios please see here.
The self-directed brokerage account that is offered in the Justworks plan is linked to your employee’s Slavic401k account and managed through Fidelity. In this option employees will have access to hundreds of mutual funds, stocks, bonds, and exchange-traded funds (ETFs). There is no additional fee to open a brokerage account however the individual investments selected may come with a transaction fee. For more information on the brokerage account option please see here. Please note that the investments selected in a brokerage account are self-selected and are not monitored or selected by Justworks, your company, or Slavic401k.
If employees do not actively select an investment when an existing 401(k) plan transfers into Slavic401k or if a plan is set up with automatic enrollment and employees do not make an investment selection they will be placed in a qualified default investment alternative (QDIA). The QDIA that they are placed in is based on their age and the target retirement date of 65. The Justworks 401(k) plan has a QDIA of Vanguard Target Date Funds (TDF).
What is a target-date fund (TDF)?
A target-date fund (TDF) is an investment vehicle, usually a mutual fund, that is designed to automatically adjust the portfolio and risk allocation (from aggressive to more conservative) over time, based on a targeted year of retirement.
For example; a person just starting their career might select a TDF for 2065. The idea is that they are targeting to retire in the year 2065. As they continue to work through their life, they contribute more and more to their 401(k) and invest in this fund. As they get older and closer to retirement the fund automatically adjusts its risk profile from aggressive, to moderate, to more conservative.
Can I change my plan after it is set up?
You will be able to change the specifications of your 401(k) plan after the plan has been set up. Please contact Justworks401k@slavic401k.com for more guidance.
What happens to employer contribution funds in the event of a refund or reversal?
If you or your employee needs to request a refund or reversal due to an error, please contact your account manager or Justworks support at firstname.lastname@example.org.
Any employer match funds that need to be returned due to a refund or reversal will be placed in the company’s plan forfeiture account. Funds in your company’s plan forfeiture account will be applied to the company invoice in the form of credits for future employer contributions and any applicable plan administration fees funded throughout the year if you have elected to cover these fees on behalf of your employees. These credits will be applied to the first invoice that processes each month. For more information on forfeitures visit Slavic 401k: Forfeitures.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.