401(k) for Employers

This article is about Justworks PEO. What product am I using?

What is a 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 amount for 2025 is $23,500 ($23,000 in 2024). 
• If you’re 50 or older, you also qualify for the catch-up contribution amount of $7,500 for 2025. Therefore your maximum annual contribution amount for 2025 is $31,000 ($30,500 in 2024). 
  • Under SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62, and 63 who participate in these plans. For 2025, this higher catch-up contribution limit is $11,250 instead of $7,500 ($34,750 maximum annual contribution amount).

Justworks automatically caps the limit for contributions that took place through Justworks payroll (both for an external provider or Empower) and any year-to-date contributions that were reported to Justworks prior to joining Justworks.

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 annual limits mentioned above 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 match as well, the match amount provided to employees can be deducted from the employer’s federal income tax.

Is employer match required?

Employer match is not always required; it will depend on your plan set-up. For example, some plan options, such as a Safe Harbor 401(k) plan, do require an employer match. When you set up your plan with Empower, they will walk you through each plan type and what is best recommended for your company’s unique needs.

Justworks and Empower

Justworks’ valued 401(k) provider is Empower

Justworks PEO offers access to a 401(k) MEP through Empower. Through the Justworks integration, employee deductions will be automatically sent over to Empower so you won’t have to worry about providing those to your 401(k) provider yourself.

About Empower

Empower is a financial services company on a mission to empower financial freedom for all. They work with individuals and all sizes of organizations to offer investment, wealth management, and retirement solutions. Justworks and Empower have partnered to offer our customers a 401(k) MEP on our PEO product. 

Why did we choose Empower? 

• Empower is the most experienced PEO MEP 401(k) record keeper with $9.5b PEO MEP assets under management
• #1 recommended retirement provider by financial professionals*
• Empower has a suite of services, tools, and dedicated resources for plan participants and adopters to help them reach their financial goals and support their teams
• Empower offers a leading cybersecurity platform

* 2022 PLANADVISER Retirement Plan Adviser Survey as of November 2022.

With Empower, customers get a robust team of professionals and resources to support their financial needs.

What are the costs and fees associated with a 401(k) plan through Empower? 

Please see below for details around plan costs and fees. 

Employer

• $0 set up fee
• $0 monthly fees
• $0 plan transfer fee from Empower (there may be a transfer fee from your previous provider)
• Certain services, such as profit-sharing allocation or plan amendments, may be subject to fees. 

For more details on employer fees, please contact Empower at 855-JWK-CUST (855-595-2878) or justworks401k@empower.com. 

Employee 

$86 per participant; $21.50 deducted from the participant’s account quarterly.

Participant transaction-based fees

Certain transactions or services may be subject to fees in addition to administrative fees. All fees are deducted from participant accounts. Some examples of transaction-based fees:

• Loan origination ($75) and quarterly loan maintenance fees ($6.25 per quarter)
• Distribution due to Severance fee ($40)
• Advisory services through My Total Retirement* — fees apply based on your assets under management.
  *Fees only apply to participants who enroll in My Total Retirement Advisory Services, an optional service provided by Empower.

For more details on participant fees please contact Empower at 855-JWK-401k (855-595-4015). 

Who is eligible to enroll in a 401(k) through Empower? 

All PEO customers will be eligible for Empower and you can customize your employee eligibility based on a few factors (see below).

Employer Eligibility Requirements

• Must be a Justworks PEO customer (Payroll customers are not eligible)

Employee Eligibility Requirements

• Employee eligibility is determined by the employer when they set up their plan, but these are the default requirements if not changed by the employer:
  • Age: At least 18 years old (this can be changed by the employer)
  • Length of service: No minimum service requirements (this can be changed by the employer)
  • No exclusions are made for specific classes; full time, part time, interns, paid and unpaid owners are all eligible
  • Contractors/temporary employees, vendors, and any employees under a labor union are not eligible. This is mandated under ERSIA

How do I set up my company's Empower plan?

First, navigate to your company’s benefits center (HR > Benefits), go to the “Add Benefits” tab, and select the Empower 401(k) tile. 

Next, find out more information on Empower as a provider and click through the tabs to learn more about eligibility, cost, set up, and general FAQs.

Once you select ‘Get Started,' you will be taken to an interest form where you will need to provide details, such as Company Name and Primary Contact information, and will have the opportunity to add any email addresses of other admins/decision makers at the company who should be cc’ed on the email outreach from Empower. If you are setting up a new plan, marking that will be the last step on this page; however, if you are transferring from an existing plan, you will need to provide details, such as the current 401(k) provider and if there are any other business entities. 

Upon clicking ‘Review,’ you will be brought to a page where you can review all the information input and click ‘Submit’ to submit the form to Empower. 

Finally, once the interest form is submitted, you will see a confirmation of the submission, information on what to expect in regards to next steps, as well as some 401(k) resources. 

A retirement plan consultant (RPC) from Empower will reach out to you within 2 to 3 business days and work with you to set up your company’s 401(k) plan. 

The process to fully set up a new 401(k) plan with Empower can take 30 to 60 days. Once your plan has been set up, Empower will send the plan information to Justworks, and then your plan will be available in your company’s Justworks account.

During your plan set up, you will work with your plan consultant to determine details, such as:

• Eligibility requirements for employees
• Employer match
• Vesting schedule
  

What investment options are available?

The Justworks 401(k) plan has several investment options available. There is a core lineup for mutual funds (see the full funds list here), a self-directed brokerage account (if you, as an employer, offers it), as well as Empower-managed investment portfolios. 

If employees do not actively select an investment when an existing 401(k) plan transfers into Empower or if a plan is set up with automatic enrollment and employees do not make an investment selection, participant accounts are directed into a Plan QDIA designated by the Plan investment fiduciary. Accounts will be directed based on information reflected in the Plan’s record at the time of default, including but not limited to the normal retirement age specified in the Plan, and a participant’s date of birth, as applicable.

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, but a fee may apply. Please contact Empower at 855-JWK-CUST (855-595-2878) or justworks401kconsult@empower.com for more guidance.

What happens to employer contribution funds in the event of a reversal? 

401(k) employee and employer contributions will only be reversed in the event of a cancelled or reversed pay voucher. Reversed employer match funds will be moved to the company's forfeitures account with Empower. If you or your employee needs to request a refund or reversal, contact your Customer Success Manager or Justworks Support at support@justworks.com .

Please note, we do not process reversals based on user error.  

 

Disclaimer

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.