What is 401(k)?
A 401(k) is a type of retirement savings plan sponsored by an employer. It lets you save and invest a portion of your paychecks either before taxes are taken out (traditional) or after taxes (Roth). The plan allows you to save for their future without having to rely on an employer offering a pension. Additionally, employers may elect to match employee contributions towards your 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 2024 is $23,000 ($22,500 in 2023)
- If you’re 50 or older, you also qualify for the catch-up contribution amount of $7,500 for 2024. Therefore your maximum annual contribution amount for 2024 is $30,500 ($30,000 in 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 $23,000 ($30,500 age 50 and over) can be a mix of pre-tax (traditional) and/or after-tax (Roth) regardless of income threshold.
Please see this IRS article on contribution limits for more information.
Justworks and Empower
Justworks’ valued 401(k) provider is Empower
Justworks PEO offers access to a 401(k) Multiple-Employer Plan (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 as long as you’re on the MEP.
Please note Empower is Justworks' trusted 401(k) provider, and our team is unable to support inquiries regarding any other external providers other than setting up manual deductions.
About Empower
Empower is a financial services company on a mission to empower financial freedom for all. They work with individuals and organizations of all sizes 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.
What are the benefits of Justworks 401(k) with Empower?
Easily set up your 401(k) account
Once you fill out a short form on Justworks with your personal information and 401(k) history, you’ll finish setting up your account on Empower’s website to finalize your enrollment and register your account.
One login for all your accounts
With single sign-on (SSO), you can use the same credentials to log into your Justworks and Empower account so you don’t need to worry about another username and password to keep track of your privacy.
Plan your financial future
Whether you want to track your investments or project what you need for your retirement, you’ll have access to a suite of financial tools with your Empower account to help you secure your financial future.
View your balance anywhere and anytime
Whether you’re at work, home, or on the go, you can view your account balance on Empower’s desktop or mobile apps*.
*Note: Account management functionality is only available on your Empower participant account, not in your Justworks account.
What are the costs and fees associated with a 401(k) plan through Empower?
Please see below for details around plan costs and fees.
Administrative Fees
$86 per participant; $21.50 deducted from your Empower 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 your Empower account. Some examples of transaction-based fees:
- Loan origination ($75) and quarterly loan maintenance fees ($25 annually or $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?
Employee eligibility will be unique to your company’s 401(k) plan setup. You will be eligible to participate in your company’s 401(k) plan once you 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. Contractors, vendors, and any employees under a labor union are not eligible to enroll in Empower. These eligibility requirements are mandated under the plan documents and ERISA.
How do I set up my Empower 401(k) plan?
Go to the "Retirement Planning" tab in your employee benefits center and click "Get Started" to learn more about the 401(k) plan including details on eligibility, costs, and employer match (if applicable).
If you are enrolling in Empower in the middle of the year and have previously contributed to another 401(k) outside of Justworks you will be prompted to record the amount you contributed to your other 401(k) accounts in that year. Keep in mind that if you received any employer-matching contributions, you do not need to include that amount in this box. Once you submit the amount, Justworks will use this and your current payroll contributions with Empower to track and cap your deferrals at the IRS limit.
Finally, you will be redirected from Justworks to complete your enrollment on the Empower website.
What to expect once you've enrolled
You will receive an email from Empower prompting you to set up your login for their online participant portal. Everything is automated from there. We'll withhold the appropriate amounts from your paycheck, calculate your match (if applicable), and send the funds to your 401(k) account.
401(k) Eligible Income
Certain types of payments are considered eligible for 401(k) deferrals and matches. If a payment type is considered compensation and eligible for 401(k), employee deferrals will apply, and if applicable, employer contributions will also apply.
What is included?
If your employer offers your 401(k) plan through Empower, “eligible compensation” includes all W-2 wages paid through Justworks. This includes, but is not limited to: regular salary or hourly wages, bonuses, and commissions. Please note, Severance Pay is not included as eligible compensation for 401(k) deductions.
If your 401(k) is not with Empower, you should contact your manager for information on your company’s plan-specific definition of eligible compensation.
Setting up deferrals
When you enroll with Empower, you can set a deferral rate for salary payments and supplemental payments, such as bonuses or commissions, within the Empower portal. The deferral rate you specify will be the rate applied to all eligible payments.
For example, if you have 6% traditional (pre-tax) elected through your enrollment and selected a bonus and commission deferral rate of 10% traditional (pre-tax), your regularly scheduled pay will still have the 6% deduction while bonus and commission payments will reflect the 10% you elected.
Please note, if you do not set up a separate deferral election, your deferral rate for all bonus, commission, and supplemental payments will default to zero. If you do have a separate bonus deferral election submitted, it will not impact your regular salary deferrals.
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 your 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 (qualified default investment alternative) 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 aiming 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 the investment risk profile from aggressive, to moderate, to more conservative.
Managing your 401(k) account
Once enrolled, you can change your contribution level at any time, including contributing $0. You can also set a different contribution rate for bonus and supplemental payments while maintaining your contribution rate for regular salary and wage payments. We recommend speaking with your employer to coordinate any contribution changes with scheduled bonus or commission payments to ensure the intended deferrals apply.
Any changes to your deferral elections for both salary payments and bonus and commission payments should be done through Empower. We recommend that this is completed at least 7 business days prior to receiving your regular payments. This is to help ensure the changes are picked up before the payroll processes at your company.
Does the maximum contribution level include matching funds contributed by my employer?
Employer matching funds do not contribute to the IRS-regulated employee contribution maximum for that year.
What are the differences between IRA and 401(k)?
Individual Retirement Arrangements (IRAs) is an individually held retirement and investment account that you can open and make tax deferred contributions into while a 401(k) is a defined contribution retirement plan that is sponsored by an employer.
An IRA has different contribution limits that can be viewed here: IRS IRAs
Can I take out a loan against my 401(k)?
You are able to take one loan at a time against your 401(k) assets. Please contact Empower at 855-JWK-401k (855-595-4015) for more information.
Should I roll over my previous 401(k) accounts?
That is totally up to you! Whatever you decide to do, keep in mind that your previous 401(k) account will likely still accrue fees while you will no longer be able to contribute to it. If you would like to get more information, please contact Empower at 855-JWK-401k (855-595-4015).
Cancellation
Should you wish to cancel your 401(k) benefits, you'll need to contact Empower directly at 855-JWK-401k (855-595-4015).
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.