PLANSPONSOR - May - June 2023 - 13

Highly Compensated Talent
Because the Roth conversion mainly benefits
highly compensated employees, and it
requires sponsors to offer extra features,
Fidelity sees a " very small percentage " of
people taking advantage of it, Sahoo says.
Maybe 0.03% to 0.04% of all eligible
participants in Fidelity's client plans opt
for the conversion each year-somewhere
between 5,000 and 10,000 people.
" I think, for sponsors, the primary
benefit [of the backdoor Roth] is attracting
and retaining highly compensated talent, "
Sahoo says. " It's a way to save for retirement
beyond what is normally available. "
But, he notes, those sponsoring a
401(k) plan must offer the feature to all
eligible employees, not just HCEs, or risk
nondiscrimination testing issues.
Each year, 401(k)s must pass IRS
nondiscrimination tests " to ensure that
contributions made by and for rank-andfile
employees (non-highly compensated
employees) are proportional to contributions
made for owners and managers
(highly compensated employees), " the
IRS states on its website.
Marcia Wagner, founder
and
managing partner of The Wagner Law
Group, says IRS nondiscrimination
rules might limit the amount that highincome
taxpayers could put into the aftertax
contribution account in a tax-qualified
plan. However, she says, the only
dollar limit on after-tax contributions to
a defined contribution plan would be the
Internal Revenue Code Section 415 limit,
which is $66,000 this year.
" So,
if an individual established
a solo 401(k) plan in 2023, he or she
could contribute zero pre-tax dollars and
$66,000 on an after-tax basis. He or she
could then withdraw this amount and
contribute it to a Roth IRA. Unlike pre-tax
deferrals to a 401(k) plan, the [IRC] generally
does not provide limitations on the
timing of withdrawals of after-tax contributions.
If a 401(k) plan also provided for
in-plan Roth conversions, plan participants
could also take advantage of that
provision. " -Remy Samuels
Emergency savings funds
Work-from-anywhere
Gap insurance
Executive health care
Retiree medical coverage
TIDBITS
Rising Retirement Costs
Increase Concerns
78% of workers worry they
cannot afford an optimal
retirement because of
increased costs, compared
with 73% in Q4 2022 and
68% in Q1 2022.
Source: Allianz Life Insurance Co.
of North America, " 2023 Q1 Quarterly
Market Perceptions Study "
Q1 2023
Q1 2022
78%
68%
Benefits Predicted for 2026
A panel of industry experts anticipate a range of
traditional and emerging voluntary benefits to soon
be common. The experts project employers to offer this
financial well-being coverage by year-end 2026:
HSAs, with high-deductible health plans
Mortgage/Rent assistance
Credit improvement programs
Critical illness insurance
69%
61%
59%
52%
43%
38%
38%
17%
13%
Source: " Transamerica Prescience Report - First report: Expert opinions on
employee financial well-being "
PLANSPONSOR.COM May - June 2023 13
http://www.PLANSPONSOR.COM
PLANSPONSOR - May - June 2023

Table of Contents for the Digital Edition of PLANSPONSOR - May - June 2023
