Safe Harbor 401(k) FAQs
Plan Design
Why a Pooled Employer Plan?
- A Pooled Employer Plan (PEP) allows businesses to band together under one retirement plan. This means that you share the same plan features, rules, and fund lineup as other businesses in the plan. But, you also share costs, making it cheaper for everyone.
What is a Safe Harbor Plan?
- A Safe Harbor 401(k) is similar to a Traditional 401(k) except, A Safe Harbor plan provides all eligible plan participants with an employer contribution. A Safe Harbor plan with QACA features allows employers to build in a 2 year vesting period for their employees.
What are the features of the Navia powered by Penelope Safe Harbor plan with QACA features?
- Navia powered by Penelope is offering a Safe Harbor 401(k) with Qualified automatic contribution arrangements (QACA). Key features include:
- Eligible employees are automatically enrolled and defers 3% (employees can opt out)
- Employer is required to match, with a upper limit of 3.5%
- Employer match will fully vest in 2 years
- Why should I offer an employer match?
- In addition to tax deductions, employer match can be a powerful recruitment and talent retention tool. Offering an employer match on a Safe Harbor plan makes it less likely to fail non-discrimination testing, reducing administrative burden.
What is auto-enrollment?
- Once we onboard an eligible employee to Navia powered by Penelope, we automatically help them defer 3% of their payroll into an age appropriate target-date fund. Easy as 1, 2, 3. (Employees can opt out).
What are the eligibility requirements for employees to participate in our plan?
- The Navia powered by Navia powered by Penelope Safe Harbor plan with QACA feature gives employers the ability to choose eligibility requirements.
- 18 or 21 years of age
- 3, 6, or 12 months of service
- Defining part time hours as 500 or 1,000 hours worked on an annual basis
- The plan also excludes Union Workers, Non Resident Aliens and Seasonal/Temporary employees.
Starter 401(k) FAQs
What is a Starter 401(k)?
- The Starter 401(k) will launch on January 1, 2024. This plan is an employer-sponsored 401(k) program that only allows employee contributions.
- This new program was established by the Secure Act 2.0 and was signed into law on December 29, 2022.
Who can offer a Starter 401(k)?
- Employers that do not already offer a qualified retirement plan to their employees may be eligible to sponsor a Starter 401(k).
How does a Starter 401(k) plan work?
- The Starter 401(k) offers auto enrollment at 3% for all eligible employees. Employees are able to opt out if they do not wish to participate in the plan. They can contribute up to 15% of their gross compensation with an annual maximum contribution of $6,000 in 2024*. If you are over the age of 50, you’re allowed an additional catch-up contribution of $1,000, which means you can contribute a total of $7,000* in 2024. Employers cannot contribute to an employee’s Starter 401(k).
As the plan sponsor, what are the employee eligibility options?
Full-time and part-time employees, as well as interns, seasonal and temporary workers, and other W-2 classifications are eligible to participate. Union workers, 1099 contractors, and non-resident aliens** are excluded from participation.
Can I customize my plan to fit my business needs?
- Yes, you can customize the plan’s eligibility criteria. The options you can choose are as follows:
- Age of participant: 18 or 21 years old
- Time of service: Immediate, 3 months, 6 months, or 12 months
Do I have to contribute to my employees' plans?
- No, there are no employer contributions in the Starter 401(k). The only contributions allowed are employee contributions.
What investments do you offer for the Starter 401(k)?
- Navia powered by Penelope provides Vanguard Target Date Funds as part of our investment lineup. These funds were carefully selected for being best in class, offering diversified investment with ease and simplicity. Employees will be automatically placed into the fund closest to their retirement date for a streamlined investment experience.
What are the established compensation limits for employees to elect from their salaries?
- Employees can defer a minimum of 3% and a maximum of 15% of their compensation annually.
What are the annual contribution limits for 2024?
- For the year 2024, the annual contribution limit for the Starter 401(k) is $6,000, and participants 50 and over can make an additional catch-up contribution of up to $1,000 in addition to their regular contributions (for a total of $7,000).
What are the contribution types available in the Starter 401(k)?
- Your employees are able to select from pre-tax, Roth, or a combination of both contribution types.
- re-Tax: Contributions are made with pre-tax dollars—meaning the money goes into your retirement account before it gets taxed. With pre-tax contributions, every dollar you save will reduce your current taxable income, which means you'll owe less in income taxes for the year.
- Roth: Contributions are made with income that's already been taxed, allowing investments to grow and be withdrawn in retirement without being taxed.
Basic 401(k) FAQs
Why should I offer a retirement plan?
- Offering a 401(k) helps your business remain competitive in the talent market. In addition to providing a way for you and your employees to save for retirement, they can also help your business capture taxing savings. Talent and cost savings? That’s a deal!
- Beyond that, many States are starting to require employers with more than 5 employees to offer retirement benefits. Learn more.
What does fiduciary duty mean?
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The DOL defines a business that operates with “fiduciary duty” must act in their client’s best interest. A clear requirement to comply with fiduciary duty is that all retirement planning commissions and fees are clearly disclosed.
What is the SECURE Act?
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SECURE Act, or the “Setting Every Community Up for Retirement Enhancement” Act, was signed into legislation by the Senate on December 19, 2019.
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The SECURE Act intends to increase access to tax advantaged accounts by providing incentives such as:
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Tax Credits for employers to offer retirement benefits
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Increasing cap from 10% of wages to 15% for safe harbor retirement plans
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Expanded eligibility for part-time workers
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Accessible access through pooled employer plans
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What tax credits are available to employers?
- Businesses starting a retirement plan for their employees for the first time may be eligible for tax credits, including: Retirement Plans Startup Cost
- Tax Credit: Employers may be able to claim a tax credit of up to $5,000, for three years, for necessary costs of starting a SEP, SIMPLE IRA or qualified plan (like a 401(k) plan.)
- Auto-enrollment tax credit: Retirement plans with an auto-enrollment features, such as QACA, may be qualified for a tax credit of $500 per year for a 3-year taxable period
What should I look for when I choose a retirement plan?
- Choosing the right retirement for you shouldn’t be rocket science. We are here to help you do just that, simply, easily, and sustainably with:
- Simple and transparent pricing;
- Easy-to-use tools for you and your employees;
- Accessible support;
- And understandable investment choices.
Customer Support FAQs
What are the employer’s administrative duties?
- We are offering a Safe Harbor plan with QACA features through a Pooled Employer Plan. Our plan design aims to cut down your administrative burden and help you and your employees get the most bang for the buck. Connect with us by email at naviabenefits@penelope.co
Can I amend my retirement plan?
- You can’t modify a Pooled Employer Plan (PEP). We designed this plan to have the broadest applicability for small businesses to capture tax credits, retain talent, and effectively invest in retirement.
What is a 5500?
- The Form 5500 is an annual report required to be filed with the IRS. Penelope will file one Form 5500 on behalf of all the employers within the Pooled Employer Plan, reducing your administrative burden.
What is Compliance testing?
- Non-discrimination testing is a way to ensure that tax-preferred retirement plans are not unfairly favoring highly compensated or key employees.
How can I change my company information?
- You can change your company information in the Account tab of the employer dashboard.
Can I change my payroll provider, schedule, and account once my company is onboard?
- You can change your payroll provider and schedule in the Payroll tab of the employer portal. Payroll information needs to be up-to-date to ensure that contributions are timely processed according to IRS regulations.
Employer FAQs
When will the first contributions occur for our plan?
- Once you’ve successfully reviewed your employee census, Penelope will send invitations to your eligible employees. If you are a payroll automated employer, it will take approximately 14 days from invitation for retirement benefits to be applied to your payroll.
How do I connect/reconnect to my payroll provider?
- You will be prompted to connect to your payroll provider during the onboarding process. If you are not offered the option, you may not qualify for payroll integration. Please reach out to naviabenefits@penelope.co if you have any questions regarding which payroll provider we are able to connect with.
- Once onboarded, you may be prompted to reconnect with your payroll provider. You can do this by:
- Navigate to your Penelope Admin Dashboard
- Go to the Payroll Tab
- Click on the Settings
- Find the Payroll Connection section
- Click on Add a Connection
- Follow the instructions from the pop-up module
What happens when I terminate an employee?
- If Penelope is connected to your Payroll, we will automatically receive that information from your Payroll Provider. Please note that this process may take up to 7 days, depending on who your payroll provider is. If you are a manual client, you will have to terminate the employee in your Penelope Admin Dashboard directly.
You can do this by:
- Navigate to your Penelope Admin Dashboard
Go to the Employee Tab
Click on the Employee
Click on Edit - Select Terminate and put in the Termination Date
Employee FAQs
When will I be enrolled/How do I enroll?
- You can expect to receive an invitation from Penelope a few days before becoming eligible to participate in your company’s retirement plan. The invitation will include importation notifications and instructions on how to set up your Penelope Participant Dashboard. Once set up, you can make changes to your deferrals and investments directly in the Participant Dashboard.
How can I take full advantage of the employer match?
QACA Safe Harbor
- The Penelope QACA Safe Harbor 401(k) Retirement Plan uses the following matching formula to calculate how much the employer are contributing to your retirement plan:
100% of the employee’s deferrals, up to first 1% of the employee’s pay, and
50% of the employee’s deferrals on the next 5% of the employee’s pay - Any amount that the Employee contributes above 6% of pay will not be matched
An employee will receive employer matching contributions only when actively contributing to the plan. - You will receive employer matching contributions only when actively contributing to the plan.
- You can get the full employer match by contributing 6% or more of your pay.
Starter(k)
- The Penelope Starter(k) does not offer an employer matching contribution.
When and how can I rollover funds from an old account?
- You can rollover funds from an old account as soon as you are eligible to participate in your retirement plan. You can find rollover instructions from your Penelope Participant Dashboard.
- Navigate to the Account Tab
- Click on Start a Rollover
- Follow the instructions
I am trying to login and my invitation code is not working?
- Please reach out to naviabenefits@penelope.co
How do I update employee information on the Penelope dashboard?
- We get your information directly from your Company’s payroll provider. If your information is incorrect, please contact your employer to update or update your information directly to your payroll provider.
How do I take a distribution?
- You can request a distribution directly from your Penelope Participant Dashboard.
- Navigate to the Account Tab
- Click on Start a Distribution
- Follow the instructions
Penelope service team contact
- For any questions regarding the Penelope 401(k) Retirement Plan, reach out to naviabenefits@penelope.co.
How should you direct Penelope inquiries?
All plan operations questions associated with a Penelope 401(k) Retirement plan should be directed to a Penelope service representative. You can recommend one of the two options below:
- Email
- Company plan administrators and retirement plan participants can always reach a Penelope service representative by emailing naviabenefits@penelope.co.
- Chat
- Company plan administrators and retirement plan participants are able to chat directly with a Penelope service representative using the chat function within the Penelope Dashboard.
For Login issue:
- Navia Login
- If your client has trouble logging into the Navia Dashboard, please contact your internal Navia IT team.
- Penelope Login
- If your client has successfully logged into the Navia Dashboard but cannot be redirected to Penelope, please contact naviabenefits@penelope.co