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2021 Updates: 401(k), IRA & Securing a Strong Retirement Act of 2020

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In general, Investment and Plan costs are dropping. Your costs depend on your average participant balance and annual contribution rates.

Let us re-quote you if you haven’t already done so in the last 24 months.

The IRS has announced the 2021 maximum contribution limits for qualified retirement plans.

Defined Contribution Plan Limits



Maximum employee elective deferral


Employee catch-up contribution (if age 50 or older by year-end)


Defined contribution maximum limit, all sources

Defined contribution maximum limit; maximum contribution all sources, plus catch-up$63,500$64,500
Employee compensation limit for calculating contributions; plan compensation max$285,000$290,000
Key employee’s compensation threshold for nondiscrimination testing$180,000$180,000
Highly compensated employees’ threshold for nondiscrimination testing$130,000$130,000
IRA Limits



Traditional or Roth IRA contribution limit


IRA catch-up contribution



SIMPLE IRA catch-up contribution$3,000$3,000

Here are some additional changes to be aware of in 2021.

2021 Retirement Plan Updates


Plan Restatement

  • All Plans must have the Summary Plan Description (SPD), updated for the new laws before July 31, 2022. This is called a Plan Restatement.
  • Penalties from the IRS will begin on July 22, 2022 for “Failure to Restate.” Remember that your “Forfeiture Account” can pay for this restatement.


Safe Harbor Notices

Safe Harbor notices are due this month for 2021, and were technically due in December 2020.


QDIA Notices

Qualified Default Investment Alternative (QDIA) notices are due in January for the year, but these can be changed as needed.

Remember that a money market cannot be your QDIA.


Participant Notices

Your Participant Notices with fee disclosures are due every 14 months. Please check when this was done last as you could be subject to IRS penalties.


Hardship Loans

If you chose to be part of the CARES Act, your participants were allowed to take distributions up to $100,000 without penalty if affected by COVID-19. Loans under the same conditions could also have been taken up to $100,000.

This is now over. Loans are back to $50,000 or 50%, whichever is less.



RMDs were waived in 2020. This has not been extended for 2021, yet.


Multiple Employer Plan (MEP)

The SECURE Act has approved a new retirement savings plan, the Multiple Employer Plan (MEP). The MEP is adopted by two or more employers that are unrelated for income tax purposes, as defined by the IRS and DOL.


Plan Administrator & Trustee Responsibilities

Plan Administrators and Trustees are required to keep their plans competitive and show they are doing what is in the best interest of their participants when it comes to Plan Fees, Investment Returns and Investment Fees, QDIA Review and Advisor Compensation.

You do not have to have the lowest possible fees, but you do have to show that you have shopped properly and your fees are competitive and justified. Make sure you’ve noted this in your 401(k) binder.


Annual Meetings

You are still required to have an Annual Trustee Review meeting and an Annual Participant Education meeting. These are being done via Zoom.

Securing a Strong Retirement Act of 2020

What You Need to Know

The proposed legislation, “Securing a Strong Retirement Act of 2020”, will affect 401(k) plans.

Expand automatic enrollment in retirement plans

401(k), 403(b) and SIMPLE plans would be required to automatically enroll eligible participants unless employees opt out. The initial automatic enrollment deferral is at least 3% but no more than 10%. Each year, the amount would increase by 1% until it reaches the maximum 10%.

Simplify and increase in Saver’s Credit

The proposal would amend the Saver’s Credit to create a single 50% rate, increase the maximum credit amount from $1,000 to $1,500 per person, and raise the maximum income eligibility amount. The legislation would index the credit to inflation.

Raise the age to begin mandatory distributions

While The SECURE Act generally increased the required minimum distribution age to 72, the proposed legislation would increase the required minimum distribution age to 75.

Index the IRA catch-up limit

Under current law, the limit on IRA contributions is increased by $1,000 (not indexed) for individuals who have attained age 50. The legislation would index IRA catch-up limit contributions beginning in 2022.

Allow higher catch-up contribution after age 60

Currently, employees who are 50 and older can make catch-up contributions to retirement plans that exceed overall applicable limits. For 2020, the catch-up contribution is $6,500, except in the case of SIMPLE plans in which case the limit is $3,000. The legislation would increase these limits to $10,000 and $5,000 (both indexed), respectively, for individuals 60 and older.

Multiple Employer 403(b) Plans

The proposed legislation would allow 403(b) plans to participate in Multiple Employer Plans (MEPs), generally following MEP rules under The SECURE Act rules.

Allow small immediate financial incentives for contributing

To motivate participants to contribute to a 401(k) plan, the bill would allow small immediate incentives such as gift cards. While section 401(k)(4)(A) of the Internal Revenue Code generally prohibits any incentives other than matching contributions, de minimis financial incentives would be exempted.

Reduce the excise tax on certain accumulations in qualified retirement plans

The Act would reduce the penalty for failure to take a required minimum distributions (RMD) from 50% to 25%. If a failure to take a RMD is corrected in a timely manner (as defined under the bill), the excise tax on the failure is reduced from 25% to 10%.

Exempt individuals with certain account balances from RMD rules

The proposed legislation would not require participants to take a RMD if the balance in their retirement plans and IRAs (excluding defined benefit plans) is not more than $100,000 (indexed) on December 31 of the year before they attain 75.

Modify the credit for small employer pension plan startup costs

The proposed start-up credit would be increased from 50% of administrative costs to 100%, for employers with up to 50 employees.

  1. Excluding defined benefit plans, an additional credit would be provided equal to the applicable percentage of the amount contributed by the employer on behalf of employees, up to a per-employee cap of $1,000. The full additional credit would be limited to employers with 50 or fewer employees, and phased out for employers with between 51 and 100 employees.
  2. The applicable percentage would be 100% in the first and second years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year.

If you have any questions or would like to discuss 401(k) Fiduciary Advisory services, please fill out the form below. We look forward to serving you.

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