Understanding spousal IRAs: A smart retirement strategy for couples
July 8, 2025
Retirement planning is essential for all families, but it can be especially critical for couples where one spouse earns little to no income. In such cases, a spousal IRA can be an effective and often overlooked tool to help build retirement savings for both partners — even if only one spouse is employed. It’s worth taking a closer look at how these accounts work and what the contribution limits are.
A spousal IRA isn’t a separate type of account created by the IRS, but rather a strategic use of an existing IRA. It allows a working spouse to contribute to an IRA on behalf of their non-working or low-income spouse. The primary requirement is that the couple must file a joint tax return. As long as the working spouse earns enough to cover both their own contribution and that of their spouse, both partners can take advantage of the retirement savings benefits offered by IRAs.
Amount you can contribute
For 2025, the contribution limit for both traditional and Roth IRAs is $7,000 per person under the age of 50. Those aged 50 or older can put away an additional $1,000 as a catch-up contribution, for a total of $8,000. This means that a married couple can potentially contribute up to $14,000 (or $16,000 if both are eligible for catch-up contributions) into their respective IRAs, even if only one spouse has earned income.
The main advantage of a spousal IRA lies in its ability to equalize retirement savings opportunities between spouses. In many households, one spouse may have taken time off from paid work to raise children, care for an elderly family member or pursue other responsibilities. Without earned income, that spouse would traditionally be excluded from contributing to a retirement account. A spousal IRA changes that by allowing the working spouse to fund both accounts, helping both partners accumulate tax-advantaged savings over time.
Income limits
Spousal IRAs can be opened as either traditional or Roth IRAs, depending on the couple’s income and tax goals. Traditional IRAs offer the possibility of a tax deduction in the year the contribution is made, though this is subject to income limits, especially if the working spouse is covered by a workplace retirement plan. On the other hand, Roth IRAs are funded with after-tax dollars, so they don’t offer an immediate tax break, but qualified withdrawals in retirement are tax-free. Couples with a modified adjusted gross income under $236,000 in 2025 can make full contributions to a Roth IRA, with the eligibility phasing out completely at $246,000.
It’s important to note that Roth IRAs aren’t subject to required minimum distributions during the original owner’s lifetime, while traditional IRAs are.
Setting up a spousal IRA is straightforward. The account must be opened in the name of the non-working spouse, and the couple must ensure that contributions are made by the annual tax filing deadline, generally April 15 of the following year. Many financial institutions offer the option to open and fund these accounts online or with the help of a financial advisor.
Plan for financial security
In summary, a spousal IRA is a valuable financial planning tool that can help ensure both partners are saving adequately for retirement, regardless of employment status. With the increased contribution limits in 2025, this strategy is more powerful than ever for couples looking to maximize their long-term financial security. For tailored advice about retirement planning and taxes, contact us to help guide you based on your unique situation.
© 2025
Unanticipated crises can threaten even the most well-run company. And the risk is often greater for small to midsize businesses where the owner wears many hats. That’s why your company needs an emergency succession plan. Unlike a traditional succession plan — which focuses on the long-term and is certainly important, too — an emergency succession plan addresses who’d take the helm tomorrow if you’re suddenly unable to run the business. Its purpose is to clarify responsibilities, preserve operational continuity and reassure key stakeholders. Naming the right person When preparing for potential disasters in the past, you’ve probably been urged to devise contingency plans to stay operational. In the case of an emergency succession plan, you need to identify contingency people. Larger organizations may have an advantage here. After all, a CFO or COO may be able to temporarily or even permanently replace a CEO relatively easily. For small to midsize companies, the challenge can be greater — particularly if the owner is heavily involved in retaining key customers or bringing in new business. For this reason, an emergency succession plan should name someone who can credibly step into the leadership role if you become seriously ill or otherwise incapacitated. Look to a trusted individual whom you expect to retain long-term and who has the skills and personality to stabilize the company during a difficult time. After you identify this person, consider the “domino effect.” That is, who’ll take on your emergency successor’s role when that individual is busy running the company? Empowering your pick After choosing an emergency successor, meet with the person to discuss the role in depth. Listen to any concerns and take steps to alleviate them. For instance, you may need to train the individual on certain duties or allow the person to participate in executive-level decisions to get a feel for running the business. Just as important, ensure your emergency successor has the power and access to act quickly. This includes: Signatory authority for bank accounts, Access to accounting and payroll systems, and The ability to execute contracts and approve expenditures. Updating company governance documents to reflect temporary leadership authority is a key step. Be sure to ask your attorney for guidance. Centralizing key information It’s also critical to document the financial, operational and administrative information your emergency successor will rely on. This includes maintaining a secure, centralized location for key records such as: Banking credentials, Vendor and customer contracts, Payroll records and procedures, Human resources data, Tax filings and financial statements, and Login details for essential systems. Without this documentation, even the most capable interim leader may struggle to keep the business functioning smoothly. Also, ensure your successor will have access to insurance records. Review your coverage to verify it protects the company financially in the event of a sudden transition. Key person insurance, disability buyout policies, and the structure of ownership or buy-sell agreements should align with your emergency succession plan’s objectives. Getting the word out A traditional succession plan is usually kept close to the vest until it’s fully formulated and nearing execution. An emergency succession plan, however, must be transparent and communicated as soon as possible. When ready, inform your team about the plan and how it will affect everyone’s day-to-day duties if executed. In addition, develop a strategy for communicating with customers, vendors, lenders, investors and other stakeholders. Acting now If you haven’t created an emergency succession plan, year end may be a good time to get started. Already have one? Be sure to review it at least annually or whenever there are significant changes to the business. We’d be happy to help you evaluate areas of financial risk, better document internal controls and strengthen the processes that will keep your company moving forward — even in the face of the unexpected. © 2025
Just because it’s December doesn’t mean it’s too late to reduce your 2025 tax liability. Consider implementing one or more of these year-end tax-saving ideas by December 31. Defer income and accelerate deductions Pushing income into the new year will reduce this year’s taxable income. If you’re expecting a bonus at work, for example, ask if your employer can hold off on paying it until January. If you’re self-employed, you can delay sending invoices so that they won’t be paid until January and thus postpone the revenue to 2026. If you itemize deductions, remember that deductions generally are claimed for the year of payment. So, if you make your January 2026 mortgage payment in December, you can deduct the interest portion on your 2025 tax return. Similarly, if you’ve received your 2026 property tax assessment and pay it by December 31, you can claim it on your 2025 return (provided your total state and local taxes don’t exceed the applicable limit). But don’t follow this approach if you expect to be in a higher tax bracket next year. Also, if you’re eligible for the qualified business income deduction for pass-through entities, consider how this approach might affect it. Harvest investment losses An investment loss has a bit of an upside — it gives you the opportunity to offset taxable gains. If you sell investments at a loss before the end of the year, you can offset gains realized this year on a dollar-for-dollar basis. If you have more losses than gains, you generally can apply up to $3,000 of the excess to reduce your ordinary income ($1,500 if you’re married and filing separately). Any remaining losses are carried forward to future tax years. Donate appreciated stock to charity If you want to give to charity, you can simply write a check or use a credit card. Or you can donate from your taxable investment portfolio, which sometimes saves more tax. By donating appreciated publicly traded stock, you can claim a charitable deduction (assuming you itemize deductions) equal to the current market value of the shares at the time of the gift. Plus, you escape any capital gains taxes you’d owe if you sold those shares. But don’t donate stock worth less than it cost. Instead, sell the shares so you can claim a capital loss, which can reduce your taxes now or in the future as discussed above. Then, give the sales proceeds to a charity and claim a charitable deduction. Maximize retirement contributions Making pretax or tax-deductible contributions to traditional retirement accounts — such as a 401(k) plan, Savings Incentive Match Plan for Employees (SIMPLE), IRA and Simplified Employee Pension (SEP) plan — can be a significant tax saver. For 2025, taxpayers can contribute pretax as much as $23,500 to a 401(k) or $16,500 to a SIMPLE. The IRA contribution limit is $7,000, though your deduction may be reduced or eliminated if you or your spouse also contributes to an employer-sponsored plan. Self-employed individuals can contribute up to 25% of net income (but no more than $70,000) to a SEP IRA. Taxpayers age 50 or older by December 31 can also make “catch-up” contributions of up to $7,500 to a 401(k) or $3,500 to a SIMPLE and $1,000 to a traditional IRA. Those age 60, 61, 62 or 63 can make an additional catch-up contribution of up to $3,750 to a 401(k) or $1,750 to a SIMPLE. The deadline for making 2025 401(k) and SIMPLE contributions is generally December 31, 2025. (And if you want to increase the amount that’s deferred from your paycheck, you’ll need to check with your plan on whether increases for the year are still allowed.) But you might be able to make deductible 2025 IRA contributions as late as April 15, 2026, and deductible 2025 SEP contributions as late as the extended 2025 filing deadline of October 15, 2026. Act soon Most of the ideas discussed here must be implemented by December 31 to reduce your 2025 taxes. So act soon. Let us know if you have questions or are looking for more last-minute tax-saving strategies. © 2025
Year-round tax planning generally produces the best results, but there are some steps you can still take in December to lower your 2025 taxes. Here are six to consider: 1. Postpone invoicing. If your business uses the cash method of accounting and it would benefit from deferring income to next year, wait until early 2026 to send invoices. 2. Prepay expenses. A cash-basis business may be able to reduce its 2025 taxes by prepaying certain 2026 expenses — such as lease payments, insurance premiums, utility bills, office supplies and taxes — before the end of the year. Many expenses can be deducted even if paid up to 12 months in advance. 3. Buy equipment. Take advantage of 100% bonus depreciation and Section 179 expensing to deduct the full cost of qualifying equipment or other fixed assets. Under the One Big Beautiful Bill Act, 100% bonus depreciation is back for assets acquired and placed in service after January 19, 2025. And the Sec. 179 expensing limit has doubled, to $2.5 million for 2025. But remember that the assets must be placed in service by December 31 for you to claim these breaks on your 2025 return. 4. Use credit cards. What if you’d like to prepay expenses or buy equipment before the end of the year, but you don’t have the cash? Consider using your business credit card. Generally, expenses paid by credit card are deductible when charged, even if you don’t pay the credit card bill until next year. 5. Contribute to retirement plans. If you’re self-employed or own a pass-through business — such as a partnership, S corporation or, generally, a limited liability company — one of the best ways to reduce your 2025 tax bill is to increase deductible contributions to retirement plans. Usually, these contributions must be made by year-end. But certain plans — such as SEP IRAs — allow your business to make 2025 contributions up until its tax return due date (including extensions). 6. Qualify for the pass-through deduction. If your business is a sole proprietorship or pass-through entity, you may be able to deduct up to 20% of qualified business income (QBI). But if your 2025 taxable income exceeds $197,300 ($394,600 for married couples filing jointly), certain limitations kick in that can reduce or even eliminate the deduction. One way to avoid these limitations is to reduce your income below the threshold — for example, by having your business increase its retirement plan contributions. Most of these strategies are subject to various limitations and restrictions beyond what we’ve covered here. Please consult us before implementing them. We can also offer more ideas for reducing your taxes this year and next. © 2025
A living trust is one of the most versatile estate planning tools available. It offers a streamlined way to manage and transfer assets while maintaining privacy and control. Unlike a traditional will, a living trust allows your assets to pass directly to your beneficiaries without going through probate. By placing assets into the trust during your lifetime, you create a clear plan for how they should be distributed, and you empower a trustee to manage them smoothly if you become incapacitated. This combination of efficiency and continuity can provide significant peace of mind for you and your family. However, even the most carefully created living trust can’t automatically account for every asset you acquire later or forget to transfer into it. That’s where a pour-over will becomes essential. Defining a pour-over will A pour-over will acts as a safety net by directing any assets not already held in your living trust to be “poured over” into the trust at your death. Your trustee then distributes the assets to your beneficiaries under the trust’s terms. Although these assets may still pass through probate, the pour-over will ensures that everything ultimately ends up under the trust’s umbrella, following the same instructions and protections you’ve already put in place. This setup offers the following benefits: Convenience. It’s easier to have one document controlling the assets than it is to “mix and match.” With a pour-over will, it’s clear that everything goes to the trust, and then the trust document determines who gets what. That, ideally, makes it easier for the executor and trustee charged with wrapping up the estate. Completeness. Generally, everyone maintains some assets outside of a living trust. A pour-over will addresses any items that have fallen through the cracks or that have been purposely omitted. Privacy. In addition to conveniently avoiding probate for the assets that are titled in the trust’s name, the setup helps maintain a level of privacy that isn’t available when assets pass directly through a regular will. Understanding the roles of your executor and trustee Your executor must handle specific bequests included in the will, as well as the assets being transferred to the trust through the pour-over provision before the trustee takes over. (Exceptions may apply in certain states for pour-over wills.) While this may take months to complete, property transferred directly to a living trust can be distributed within weeks of a person’s death. Therefore, this technique doesn’t avoid probate completely, but it’s generally less costly and time consuming than usual. And, if you’re thorough with the transfer of assets made directly to the living trust, the residual should be relatively small. Note that if you hold back only items of minor value for the pour-over part of the will, your family may benefit from an expedited process. In some states, your estate may qualify for “small estate” probate, often known as “summary probate.” These procedures are easier, faster and less expensive than regular probate. After the executor transfers the assets to the trust, it’s up to the trustee to do the heavy lifting. (The executor and trustee may be the same person, and, in fact, they often are.) The responsibilities of a trustee are similar to those of an executor, with one critical difference: They extend only to the trust assets. The trustee then adheres to the terms of the trust. Creating a coordinated estate plan When used together, a living trust and a pour-over will create a comprehensive estate planning structure that’s both flexible and cohesive. The trust handles the bulk of your estate efficiently and privately, while the pour-over will ensures that no assets are left out or distributed according to default state laws. This coordinated approach helps maintain consistency in how your estate is managed and can reduce stress and confusion for your loved ones. Because living trusts and pour-over wills involve legal considerations, we recommend working with an experienced estate planning attorney to finalize the documents. We can assist you with the related tax and financial planning implications. Contact us to learn more. © 2025
As a small to midsize business grows, demands on its time, talent and resources inevitably expand right along with it. Many business owners reach a point where continuing to do everything in-house — or even themselves — begins to slow progress or expose the company to unnecessary risk. Have you reached this point yet? If so, or even if you’re getting close, outsourcing could be a smart move. Common candidates Many business activities can be outsourced. The key is identifying functions that, if handled by an external provider, would improve efficiency, strengthen compliance, and give you and your team more time to focus on revenue-generating work. Here are some common candidates: Accounting and financial reporting. A reputable provider can manage your books, collect payments, pay invoices and keep accounting technology up to date. It should also be able to prepare financial statements that meet the standards expected by lenders, investors and other outside parties. Customer service. This may seem an unlikely candidate because you might believe that someone must work for your business to truly represent it. But that’s not necessarily true. Internal customer service departments often have high turnover rates, which drives up costs and reduces service quality. Outsourcing to a provider with a more stable, well-trained team can improve both customer satisfaction and operational consistency. Information technology (IT). Bringing in an outside firm or consultant to manage your IT needs can provide significant benefits. For starters, you’ll be able to better focus on your mission without the constant distraction of changing technology. Also, a provider will stay current on the best hardware and software for your business, as well as help you securely access, store and protect your data. Payroll and human resources (HR). These functions are governed by complex regulations that change frequently — as does the necessary software. A qualified vendor can help your business comply with current legal requirements while giving you and your employees a better, more secure platform for accessing payroll and HR information. Downsides to watch out for Naturally, outsourcing comes with potential downsides. You’ll need to spend time and resources researching and vetting providers. Then each engagement will involve substantial ongoing expenses. You’ll also have to place considerable trust in providers — especially in today’s environment, where data breaches are common and cybersecurity is critical. Finally, even a solid outsourcing arrangement requires ongoing communication and management to maintain a productive relationship. Not a one-size-fits-all solution Every business owner must carefully consider when to outsource, which services are worth the money and how to measure return on investment over time. If you’d like help evaluating your options or better understanding the financial and tax implications of outsourcing, contact us. © 2025
If you have a flexible spending account (FSA) through your employer to help pay for health or dependent care expenses, now’s a good time to check your balance. FSAs save taxes, but they generally require you to incur expenses to use the funds by year end or forfeit them. Here’s a refresher on the rules and limits. FSAs for health care A maximum pretax contribution of $3,300 to a health care FSA is permitted in 2025. (This amount is annually adjusted for inflation and will increase to $3,400 in 2026.) You use the pretax dollars to pay for medical expenses not covered by insurance. An FSA allows you to save taxes without having to claim a medical expense deduction. This is beneficial because, to claim the deduction, you must itemize deductions on your tax return and the expenses are deductible only to the extent that they exceed 7.5% of your adjusted gross income. This threshold can be hard to meet. An added benefit of FSA contributions is that they aren’t subject to Social Security or Medicare taxes. However, the “use-it-or-lose-it” rule means you must incur qualifying medical expenses by the last day of the plan year (December 31 for a calendar year plan) — unless the plan allows a grace period. A grace period can’t extend beyond the 15th day of the third month following the close of the plan year (March 15 for a calendar year plan). Alternatively, your FSA might allow you to roll over a balance of up to $660 to 2026. (The limit for rollovers from 2026 to 2027 will be $680.) Take a look at your year-to-date FSA expenditures now to see how much you still need to spend. What are some ways to use up the money? Before year end (or the extended date, if permitted), schedule certain elective medical procedures, visit the dentist or buy new eyeglasses. Even over-the-counter medications and health-related supplies may be eligible. FSAs for dependent care Some employers also allow employees to set aside funds on a pretax basis in dependent care FSAs. A $5,000 maximum annual contribution is permitted ($2,500 for a married couple filing separately) in 2025. (This amount isn’t annually adjusted for inflation. But under the One Big Beautiful Bill Act, the limit will increase to $7,500 beginning in 2026.) Dependent care FSAs can be used to pay dependent care expenses for: A child who qualifies as your dependent and who is under age 13, or A dependent or spouse who is physically or mentally incapable of self-care and who has the same principal place of abode as you for more than half of the tax year. Like health FSAs, dependent care FSAs are subject to a use-it-or-lose-it rule, and grace period relief may apply. But rollovers to the next year aren’t allowed. Therefore, it’s a good idea to check your dependent care expenses to date. Wrapping up 2025 As 2025 wraps up, be sure to review your FSA balance and check whether your plan offers a grace period or rollover option. Then take steps before year end to ensure you don’t forfeit any FSA funds. Ask your HR department any questions you have about your specific plan. We can answer your tax-related questions and provide more year-end tax planning tips. © 2025
Whether you’re selling your business or acquiring another company, the tax consequences can have a major impact on the transaction’s success or failure. So if you’re thinking about a merger or acquisition, you need to consider the potential tax impact. Asset sale or stock sale? From a tax standpoint, a transaction can basically be structured as either an asset sale or a stock sale. In an asset sale, the buyer purchases just the assets of a business. This may happen if a buyer only wants specific assets or product lines. And it’s the only option if the target business is a sole proprietorship or a single-member limited liability company (LLC) that’s treated as a sole proprietorship for tax purposes. Alternatively, if the target business is a corporation, a partnership or an LLC that’s treated as a partnership for tax purposes, the buyer can directly purchase the seller’s stock or other form of ownership interest. Whether the business being purchased is a C corporation or a pass-through entity (that is, an S corporation, partnership or, generally, an LLC) makes a significant difference when it comes to taxes. The flat 21% corporate federal income tax rate under the Tax Cuts and Jobs Act (TCJA), which the One Big Beautiful Bill Act (OBBBA) didn’t change, makes buying the stock of a C corporation somewhat more attractive. Why? The corporation will pay less tax and generate more after-tax income. Plus, any built-in gains from appreciated corporate assets will be taxed at a lower rate when they’re eventually sold. The TCJA’s reduced individual federal tax rates, which have been made permanent by the OBBBA, may also make ownership interests in S corporations, partnerships and LLCs more attractive than they once were. This is because the passed-through income from these entities will be taxed at the TCJA’s lower rates on the buyer’s personal tax return. The buyer may also be eligible for the TCJA’s qualified business income deduction, which was also made permanent by the OBBBA. Note: In some circumstances, a corporate stock purchase can be treated as an asset purchase by making a Section 338 election. Contact us for more information. We’d be pleased to help determine if this would be beneficial in your situation. Seller or buyer? Sellers generally prefer stock sales for tax and nontax reasons. One of their main objectives is to minimize the tax bill from a sale. That can usually be best achieved by selling ownership interests in the business (corporate stock or interests in a partnership or LLC) as opposed to selling the business’s assets. With a sale of stock or other ownership interest, liabilities generally transfer to the buyer and any gain on sale is typically treated as lower-taxed long-term capital gain (assuming the ownership interest has been held for more than one year). Buyers, however, usually prefer to purchase assets. Generally, a buyer’s main objective is to generate enough cash flow from an acquired business to pay any acquisition debt and provide an acceptable return on the investment. Therefore, buyers want to limit exposure to undisclosed and unknown liabilities and minimize taxes after the deal closes. A buyer can step up (increase) the tax basis of purchased assets to reflect the purchase price. Stepped-up basis lowers taxable gains when certain assets, such as receivables and inventory, are sold or converted into cash. It also increases depreciation and amortization deductions for qualifying assets. Keep in mind that other factors, such as employee benefits, can cause unexpected tax issues when merging with or acquiring a business. We can help Selling the business you’ve spent years building or becoming a first-time business owner by buying an existing business might be the biggest financial move you ever make. We can assess the potential tax consequences before you start negotiating to help avoid unwelcome tax surprises after a deal is signed. Contact us to get started. © 2025
With Notice 2025–67, the IRS has issued its 2026 inflation-adjusted retirement plan contribution limits. Although the changes are more modest than in recent years, most retirement-plan-related limits will still increase for 2026. Depending on your plan, these adjustments may provide extra room to boost your retirement savings.
Planning for the end of life is never easy, but including your funeral and memorial wishes in your estate plan can relieve a major burden from your loved ones. When your family is grieving, decisions about burial or cremation, service preferences, or even the type of obituary you’d like can feel overwhelming. By documenting these choices in advance, you not only help to ensure your wishes are honored but also give your family clarity and comfort. Express your wishes First, make your wishes known to family members. This typically includes instructions about where you’re to be buried or cremated, the type of memorial service you prefer (if any), and even the clothing you’ll be buried in. If you don’t have a next of kin or would prefer someone else to be in charge of arrangements, you can appoint another representative. Be aware that the methods for expressing these wishes vary from state to state. With the help of your attorney, you can include a provision in your will, language in a health care proxy or power of attorney, or a separate form specifically designed for communicating your desired arrangements. Whichever method you use, it should, at a minimum, state 1) whether you prefer burial or cremation, 2) where you wish to be buried or have your ashes interred or scattered (and any other special instructions), and 3) the person you’d like to be responsible for making these arrangements. Some people also request a specific funeral home. Weigh your payment options There’s a division of opinion in the financial community as to whether you should prepay funeral expenses. If you prepay and opt for a “guaranteed plan,” you lock in the prices for the arrangements, no matter how high fees may escalate before death. With a “nonguaranteed plan,” prices aren’t locked in, but the prepayment accumulates interest that may be put toward any rising costs. When weighing whether to use a prepaid plan, the Federal Trade Commission recommends that you ask the following questions: What happens to the money you’ve prepaid? What happens to the interest income on prepayments placed in a trust account? Are you protected if the funeral provider goes out of business? Before signing off on a prepaid plan, learn whether there’s a cancellation clause in the event you change your mind. One alternative that avoids the pitfalls of prepaid plans is to let your family know your desired arrangements and set aside funds in a payable-on-death (POD) bank account. Simply name the person who’ll handle your funeral arrangements as the beneficiary. When you die, he or she will gain immediate access to the funds without the need for probate. Incorporate your wishes into your estate plan Thoughtful planning today can provide lasting peace of mind for the people you care about most. Don’t wait to incorporate your wishes into your estate plan — or to update your plan if needed. © 2025
If your business sponsors a 401(k) plan for employees, you know it’s a lot to manage. But manage it you must: Under the Employee Retirement Income Security Act (ERISA), you have a fiduciary duty to act prudently and solely in participants’ interests. Once a plan is launched and operational, it may seem to run itself. However, problems can arise if you fail to actively oversee administration — even when a third-party administrator is involved. With 2025 winding down and a new year on the horizon, now may be a good time to review your plan’s administrative processes and fiduciary procedures. Investment selection and management Study your plan’s investment choices to determine whether the selections available to participants are appropriate. Does the lineup offer options along the risk-and-return spectrum for workers of all ages? Are any premixed funds, which are based on age or expected retirement date, appropriate for your employee population? If the plan includes a default investment for participants who haven’t directed their investment contributions, look into whether that option remains appropriate. In the event your plan doesn’t have a written investment policy or doesn’t use an independent investment manager to help select and monitor investments, consider incorporating these risk management measures. Should you decide to engage an investment manager, however, first implement formally documented procedures for selecting and monitoring this advisor. Consult an attorney for assistance. If you’re already using an investment manager, reread the engagement documentation to make sure it’s still accurate and comprehensive. Fee structure The fee structures of 401(k) plans sometimes draw media scrutiny and often aggravate employees who closely follow their accounts. Calculate the amount of current participant fees associated with your plan’s investments and benchmark them against industry standards. In addition, examine the plan’s administrative, recordkeeping and advisory fees to understand how these costs are allocated between the business and participants. Establish whether any revenue-sharing arrangements are in place and, if so, assess their transparency and oversight. It’s also a good idea to compare your total plan costs to those of similarly sized plans. This way, you can determine whether your overall fee structure remains competitive and reasonable under current market conditions. Third-party administrator Even if your third-party administrator handles day-to-day tasks, it’s important to periodically verify that their internal controls, cybersecurity practices and data-handling procedures meet current standards. Confirm that the administrator: Maintains proper documentation, Follows timely and accurate reporting practices, and Provides adequate support when compliance questions arise. A proactive review of their service model can help ensure your business isn’t unknowingly exposed to risks from operational errors, data breaches or outdated administrative practices. Overall compliance Some critical compliance questions to consider are: Do your plan’s administrative procedures comply with current regulations? If you intend it to be a participant-directed individual account plan, does it follow all the provisions of ERISA Section 404(c)? Have there been any major changes to other 401(k) regulations recently? Along with testing the current state of your plan against ERISA requirements, evaluate whether your operational practices align with your plan document — an area where many sponsors stumble. Double-check key items such as contribution timelines, eligibility determinations, vesting schedules and loan administration. Verify that procedures precisely follow the terms of your plan document. Conducting periodic internal audits can help identify inconsistencies and operational errors before they become costly compliance failures. You might even discover fraudulent activities. Great power, great responsibility A 401(k) plan is a highly valuable benefit that can attract job candidates, retain employees and demonstrate your business’s commitment to participants’ financial well-being. However, with this great power comes great responsibility on your part as plan sponsor. If your leadership team and key staff haven’t reviewed your company’s oversight practices recently, year end may be an ideal time to take stock. We can help you identify plan costs and fees, spot potential compliance gaps, and tighten internal controls. © 2025