Boost Participation with Tax Credit

Very few lower income employees are aware of the double tax benefit available through the Saver’s Credit or Retirement Savings Contribution Credit because it’s not in the 1040EZ tax form. But depending on their income, they can get an extra $1,000 to $2,000 tax credit if they participate in their employer’s retirement plan. A Transamerica survey reported less than 25% of these people know this. In 2016 it’s estimated that 70% of workers are eligible with incomes as follows:

  • Individual workers earning up to $30,750
  • Heads of households, $46,125
  • Married couples is $61,500

Lower income workers frequently find it difficult to justify contributing to their employer’s plan, but a tax credit (free money from the government), as well as a company match can be influential motivations to encourage participation. By explaining these incentives – especially through walking them through the actual calculations – they can understand just how much they will be getting back by contributing to their employer’s retirement plan. The Plan Sponsor University (TPSU) reported that an attendee created a spreadsheet letting people know how much money they left on the table by not deferring up to the company match in order to graphically display this and thereby boost participation – the Saver’s Credit or Retirement Savings Contributions Credit could also help achieve this.

This method is far more influential than general information or percentages. Let your QBI Consultant know how we can be of help with timely and effective administrative plan reviews.

Missed opportunity sells everyone short. Let your QBI Consultant know how we can be of help with timely and effective administrative plan reviews that complement your investment reviews for your clients.

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