Companies that offer retirement plans spend copious amounts of time on 401k retirement education, but few education sessions include the topic of free money from the Saver’s Credit. Most companies do not want to be in the business of giving tax advice to their employees for obvious reasons. Most companies also attempt to avoid giving investment advice. Perhaps that is why companies shy-away from providing retirement education to plan participants on the topic of the Saver’s Credit. However, those decisions to not provide retirement education on the Saver’s Credit may collectively be costing plan participants Billions of dollars each year.
Where is the Disconnect?
A recent poll by the National Association of Plan Advisors reveals that only one in eight individuals who are eligible for up to a $1,000 credit on their federal taxes, take advantage of the free money. There are various reasons for poor uptake on this available federal tax credit. In the same poll it was noted that among the reasons cited as to why people do not take advantage of the Saver’s Credit, 58% felt that the taxpayers are not aware of the Saver’s Credit option. Surprising also, the poll indicated that 29% of plan sponsors do not communicate the availability of the Saver’s Credit to their retirement plan participants.
Who Qualifies for the Saver’s Credit?
The Internal Revenue Service makes the Retirement Savings Contribution Credit, normally referred to as the Saver’s Credit, available to working Americans who have an Adjusted Gross Income (AGI) of $30,750 or less (if single) or $61,500 or less (if married).
Bridging the Education Gap
Plan sponsors should take an active role in overseeing retirement education of the workforce. Retirement plan advisors are well aware of the Saver’s Credit. If your plan advisor is not proactive in working with your plan participants, you need to find out why. It is clearly in the best interest of all parties to have a workforce which is taking advantage of the saver’s credit option. Your employees today need this education as soon as possible if they are to take full advantage of the Saver’s Credit for tax year 2016.
