If you grew up playing Super Mario Bros. on your Nintendo, you remember the moment Mario hit that first Super Mushroom and leveled up. Suddenly? Stronger. Harder to knock out. More resilient.
That’s exactly what the right plan features can do for retirement plans.
Let’s talk about three power-ups that elevate plan benefits and reduce employer risk.
Power-Up #1: Automatic Enrollment
Boost participation automatically.
Automatic enrollment is one of the most effective features for increasing participation in retirement plans. Instead of waiting for employees to opt in, eligible employees are automatically enrolled at a default deferral rate (with the option to opt out).
Why it’s a game-changer
- Dramatically increases participation rates
- Improves retirement readiness
- Reduces demographic imbalance
- Helps mitigate failed nondiscrimination testing
Plans with auto-enrollment consistently see participation rates around 90%, compared to lower voluntary enrollment rates.
Requirements
SECURE 2.0 added automatic enrollment requirements for many retirement plans. New 401(k) and 403(b) plans established after December 29, 2022 must include:
- Automatic enrollment starting between 3%–10%
- Annual auto-escalation of 1% per year
- Escalating up to at least 10%, but not more than 15%
- Employees must have the ability to opt out.
- Certain small and new businesses may qualify for exceptions.
In short: automatic enrollment is no longer just a best practice — for many plans, it’s the new standard.
Tax credits
Adding automatic enrollment doesn’t just boost participation — it can also generate a direct tax incentive. Under SECURE 2.0, eligible small employers may qualify for a $500 annual tax credit, available for up to 3 years for adding an Eligible Automatic Contribution Arrangement (EACA) to a new or existing plan.
This credit is specifically designed to encourage employers to adopt automatic enrollment features that increase employee participation. It’s a rare win-win in retirement planning — better outcomes for employees, plus a tax benefit for the employer.
Power-Up #2: Safe Harbor Plan Design
Remove ADP/ACP testing risk and protect key contributors.
If automatic enrollment is your participation power-up, safe harbor plan design is your compliance shield.
Most traditional 401(k) plans are required to pass annual nondiscrimination testing — specifically ADP (Actual Deferral Percentage) testing or ACP (Actual Contribution Percentage) testing.
These tests are required under IRS rules to ensure retirement plans don’t disproportionately benefit Highly Compensated Employees (HCEs).
The IRS requires 401(k) plans to demonstrate that:
- Non-Highly Compensated Employees (NHCEs) are meaningfully participating
- Highly Compensated Employees aren’t benefiting “too much” relative to the rest of the workforce
In simple terms: If owners and executives defer aggressively, but rank-and-file employees participate at low rates, the plan may fail testing.
What happens if a plan fails?
If a traditional 401(k) fails ADP/ACP testing, corrective action is required — often in the form of refunds to HCEs, corrective employer contributions to NHCEs, administrative time and additional compliance work. This also leads to frustration for owners who thought they were maximizing contributions.
Enter: Safe harbor design
Safe harbor status is essentially a trade-off:
The IRS says: “If you commit to providing a certain level of employer contributions and follow the rules, you don’t have to worry about ADP/ACP testing.”
That’s huge — especially for smaller companies or those with highly compensated owners who want to maximize contributions without running tests every year.
To qualify, a safe harbor plan must:
- Provide required employer contributions according to IRS-approved formulas.
- Generally fully vest those contributions when made
- Comply with employee notice requirements explaining the safe harbor design and contributions.
What that means for employers
Safe harbor plans are popular with employers for several reasons:
- Automatic compliance with nondiscrimination rules — no ADP/ACP testing headaches
- Allow owners/HCEs to maximize retirement savings without refunds or corrections
- Predictable budgeting — employer contributions are fixed and known ahead of time
- Attracts and retains employees — employer match or nonelective contributions are meaningful benefits
In simpler terms: rather than hoping their plan will pass annual nondiscrimination testing, safe harbor design gives plan sponsors a built-in compliance shield — a strategic design choice that reduces risk and simplifies administration while still delivering a strong benefit to employees.
Power-Up #3: EGPS 360 – 3(16) Fiduciary Services
Reduce risk. Reduce workload. Regain peace of mind.
Here’s something many plan sponsors don’t fully realize:
When a company sponsors a retirement plan, it becomes a fiduciary under ERISA. And unless responsibility is formally delegated, the employer is typically serving as the Plan Administrator under ERISA Section 3(16). That role comes with a plethora of tasks and legal responsibility.
That’s where EGPS 360 – 3(16) fiduciary services come in. By appointing EGPS as the 3(16) plan administrator, key responsibilities are delegated — significantly reducing the employer’s workload and risk.
Key tasks EGPS takes off the plan sponsor’s plate:
- Monitoring and managing eligibility tracking
- Processing distributions and loans
- Preparing and filing Form 5500
- Ensuring required notices are delivered
- Overseeing contribution deadlines
- Compiling annual census data
- Providing audit support (if applicable)
- And more!
What that means for plan sponsors:
- Reduced fiduciary exposure and lower DOL/IRS correction risk
- Significantly less time spent on retirement plan tasks
- Greater confidence that compliance tasks are handled correctly
Instead of juggling paperwork and compliance deadlines, sponsors can focus on running their business. That’s not just a feature. That’s peace of mind.
The Power-Up Effect
Automatic enrollment increases participation. Safe harbor design removes testing risk. 3(16) fiduciary services reduce liability and workload.
Each one is a strategic upgrade, and each one can strengthen the plan.
Just like grabbing a power-up in Super Mario Bros., the right features don’t just help you get by — they elevate the entire level.
Stronger participation.
Smarter compliance.
Greater confidence.
That’s what it means to level up a retirement plan.
Ready to Power Up?
If you’d like more details on any of these features — or want to explore how they could work for your plan — fill out the form and we’ll send additional information and answer any questions you have.
