The holiday season is rapidly approaching. Turkey, apple pie, gifts, and stressful Christmas shopping are right around the corner.
I remember the late nights spent coupon hunting with family after Thanksgiving dinner, scouring the papers and meticulously planning each store’s purchases for Black Friday. Now, as an adult and financial professional, I see that it is equally important to take the time to make a list—and check it twice—to plan the steps for my end-of-year financial tasks.
Organizational year-end activity is no different, so here are 7 financial “to-do’s” that plan sponsors need to complete and remind participants about before December 31:
1) Remind employees about retirement plan contributions
While Roth and traditional IRA contributions can be made until Tax Day of the following year, your employees must make any 2022 employer-sponsored retirement plan contributions by December 31st. Remind your staff that contributing more to the plan is an excellent way to reduce their taxable income or get more money into their Roth balance (tax-free on withdrawal after specific retirement ages). If your organization is considering a holiday or year-end bonus, they should consider earmarking as much as they can towards their retirement savings, especially if your plan offers matching contributions.
2) Remind employees about other benefits, such as FSA or HSA utilization
Most organizations begin their open enrollment periods, when employees can select/change their employer-sponsored benefits for the upcoming year, in the final quarter of the preceding year. Have your staff consult with your human resources team to get all open enrollment and insurance information for the coming year. Additionally, remind employees to take advantage of any 2022 flexible savings account (FSA) dollars unused and/or making additional health savings account (HSA) savings potential, if applicable.
3) Review participant accounts subject to required minimum distributions (RMDs)
The Internal Revenue Service requires a certain amount to be withdrawn from most tax-advantaged retirement accounts upon reaching a defined age. For former employees or current employees that are at least 5% owners in your organization, these withdrawals must be made by December 31 each year after reaching age 72 (but note, the exception that participants have until April 1 of the year following if it is their first RMD). Your retirement plan recordkeeper may communicate to participants as well. The penalty to the account holder for not taking a timely RMD can be as much as 50% of the required amount that was not withdrawn, so missing this requirement could be costly.
4) Review employee information for gaps or updates
The holiday season is a busy time for all employees and employers alike, but do not miss a good chance to complete your payroll, bonus, or benefits package checklist. This is also a great time to audit employee information for incorrect phone numbers and addresses, or to update statuses for new and former employees. Lastly, it can be helpful to review retirement plan participant accounts for missing beneficiary designations.
5) Review vendor and retirement plan contact information
A lot can change in any year. Your business is not immune to moving pieces, nor are your vendors. Use this time to verify that contact information is still correct for each of your vendors. Purge your online systems of any inactive or inaccurate records. Review relevant internal contact information and authorized signers on record with your retirement plan service providers as well.
6) Look back at the year coming to an end
The end of the year is a great time to assess where things stand, financially, and how current numbers compare to previous years. Financial reporting is the best way to see at a glance, where you stand and what your outlook is for the new year. If cash inflow is lower than expected, you may want to make some changes as you head into the new year. If inflow is higher than expected, it might be a good time to consider increasing expenses toward organizational goals or expanding your workforce. Never forget to celebrate successes! In all the hustle and bustle of a work year, small victories often go overlooked. Celebrating your employees and colleagues is a great way to boost morale and end the year on a high note.
7) Set goals for the new year ahead
Like personal New Year’s resolutions, organizational/financial resolutions can aid future planning and focus. Take the time to evaluate any goals, hiring expectations, bonuses, raises, or vacation allowances and plan those changes into next year’s figures. Set specific and attainable goals for your organization.
At Innovest, we hope you enjoy the upcoming holiday season!
Frank Cornett, CFP, is a Senior Client Manager and a member of the Education, Due Diligence, Research, Investment Committee, and Capital Markets Teams. Frank also focuses his efforts on projects for Innovest’s high net worth and retirement plan clients. Dustin Roberts, MBA, QKA, AIF, is a Vice President and Consultant at Innovest Portfolio Solutions. He is a member of the firm’s Retirement Plan Practice Group, a specialized team that identifies best practices and implements process improvements to maximize efficiencies for retirement plan clients. He also leads the firm’s Employee Education Team.
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Frank is a Senior Client Manager and a member of the Education, Due Diligence, Research, Investment Committee, and Capital Markets Teams. Frank also focuses his efforts on projects for Innovest’s high net worth and retirement plan clients. Innovest’s Education team prioritizes educating plan participants in understanding the nuances of their retirement plans and simplified financial planning concepts. The Due Diligence Team and Research Team are responsible for sourcing investment managers, as well as monitoring recommended products and strategies. Additionally, this team utilizes both quantitative and qualitative analysis while evaluating performance, understanding return attribution, and meeting with management teams. On the Capital Markets team, Frank assists the team with Innovest’s long term capital markets outlook and asset allocation studies.
