Betterment Editors

What are unallocated funds? Jan 28, 2026 2:30:00 PM Unallocated funds are non-invested assets within the plan. Many 401(k) plans have unallocated funds as a result of daily plan administration. Plan sponsors can view the balances of their unallocated funds under the 401(k) Plan tab >> Activity in their Plan Sponsor Dashboard. There are three types of unallocated funds: Forfeiture account funds Suspense account funds Cash funds We’ll describe each of these below. What are Forfeiture account funds? Where do they come from? Forfeiture account funds can arise in two main ways and live in the plan's forfeiture utility account: When participants are auto-enrolled in the plan and choose to request their money back (within the 90-day permissible window under EACA), any employer contributions associated with those returned participant contributions become Forfeiture funds. Unvested contributions: When terminated participants have unvested contributions, take a distribution, or incur a 5-year break in service, and have unvested employer contributions, those unvested employer contributions associated with the terminated participants’ distribution become Forfeiture funds. How can Forfeiture account funds be used? The way they can be used is written into the plan document. Generally speaking, they can be used to: Pay eligible plan expenses. Offset employer matching or profit sharing contributions by the end of the plan year following the year in which they occurred. Allocate to eligible participants as additional employer contributions. Forfeitures cannot be used as elective deferrals. Note: Forfeiture account funds cannot be used to offset elective deferrals. Timing requirements Forfeiture account funds must be used before the end of the plan year following the plan year in which the forfeiture occurred. What are Suspense account funds? Where do they come from? Suspense account funds mainly arise due to over-contribution of the employer match due/profit sharing (e.g., exceeding IRS 415(c) limits) or by pre-funding employer contributions for the year. They may also arise from suspended contributions or loans for which a recipient cannot be identified or other miscellaneous inflows that result in excess funds within the plan’s trust. How can suspense funds be used? Suspense account funds can only be used to offset employer matching contributions or profit sharing contributions, or allocated to eligible participants as additional employer contributions from the year in which they occur. They cannot be used to pay for plans fees or elective deferrals. Timing requirements These funds should be used as soon as administratively possible, but typically no longer than the end of the plan year in which they occur. What are Cash funds? How do they come up? Cash is allocated to the plan and appropriately assigned to plan participants, plan forfeiture accounts or suspense accounts. How can they be used? Generally speaking, these funds can be used to correct the applicable error or returned to the plan sponsor as a “Mistake of Fact” (if the error qualifies for this treatment under IRS guidance - such as a duplicate payroll). If you have an employer match, you can also elect to use funds to offset employer contributions, and may also be used to offset other fees and expenses, as long as the funds are used for the benefit of the plan and not the plan sponsor. How can unallocated funds be used towards payroll at Betterment? Based on the plan sponsor’s direction, Betterment will automatically apply unallocated funds to offset employer contributions during upcoming payrolls. The order of operations of fund usage is: Suspense, Forfeiture (the oldest eligible year then current year), then Cash funds. Betterment will automatically apply the regulatory timing restrictions of when certain funds need to be used by. If the unallocated funds cannot cover the entire employer contribution portion of a particular payroll, an entire employer portion of a particular payroll (or if there are no remaining unallocated funds), then the plan’s bank account(s) will be used to cover the outstanding amount. Unallocated funds can only be applied to a specific employer portion of a payroll if the automated usage setting is turned on before the payroll is approved (otherwise the funds would be applied to the next payroll). Plan sponsors can find details on the amount of each unallocated fund that was applied towards a payroll on the Payroll Overview page in their dashboard. If a plan does not want unallocated funds to be applied automatically towards payroll, but would rather use funds for a specific payroll, a “Mistake of Fact” return, or towards a year-end contribution, then the plan should reach out to Plan Support. Reports guide To see granular information on how funds were generated or used, utilize the Forfeiture fund, Suspense fund, and Cash fund reports. Use the Unallocated fund summary report to view the yearly balances of each fund. Glossary (for terms used in the reports) Correction_redistribution: Typically a payroll correction to add money towards a specific employees’ payroll contributions that should have originally been made. Compliance_inflow: Inflow to participants – anything related to year-end compliance testing that causes funds to be added to the plan/participants (i.e. True ups, QNECs, ADP/ACP, Top Heavy, Lost Earnings). Corrective_transfer: Outflow from participants – compliance outflow (i.e. ADP Test, ACP Test, 415 Annual Additions Excess, Funding in Excess of Formula). Component_reversal: Typically a payroll correction to reverse payroll contributions that should not have been made. Year_end_contribution: Employer contributions only (typically annual additions added during compliance season but can also occur at anytime to correct issues). Interested in bringing a Betterment 401(k) to your organization? Get in touch today at 401k@betterment.com.

Everything You Need to Know about Form 5500 Jan 6, 2026 9:15:00 AM If you’d like to get a general idea of what it takes to file a Form 5500 for a 401(k) plan, here are the top five things you need to know. As you can imagine, the Internal Revenue Service (IRS) and the Department of Labor (DOL) like to keep tabs on employee benefit plans to make sure everything is running smoothly and there are no signs of impropriety. One of the ways they do that is with Form 5500. You may be wondering: What is Form 5500? Well, Form 5500—otherwise known as the Annual Return/Report of Employee Benefit Plan—discloses details about the financial condition, investments, and operations of the plan. Not only for retirement plans, Form 5500 must be filed by the employer or plan administrator of any pension or welfare benefit plan covered by ERISA, including 401(k) plans, pension plans, medical plans, dental plans, and life insurance plans, among others. If you’re a Betterment client, you don’t need to worry about many of these Form 5500 details because we do the heavy lifting for you. But if you’d like to get a general idea of what it takes to file a Form 5500 for a 401(k) plan, here are the top five things you need to know. Please note: Betterment does not prepare the Form 5500 for solo 401(k) accounts. 1. There are three different versions of Form 5500—each with its own unique requirements. Betterment drafts a signature-ready Form 5500 on your behalf. But if you were to do it yourself, you would select from one of the following form types based on your plan type: Form 5500-EZ – If you have a one-participant 401(k) plan —also known as a “solo 401(k) plan”—that only covers you (and your spouse if applicable), you can file this form. Have a solo 401(k) plan with less than $250,000 in plan assets as of the last day of the plan year? No need to file a Form 5500-EZ (or any Form 5500 at all). Lucky you! Form 5500-SF– If you have a small 401(k) plan—which is generally defined as a plan that covers fewer than 100 participants on the first day of the plan year—you can file a simplified version of the Form 5500 if it also meets the following requirements: It satisfies the independent audit waiver requirements established by the DOL. It is 100% invested in eligible plan assets—such as mutual funds and variable annuities—with determinable fair values. It doesn’t hold employer securities. Form 5500– If you have a large 401(k) plan—which is generally defined as a plan that covers more than 100 participants with assets in the plan—or a small 401(k) plan that doesn’t meet the Form 5500-EZ or Form 5500-SF filing requirements, you must file a long-form Form 5500. Unlike Form 5500-EZ and Form 5500-SF, Form 5500 is not a single-form return. Instead, you must file the form along with specific schedules and attachments, including: Schedule A -- Insurance information Schedule C -- Service provider information Schedule D -- Participating plan information Schedule G -- Financial transaction schedules Schedule H or I -- Financial information (Schedule I for small plan) Schedule R -- Retirement plan information Independent Audit Report Certain forms or attachments may not be required for your plan. Is your plan on the cusp of being a small (or large) plan? If your plan has between 80 and 120 participants on the first day of the plan year, you can benefit from the 80-120 Rule. The rule states that you can file the Form 5500 in the same category (i.e., small or large plan) as the prior year’s return. That’s good news, because it makes it possible for large retirement plans with between 100 and 120 participants to classify themselves as “small plans” and avoid the time and expense of completing the independent audit report. 2. You must file the Form 5500 by a certain due date (or file for an extension). You must file your plan’s Form 5500 by the last business day of the seventh month following the end of the plan year. For example, if your plan year ends on December 31, you should file your Form 5500 by July 31 of the following year to avoid late fees and penalties. If you’re a Betterment client, you’ll receive your signature-ready Form 5500 with ample time to submit it. Plus, we’ll communicate with you frequently to help you meet the filing deadline. But if you need a little extra time, Betterment can file for an extension on your behalf using Form 5558—but you have to do it by the original deadline for the Form 5500. The extension affords you another two and a half months to file your form. (Using the prior example, that would give you until October 15 to get your form in order.) What if you happen to miss the Form 5500 filing deadline? If you miss the filing deadline, you’ll be subject to penalties from both the IRS and the DOL: The IRS penalty for late filing is $250 per day, up to a maximum of $150,000. The DOL penalty for late filing can run up to $2,259 per day, with no maximum. There are also additional penalties for plan sponsors that willfully decline to file. That said, through the DOL’s Delinquent Filer Voluntary Compliance Program (DFVCP), plan sponsors can avoid higher civil penalty assessments by satisfying the program’s requirements. Under this special program, the maximum penalty for a single late Form 5500 is $750 for small 401(k) plans and $2,000 for large 401(k) plans. The DFVCP also includes a “per plan” cap, which limits the penalty to $1,500 for small plans and $4,000 for large plans regardless of the number of late Form 5500s filed at the same time. 3. The Form 5500 filing process is done electronically in most cases. For your ease and convenience, Form 5500 and Form 5500-SF must be filed electronically using the DOL’s EFAST2 processing system (there are a few exceptions). EFAST2 is accessible through the agency’s website or via vendors that integrate with the system. To ensure you can file your Form 5500 quickly, accurately, and securely, Betterment facilitates the filing for you. Whether you file electronically or via hard copy, remember to keep a signed copy of your Form 5500 and all of its schedules on file. Once you file Form 5500, your work isn’t quite done. You must also provide your employees with a Summary Annual Report (SAR), which describes the value of your plan’s assets, any administrative costs, and other details from your Form 5500 return. The SAR is due to participants within nine months after the end of the plan year. (If you file an extension for your Form 5500, the SAR deadline also extends to December 15.) For example, if your plan year ends on December 31 and you submitted your Form 5500 by July 31, you would need to deliver the SAR to your plan participants by September 30. While you can provide it as a hard copy or digitally, you’ll need participants’ prior consent to send it digitally. In addition, participants may request a copy of the plan’s full Form 5500 return at any time. As a public document, it’s accessible to anyone via the DOL website. 4. It’s easy to make mistakes on the Form 5500 (but we aim to help you avoid them). As with any bureaucratic form, mistakes are common and may cause issues for your plan or your organization. Mistakes may include: Errors of omission such as forgetting to indicate the number of plan participants Errors of timing such as indicating a plan has been terminated because a resolution has been filed, yet there are still assets in the plan Errors of accuracy involving plan characteristic codes and reconciling financial information Errors of misinterpretation or lack of information such as whether there have been any accidental excess contributions above the federal limits or failure to report any missed contributions or late deposits Want to avoid making errors on your Form 5500? Betterment prepares the form on your behalf, so all you need to do is review, sign, and submit—it’s as simple as that. 5. Betterment drafts a signature-ready Form 5500 for you, including related schedules When it comes to Form 5500, Betterment does nearly all the work for you. Specifically, we: Prepare a signature-ready Form 5500 that has all the necessary information and related schedules Remind you of the submission deadline so you file it on time Guide you on how to file the Form 5500 (it only takes a few clicks) and make sure it’s accepted by the DOL Provide you with an SAR that’s ready for you to distribute to your participants Ready to learn more about how Betterment can help you with your Form 5500 (and so much more)? Let’s talk.

Meeting Your 401(k) Fiduciary Responsibilities Nov 11, 2025 8:45:00 AM To help your business avoid any pitfalls, this guide outlines your 401(k) fiduciary responsibilities. If your company has or is considering starting a 401(k) plan, you’ve probably heard the term “fiduciary.” But what does being a fiduciary mean to you as a 401(k) plan sponsor? Simply put, it means that you’re obligated to act in the best interests of your 401(k) plan, its participants and beneficiaries. It’s serious business. If fiduciary responsibilities aren’t managed properly, your business could face legal and financial ramifications. To help you avoid any pitfalls, this guide outlines ways to understand your 401(k) fiduciary responsibilities. A brief history of the 401(k) plan and fiduciary duties When Congress passed the Revenue Act of 1978, it included the little-known provision that eventually led to the 401(k) plan. The Employee Retirement Income Security Act of 1974, referred to as ERISA, is a companion federal law that contains rules designed to protect employee savings by requiring individuals and entities that manage a retirement plan, referred to as “fiduciaries,” to follow strict standards of conduct. Among other responsibilities, fiduciaries must always act with care and prudence and not engage in any conflicts of interest with regard to plan assets. When you adopt a 401(k) plan for your employees as a plan sponsor, you become an ERISA fiduciary. And in exchange for helping employees build retirement savings, you and your employees receive special tax benefits, as outlined in the Internal Revenue Code. The IRS oversees the tax rules, and the Department of Labor (DOL) provides guidance on ERISA fiduciary requirements and enforcement. As you can imagine, following these rules can sometimes feel like navigating a maze. But the good news is that an experienced 401(k) provider like Betterment can help you understand your fiduciary duties, and may even shoulder some of the responsibility for you as we’ll explain below. Key fiduciary responsibilities No matter the size of your company or 401(k) plan, every plan sponsor has fiduciary duties, broadly categorized as follows: You are considered the “named fiduciary” with overall responsibility for the plan, including selecting and monitoring plan investments. You are also considered the “plan administrator” with fiduciary authority and discretion over how the plan is operated. As a fiduciary, you must follow the high standards of conduct required by ERISA when managing your plan’s investments and when making decisions about plan operations. There are five cornerstone rules you must follow: Act in employees’ best interests—Every decision you make about your plan must be solely based on what is best for your participants and their beneficiaries. Act prudently—Prudence requires that you be knowledgeable about retirement plan investments and administration. If you do not have the expertise to handle all of these responsibilities, you will need to engage the services of those who do, such as investment managers or recordkeepers. Diversify plan investments—You must diversify investments to help reduce the risk of large losses to plan assets. Follow the plan documents—You must follow the terms of the plan document when operating your plan (unless they are inconsistent with ERISA). Pay only reasonable plan fees—Fees from plan assets must be reasonable and for services that are necessary for your plan. Detailed DOL rules outline the steps you must take to fulfill this fiduciary responsibility, which include reviewing fees on an ongoing basis, collecting and evaluating fee disclosures for investments and service provider’s revenue, and comparing (or benchmarking) fees to help ensure they are reasonable. You don’t have to pay a lot to get a quality 401(k) plan Fees can really chip away at your participants’ account balances (and have a detrimental impact on their futures). So take care to help ensure that the services you’re paying for are necessary for the plan and that the fees paid from plan assets are reasonable. To determine what’s reasonable you may need to benchmark the fees against those of other similar retirement plans. And if you have an existing 401(k) plan, it’s important to take note of the “ongoing” responsibility to review fees to determine their reasonableness. The industry is continually evolving and what may have been reasonable fees from one provider may no longer be the case! It’s your responsibility as a plan fiduciary to keep an eye on what’s available. Why it’s important to fulfill your fiduciary duties Put simply, it’s incredibly important that you meet your 401(k) fiduciary responsibilities. Not only are your actions critical to your employees’ futures, but there are also serious consequences if you fail to fulfill your fiduciary duties. In fact, plan participants and other plan fiduciaries have the right to sue to correct any financial wrongdoing. If the plan is mismanaged, you face a two-fold risk: Civil and criminal action (including expensive penalties) from the government and the potentially high price of rectifying the issue. Under ERISA, fiduciaries are personally liable for plan losses caused by a breach of fiduciary responsibilities and may be required to: Restore plan losses (including interest) Pay expenses relating to correction of inappropriate actions. While your fiduciary responsibilities can seem daunting, the good news is that ERISA also allows you to delegate many of your fiduciary responsibilities to 401(k) professionals like Betterment. Additional fiduciary responsibilities On top of the five cornerstone rules listed above, there are a few other things on a fiduciary’s to-do list: Deposit participant contributions in a timely manner —This may seem simple, but it’s extremely important to do it quickly and accurately. Specifically, you must deposit participants’ contributions to your plan’s trust account on the earliest date they can be reasonably segregated from general corporate assets. The timelines differ depending on your plan size: Small plan—If your plan has fewer than 100 participants, a deposit is considered timely if it’s made within seven business days from the date the contributions are withheld from employees’ wages. Large plan— If your plan has 100 participants or more, you must deposit contributions as soon as possible after you withhold the money from employees’ wages. It must be “timely,” which means typically within a few days. For all businesses, the deposit should never occur later than the 15th business day of the month after the contributions were withheld from employee wages. However, contributions should be deposited well before then. Fulfill your reporting and disclosure requirements—Under ERISA, you are required to fulfill specific reporting requirements. While the paperwork can be complicated, an experienced 401(k) provider like Betterment should be able to help to guide you through the process. It’s important to note that if required government reports—such as Form 5500—aren’t filed in a timely manner, you may be assessed financial penalties. Plus, when required disclosures—such as Safe Harbor notices—aren’t provided to participants in a timely manner, the consequences can also be severe including civil penalties, plan disqualification by the IRS, or participant lawsuits. Get help shouldering your fiduciary responsibilities For most employers, day-to-day business responsibilities leave little time for the extensive investment research, analysis, and fee benchmarking that’s required to responsibly manage a 401(k) plan. Because of this, many companies hire outside experts to take on certain fiduciary responsibilities. However, even the act of hiring 401(k) experts is a fiduciary decision! Even though you can appoint others to carry out many of your fiduciary responsibilities, you can never fully transfer or eliminate your role as an ERISA fiduciary. Take a look at the chart below to see the different fiduciary roles—and what that would mean for you as the employer: Defined in ERISA section Outside expert Employer No Fiduciary Status Disclaims any fiduciary investment responsibility Retains sole fiduciary responsibility and liability 3(21) Shares fiduciary investment responsibility in the form of investment recommendations Retains responsibility for final investment discretion 3(38) Assumes full discretionary authority for assets and investments Relieves employer of investment fiduciary responsibility (yet still needs to monitor the 3(38) provider) 3(16) Has discretionary responsibility for certain administrative aspects of the plan Relieves employer of certain plan administration responsibilities Betterment can help Betterment serves as a 3(38) investment manager for all plans that we manage and can serve as a limited 3(16) fiduciary with agreed upon administrative tasks as well. This means less work for you and your staff, so you can focus on your business. Get in touch today if you’re interested in bringing a Betterment 401(k) to your organization: 401k@betterment.com.

Understanding your 401(k) Plan Document Nov 5, 2025 8:00:00 AM Betterment will draft your 401(k) plan document, but it’s important that you understand what it includes and that you follow it as written. What exactly is a Plan Document? A 401(k) plan is considered a qualified retirement plan by the Internal Revenue Service (IRS), and as such, must meet certain requirements to take advantage of significant tax benefits. Every 401(k) retirement plan is required to have a plan document that outlines how the plan is to be operated. The plan document should reflect your organization’s objectives in sponsoring the 401(k) plan, including information such as plan eligibility requirements, contribution formulas, vesting requirements, loan provisions, and distribution requirements. As regulations change or your organization changes plan features and/or rules, the plan document will need to be amended. Your provider will likely draft your plan’s document, but because of your fiduciary duty, it is important that you as plan sponsor review your plan document, understand it, and refer to it if questions arise. Whether you are a small business or a large corporation, failure to operate the plan in a manner consistent with the document as written can result in penalties from the IRS and/or the Department of Labor (DOL). Understanding Your Fiduciary Responsibilities Although any given 401(k) plan may have multiple (and multiple types of) fiduciaries based on specific plan functions, the plan document identifies the plan’s “Named Fiduciary” who holds the ultimate authority over the plan and is responsible for the plan’s operations, administration and investments. Typically the employer as plan sponsor is the Named Fiduciary. The employer is also the “plan administrator” with responsibility for overall plan governance. While certain fiduciary responsibilities may be delegated to third parties, fiduciary responsibility can never be fully eliminated or transferred. All fiduciaries are subject to the five cornerstone rules of ERISA (Employee Retirement Income Security Act) when managing the plan’s investments and making decisions regarding plan operations: Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them; Carrying out their duties prudently; Following the plan documents (unless inconsistent with ERISA); Diversifying plan investments; and Paying only reasonable plan expenses. One of the best ways to demonstrate that you have fulfilled your fiduciary responsibilities is to document your decision-making processes. Many plan sponsors establish a formal 401(k) plan committee to help ensure that decisions are appropriately discussed and documented. Which Type of 401(k) Plan is Best for Your Organization? The plan document will identify the basic plan type: Traditional 401(k) plans provide maximum flexibility with respect to employer contributions and associated vesting schedules (defining when those contributions become owned by the employee). However, these plans are subject to annual nondiscrimination testing to ensure that the plan benefits all employees—not just business owners or highly compensated employees (HCEs). Safe Harbor 401(k) plans are deemed to pass certain nondiscrimination tests but require employers to contribute to the plan on behalf of employees. This mandatory employer contribution must vest immediately—rather than on a graded or cliff vesting schedule. QACA Safe Harbor plans are an exception, which may have up to a two-year cliff vesting schedule. Profit-sharing 401(k) plans include an additional component that allows employers to make more significant contributions to their employee accounts. Besides helping to attract and retain talent, small businesses can find this feature especially helpful In highly profitable years, since it reduces taxable income. There is no one plan type that is better than another, but this flexibility allows you to determine which type makes the most sense for your organization. Eligibility Requirements to Meet Your Needs Although the IRS mandates that employees age 21 or older with at least 1 year of service are eligible to make employee deferrals, employers do have considerable flexibility in setting 401(k) plan eligibility: Age -- employers often choose to adopt a minimum age of 18. Service -- employers can establish requirements on elapsed time or hours. Entry date -- employers may allow employees to participate in the plan immediately upon hiring but often require some waiting period. For example, employees may have to wait until the first of the month or quarter following their hire date. This flexibility allows employers to adopt eligibility requirements appropriate to their business needs. For instance, a company with high turnover or lots of seasonal workers may institute a waiting period to reduce the number of small balance accounts and the associated administrative costs. Automatic Enrollment Is Now the Standard for 401(k) Plans Under the SECURE 2.0 Act, which became effective on December 29, 2022, automatic enrollment has become the new standard. The provision requires that 401(k) plans established after that date were required to include automatic enrollment no later than January 1, 2025. Eligible employees will have a set percentage of each paycheck automatically deferred and contributed to the plan—unless they choose to opt out or adjust their contribution rate. Certain plans, such as those created before that date or sponsored by small businesses, churches, or government employers, are exempt and may continue to use voluntary enrollment. The benefit of automatic enrollment is that human inertia means most employees take no action and start saving for their future. In fact, according to the Congressional Research Service (2024), automatic enrollment 401(k) plans have participation rates of about 90%, compared to about 70% for plans with voluntary (opt-in) enrollment. Employee Contribution Flexibility Provides Valuable Flexibility The plan document will specify the types of contributions (or “elective deferrals”) that eligible employees can make to the plan via payroll deduction. Typically these will be either pre-tax contributions or Roth (made with after-tax dollars) contributions. Allowing plan participants to decide when to pay the taxes on their contributions can provide meaningful flexibility and tax diversification benefits. Elective deferrals are often expressed as either a flat dollar amount or as a percentage of compensation. Employee contribution limits are determined each year by the IRS. The plan document must specify whether the plan will allow catch-up contributions for those age 50 and older. Able and/or Willing to Contribute to Employee Accounts? The plan document will also include provisions regarding employer contributions, which can be made on either a matching or non-matching basis. Matching contributions are often used to incentivize employees to participate in the plan. For example, an employer may match 50% of every $1 an employee contributes, up to a maximum of 6% of compensation. For traditional 401(k) plans, matching contributions can be discretionary so that the employer can determine not only how much to contribute in any given year but whether or not to contribute at all. As stated above, matching employer contributions are required for Safe Harbor 401(k) plans. The plan document may also permit the employer to make contributions other than matching contributions. These so-called “nonelective” contributions would be made on behalf of all employees who are considered plan participants, regardless of whether they are actively contributing. Vesting Schedules and Employee Retention Vesting simply means ownership. Employees own, or are fully vested, in their own contributions at all times. Employers with traditional 401(k) plans, however, often impose a vesting schedule on company contributions to encourage employee retention. Although there are a wide variety of approaches to vesting, one of the most common is to use a graded vesting schedule. For instance, an employee would vest in the employer contribution at a rate of 25% each year and be 100% vested after 4 years. Employer contributions as part of Safe Harbor 401(k) plans are vested immediately, aside from QACA Safe Harbor plans. Let Betterment help you create a 401(k) that works for you and your employees As a full-service provider, Betterment aims to make life easy for you. We will draft your plan document based on your preferences and our industry expertise of best practices. We will work with you to keep your plan in compliance and can prepare amendments based on your changing needs. Want to learn more about offering a Betterment 401(k)? Get in touch.

Smart savings, lasting impact: Why a cost-efficient 401(k) matters more than ever Oct 21, 2025 9:33:43 AM This open enrollment, see how a transparent, low-fee 401(k) can help attract talent, save on costs, and build a stronger benefits foundation. Key takeaways Open enrollment season is a chance to strengthen your benefits and show employees you’re invested in them. A cost-efficient 401(k) helps form the foundation of financial wellness for both employees and employers. Lower fees can mean faster growth for savings and greater transparency for plan sponsors. Automation reduces administrative burden and compliance risk, freeing HR to focus on people. A modern, low-cost 401(k) helps attract and retain talent while reinforcing a culture of care. We like to think of open enrollment season as a company’s annual wellness checkup. It’s when employees review benefits, make updates, and—intentionally or not—evaluate how much their employer is investing in them. That’s especially important now. Health costs are rising fast: U.S. employers expect a 5.8% jump in health insurance costs in 2025.Those increases come on top of already difficult trends in premiums, deductibles, and out-of-pocket burden. For plan sponsors, it’s a good time to reassess your benefits offerings. After all, benefits can influence your ability to attract top talent, stay for the long haul, or return to the job hunt. And few benefits make a bigger impression than your 401(k) plan. Why a cost-efficient 401(k) is the foundation of financial wellness If your company were a home, your 401(k) would be part of its foundation—something solid and well-designed, built to support the floors that come after it. The same is true of a cost-efficient 401(k): It provides structure and stability for your employees’ financial futures, while helping your business stand on solid financial ground. And just like any well-built home, it’s the details that matter. With a 401(k), that includes things like low fees and transparent pricing, flexible plan design, automation, compliance, and support when you need it. Lower 401(k) fees mean more value for every dollar High plan fees can quietly eat into employees’ savings and employers’ budgets alike. But with a cost-efficient 401(k), your contributions and your employees’ can grow faster. Betterment at Work focuses on transparency—no hidden fees, no surprise markups—so both sponsors and participants can see where their money goes and how it’s working for them. Automated 401(k) administration saves time and reduces errors Running a 401(k) shouldn’t feel like constant maintenance. Betterment at Work can help you stay on top of payroll syncing, compliance requirements, and plan administration—to free up time for your HR team to focus on people, not paperwork. And our Hassle-Free Compliance Guarantee means you can count on a smooth audit season. How a cost-efficient 401(k) helps boost employee retention Today’s employees aren’t just comparing salaries—they’re comparing overall experiences. And much of that boils down to employee benefits. A modern, low-cost 401(k) shows you’re invested in their future. Think of your plan like a blueprint for financial wellness. By offering additional benefits, like an employer match, you’re underlining your commitment to your team and their financial future. Our modern platform and low-fee structure is designed for employees who want to see their money work as hard as they do. And for employers, it’s a sign of fiscal responsibility—proof that you’re building something meant to last. Efficiency is empathy: Building better 401(k) plans for people and business Offering a cost-efficient 401(k) is about improving outcomes—not just reducing expenses. Lower fees can help increase employee retirement savings, while streamlined administration reduces workload and compliance risk. This Open Enrollment, evaluate whether your plan’s structure, fees, and technology are helping both your employees and your organization achieve better results.

Pros and Cons of the New York State Secure Choice Savings Program Oct 16, 2025 9:00:00 AM Answers to small businesses' frequently asked questions Key takeaways: New York now requires eligible employers to offer a retirement plan or enroll workers in the state’s Secure Choice program. Enrollment deadlines begin in 2026, starting with employers of 30+ employees. Secure Choice is simple but limited, with lower contribution caps and no employer match. 401(k) plans provide more flexibility, tax advantages, and investment options. Employers should act soon to choose the option that best fits their business. The New York State Secure Choice Savings Program was established to help private-sector workers in the state who have no access to a workplace retirement savings plan. Originally enacted as a voluntary program in 2018, Gov. Kathy Hochul signed a law on Oct. 22, 2021, that requires all employees of qualified businesses be automatically enrolled in the state's Secure Choice Savings Program. After running a pilot program, New York Secure Choice launched in October 2025. What does this mean for employers? If you’re an employer in New York, state laws require you to offer the Secure Choice Savings Program if you: Had 10 or more employees during the entire prior calendar year Have been in business for at least two years Have not offered a qualified retirement plan during prior two years The New York Secure Choice program will notify employers required to facilitate the program, but they can also enroll by the following dates: Employers with 30 employees must enroll by March 18, 2026 Employers with 15-29 employees must enroll by May 15, 2026 Employers with 10-14 employees must enroll by July 15, 2026 If you’re wondering whether the Secure Choice Savings Program is the best choice for your employees, read on for answers to frequently asked questions. 1. Do I have to offer my employees the Secure Choice Savings Program? No. State laws require businesses with 10 or more employees to offer retirement benefits, but you don’t have to elect the Secure Choice Savings Program if you provide a 401(k) plan (or another type of employer-sponsored retirement program). 2. What is the Secure Choice Savings Program? The Secure Choice Savings Program is a Payroll Deduction IRA program—also known as an “Auto IRA” plan. Under an Auto IRA plan, if you don’t offer a retirement plan, you must automatically enroll your employees into a state IRA savings program. Specifically, the New York plan requires employers to automatically enroll employees at a 3% deferral rate. As an eligible employer, you must set up the payroll deduction process and remit participating employee contributions to the Secure Choice Savings Program provider. Employees retain control over their Roth IRA and can customize their account by selecting their own contribution rate and investments—or by opting out altogether. 3. Why should I consider the Secure Choice Savings Program? The Secure Choice Savings Program is a simple, straightforward way to help your employees save for retirement. According to SHRM, it is managed by the program’s board, which is responsible for selecting the investment options. The state pays the administrative costs associated with the program until it has enough assets to cover those costs itself. When that happens, any costs will be paid out of the money in the program’s fund. 4. Are there any downsides to the Secure Choice Savings Program? Yes, there are factors that may make the Secure Choice Savings Program less appealing than other retirement plans. Here are some important considerations: The Secure Choice Savings Program is a Roth IRA, which means it has income limits—If your employees earn above a certain threshold, they will not be able to participate. For example, single filers with modified adjusted gross incomes of more than $144,000, as of 2022, would not be eligible to contribute. If they mistakenly contribute to the Secure Choice Savings Program—and then find out they’re ineligible—they must correct their error or potentially face taxes and penalties. However, 401(k) plans aren’t subject to the same income restrictions. New York Secure Choice is not subject to worker protections under ERISA—Other tax-qualified retirement savings plans—such as 401(k) plans—are subject to ERISA, a federal law that requires fiduciary oversight of retirement plans. Employees don’t receive a tax benefit for their savings in the year they make contributions—Unlike a 401(k) plan—which allows both before-tax and after-tax contributions—Illinois only offers after-tax contributions to a Roth IRA. Investment earnings within a Roth IRA are tax-deferred until withdrawn and may eventually be tax-free. Contribution limits are far lower—Employees may save up to $6,000 in an IRA in 2022 ($7,000 if they’re age 50 or older), while in a 401(k) plan employees may save up to $20,500 in 2022 ($27,000 if they’re age 50 or older). So even if employees max out their contribution to the Secure Choice Savings Program, they may still fall short of the amount of money they’ll likely need to achieve a financially secure retirement. No employer matching and/or profit sharing contributions—Employer contributions are a major incentive for employees to save for their future. 401(k) plans allow you the flexibility of offering employer contributions; however, the Secure Choice Savings Program does not. Limited investment options—Secure Choice Savings Program offers a relatively limited selection of investments. 5. Why should I consider a 401(k) plan instead of the Secure Choice Savings Program? For many employers—even very small businesses—a 401(k) plan may be a more attractive option for a variety of reasons. As an employer, you have greater flexibility and control over your plan service provider, investments, and features so you can tailor the plan that best meets your company’s needs and objectives. Plus, you’ll benefit from: Tax credits—Thanks to the SECURE Act, you can now receive up to $15,000 in tax credits to help defray the start-up costs of your 401(k) plan over three years. Plus, if you add an eligible automatic enrollment feature, you could earn an additional $1,500 in tax credits over the course of three years. Tax deductions—If you pay for plan expenses like administrative fees, you may be able to claim them as a business tax deduction. With a 401(k) plan, your employees may also have greater: Choice—You can give employees, regardless of income, the choice of reducing their taxable income now by making pre-tax contributions or making after-tax contributions (or both!) Not only that, but employees can contribute to a 401(k) plan and an IRA if they wish—giving them even more opportunity to save for the future they envision. Saving power—Thanks to the higher contributions limits of a 401(k) plan, employees can save thousands of dollars more—potentially setting them up for a more secure future. Plus, if the 401(k) plan fees are lower than what an individual might have to pay with New York Secure Choice that means more employer savings are available for account growth. Investment freedom—Employees may be able to access more investment options and the guidance they need to invest with confidence. Case in point: Betterment offers expert-built, globally diversified portfolios (including those focused on making a positive impact on the climate and society). Support—401(k) providers often provide a greater degree of support, such as educational resources on a wide range of topics. For example, Betterment offers personalized, “always-on” advice to help your employees reach their retirement goals and pursue overall financial wellness. Plus, we provide an integrated view of your employees’ outside assets so they can see their full financial picture—and track their progress toward all their savings goals. 6. What action should I take now? If you decide that New York’s Secure Choice Savings Program is most appropriate for your company, visit the New York Secure Choice website to learn more. If you decide to explore your retirement plan alternatives, talk to Betterment. We can help you get your plan up and running —and aim to simplify ongoing plan administration. Plus, our fees are at one of the lowest costs in the industry. That can mean more value for your company—and more savings for your employees. Get started now.

How to implement 401(k) auto-escalation Aug 6, 2025 10:00:00 AM Historically, employers have had the choice to add automatic escalation to their 401(k) plans, but now SECURE 2.0 is requiring it to help people save. If you are faced with implementing automatic escalation, we've got you covered with advice on how to approach the change, and most importantly, how to communicate it to your employees. How SECURE 2.0 approaches automatic escalation Under SECURE 2.0, in addition to requiring automatic enrollment at a default rate between 3% and 10%, 401(k) plans are required to automatically escalate contributions at 1% per year to at least 10% (but no more than 15%). As always, employees can change their contribution rate or opt out of the plan at any time. Automatic escalation is a requirement for plans with an initial effective date on or after December 29, 2022. Consider this when setting your maximum escalation rate When you implement automatic escalation, you’ll need to decide your maximum rate, from 10% up to 15%. We like to think about automatic enrollment and automatic escalation together. Consider your default automatic enrollment rate when determining the limit to your escalation rate. For example, if you have a default enrollment rate of 8%, then a 15% escalation maximum rate might make sense, giving employees more room to grow their savings. Whereas a plan with a 3% default enrollment rate may want to consider a lower maximum escalation rate. Also, consider your employer match, if you offer one. Most experts recommend saving at least 10-15% of your salary for retirement, and this includes the employer match. For example, if you are matching 5% and your automatic enrollment default rate is 8%, any employee who does not change their default rate is saving 13% of their income. Every company is different. It’s important to review different potential scenarios and keep in mind what your employees will respond best to when setting these default enrollment and escalation rates. Employee communications When it comes time to implement automatic escalation, how you communicate the change, along with any other plan changes, to your employees is incredibly important. If an employee doesn’t understand why the change is happening, they may fear it or be surprised to see an increased contribution if they were not expecting it. Instead, take the time to explain the purpose of automatic escalation. Consider this sample language when implementing the change with your employees: Recently, a new law was implemented called the SECURE 2.0 Act. Its purpose is to help Americans save more for retirement. Part of the Act that we’ll be adopting is called automatic escalation. Automatic escalation increases an employee’s contribution rate to their 401(k) plan by 1% each year until the contribution reaches [INSERT YOUR PERCENTAGE]. It’s designed to help everyone participating in our 401(k) to build retirement savings. Most experts recommend saving at least 10-15% of your annual income for retirement and automatic escalation helps get closer to that amount without additional effort. But don’t worry: If you are not comfortable with the escalation, you have the option to change your contribution rate or opt out of the plan at any time. We’re excited about this change and are proud to continue to evolve our 401(k) program to make saving easier. Feel free to edit this language to fit your organization’s needs, including any mandatory communications. What’s most important is that your employees see automatic escalation as a positive change.

Why Adding 529s to Your Financial Benefits Can Appeal to Working Parents Jul 22, 2025 10:15:00 AM 529s can help your employees maximize money put aside for education Offering a better benefits package starts with a simple idea: your employees have diverse and ever-changing needs: Retirement may be their end goal, but there may be more pressing needs. Some of your staff might be striving to pay off their student loans. Others may need help saving for education. With Betterment at Work, it’s possible to help them with all three goals in one place. Let's take a closer look at 529 plans, an appealing benefit for working parents that helps them maximize money set aside for educational expenses. 529s help combat the steep cost of college The average cost of 4-year college tuition and fees has more than tripled since 1980. So it’s no wonder paying for kids’ education is a top concern among parents. 529s are special investing accounts that can help, and they’re growing in popularity. The number of 529s opened has increased by 55% since 2009. Funds in a 529 both grow and can be used tax-free for qualified expenses—things like tuition and fees, books and supplies, and even some room and board. You can even use them for up to $10,000 per year in K-12 tuition in all but a few states. Other benefits include a high balance limit—between $235,000 and $550,000 depending on the state—and low-maintenance investment options that automatically adjust risk as the beneficiary nears college age. Betterment at Work streamlines the 529 experience By offering your employees access to 529s through Betterment at Work, you add a unique benefit without adding another benefits provider. Manage your 529 offering right alongside your 401(k) and you can even offer an employer match, just like a 401(k). Just as importantly, your employees get a simple way to sign up for this savings tool. 529s can be a pain to shop for on your own, with nearly every state offering a plan open to anyone. The quality of those plans—everything from investment options and fees to website interfaces—can vary widely. Betterment at Work simplifies things. Employees can compare and select plans all within the Betterment app, and with integrated plans, they can automatically fund their 529 through payroll deductions. They can also see their 529 savings right alongside their 401(k) and connected student loans. 529s are available through our Pro and Flagship plans. Learn more or get started today.