Bottom Line Up Front

• IRMAA (Medicare Income-Related Monthly Adjustment Amount) imposes additional premiums for Medicare Part B and Part D based on income.
• Individuals with Modified Adjusted Gross Income (MAGI) exceeding $109,000 for single filers or $218,000 for joint filers are subject to IRMAA premiums, which can be appealed in case of life changing events.
• Strategies to manage and mitigate IRMAA premiums include timing income events to minimize spikes in MAGI, employing tax-efficient investment strategies, leveraging health savings accounts (HSAs), making qualified charitable distributions (QCDs) from IRAs, and seeking advice from financial professionals and tax advisors.

If you’re approaching retirement and looking at Medicare, you may want to be aware of the Medicare Income-Related Monthly Adjustment Amount (“IRMAA”). The short answer is that the Social Security Administration (“SSA”) sets an additional income based premium for both Medicare Part B (provider coverage) and Medicare Part D (prescription drug coverage).

What Are The Key Things I Need to Know?

• Income based premiums – Unlike health insurance at your employer or in the private market, your premiums are based on your income. For 2026, the “standard” Medicare Part B premium s $202.90 per month (indexed each year). For higher income individuals, you are subject to an additional IRMAA premium which is based on your tax filing status and Modified Adjusted Gross Income (“MAGI”) from two years earlier (e.g., 2024 MAGI for 2026 Medicare premium rates).
• Appeals process for lower IRMAA assessment – If you’ve had a life changing event (e.g., marriage, divorce, reduced income, etc.), you can appeal for a reduction in your IRMAA premium.
• Income levels subject to IRMAA – If your 2024 MAGI was more than $109,000 for a single filer or $218,000 for a joint filer, you are subject to the IRMAA premiums for your Medicare Part B and Medicare Part D coverages.
• Tax filing status – Note that the IRMAA premiums based on filing status are for each individual’s Medicare coverage.
• Notification – The SSA will end with a notice each year to beneficiaries that details the determined rate.

What Are The 2026 IRMAA monthly Premiums?

What If I’m In Medicare Advantage (Medicare Part C)?

Medicare Advantage plans usually offer prescription drug coverage (e.g., roll in Part D coverage). As such, you’re subject to Medicare Part D IRMAA surcharge even if you’re in Medicare Advantage plan.

What Are The Ways To Avoid Or Mitigate IRMAA Premiums?

Given that these premiums are based on your modified adjusted gross income from two (2) years prior, it’s important to manage your MAGI to the extent possible.

• Income Timing – Consider timing large income events, such as selling property or taking large retirement account distributions, to minimize spikes in MAGI.
• Tax Planning – Use tax efficient investment strategies to lower your MAGI. This could involve investing in Roth IRAs (for which withdrawals are tax-free) or managing capital gains and losses.
• Life-Changing Events – If you experience a life-changing event that reduces your income (such as retirement, divorce, or death of a spouse), you can appeal the IRMAA decision with the SSA. This is formally known as a “new initial determination.”
• Health Savings Account (HSAs) – Contributions to HSAs can reduce your MAGI, potentially lowering or eliminating IRMAA charges.
• Charitable Contributions – If you’re over 70½, consider making Qualified Charitable Distributions (QCDs) from your IRA. These distributions can satisfy required minimum distributions (RMDs) without increasing your MAGI.

Given that this is just one element of your retirement expenses, it’s important to consult with your financial professionals and tax advisors to ensure that any decisions fit your overall objectives.

If you have questions, we’d be happy to help. You can reach me or another Odyssey consultant by dropping us a message here.

WHENEVER YOU’RE READY, HERE ARE THREE WAYS WE CAN HELP:

1. Minimize your liabilities with a comprehensive OPEB valuation here. 
2. Get a free review of your last valuation here.
3. Get to know all of your options (including if making the switch to Medicare would work for you) with a benefits plan analysis here.

The post What’s The Deal With IRMAA? appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Making contributions to your company’s 401(k) plan and then transferring the balance to a Roth 401(k) can allow you to increase contributions and help decrease your taxes.
• In 2026, a participant can contribute up to $24,500 from their pre-tax earnings and up to $47,500 after taxes into their 401(k) plan for a total of up to $72,000 (indexed) — not including catch-up contributions.
• The Mega Roth Backdoor IRA can be effective under a plan with ideal demographics and generous employer contributions to save more in a Roth IRA or Roth 401(k) than you would normally be able to.

You know that Mega Backdoor Roth thing your friend mentioned or that you stumbled across online? The one where you can make substantial contributions to your employer-sponsored 401(k) plan and then transfer them to a Roth 401(k) essentially saving you more on taxes in the long run. It may sound too good to be true, but it can work wonders for those who qualify and are in the right plan. It’s especially helpful if you’d typically be unable to contribute to a Roth account due to exceeding income limits. 

The Logistics

Under the IRS Code, 401(k) plans have a variety of contribution limits (excluding catch-up contributions):

• Employee Deferral – $24,500 for 2026 (indexed)
• Maximum Account Addition – $72,000 for 2026 (indexed)

Beyond that, 401(k) plans have various non-discrimination rules to ensure that the plan does not overly benefit highly compensated employees (“HCEs”). As it relates to this situation, the key testing is the ADP/ACP test.

As an example – we have a small company with two (2) owners and five (5) employees. The plan has reasonable participation with the employees on average contributing 7.14% of their pay and an employer match of 50% up to 6.0% of pay deferred yielding a Non-Highly Compensated Employee (“NHCE”) Average Contribution Percentage (“ACP”) of 2.40% for our NHCE group.

Based on these figures our owner’s contributions of 9.08% as employees and the employer match ACP of 3.00% allows them to easily pass our ADP & ACP tests.

Now, let’s add an after-tax feature to our plan. The owners see that they are far from their $72,000 total contribution limit and they have additional money they’d like to save for retirement. Owner 1 contributes the full $38,500 of that potential $38,500 available to maximize their account to the after-tax source in the plan. It’s important to remember that after-tax contributions are treated as employer contributions for purposes of the ACP test.

So, let’s see what happens:

The ADP test still passes easily as there was no change. However, they now fail the ACP test and the Owner 1 will be required to take a return of $22,575 in excess after-tax contributions – that’s not going to be a pleasant conversation for the TPA to have with them.

So, what’s the big deal? I put money in, and I get it back if we fail?

Well, let’s remember the objective here. You were putting money into the after-tax source with the goal of immediately converting it to a Roth either within the plan or via an in-service distribution to a Roth IRA. Well, that conversion/rollover would be ineligible and would need to be disgorged from their account – and you thought the 1st TPA conversation with Owner 1 was going to be rough!

Bottom Line

The Mega Backdoor Roth can and does work. But you need to have ideal demographics and likely a very generous employer contribution to the plan. If so, this can be a great benefit.

The short answer – talk to your TPA or consultant, evaluate the demographics and objectives, and do a preliminary ACP test in advance to see if it will work.

If you’d like to know more, you can reach out to us here. We’d be happy to help answer any questions you may have.

The post Mega Backdoor Roth & After-Tax Contributions in Your 401(k) Plan appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• IRC Section 415 sets limits on retirement plan benefits and contributions, and exceeding them can trigger significant tax penalties and administrative complications.
• Defined Benefit and Cash Balance plans are especially vulnerable to overfunding, particularly when investment returns or contributions outpace allowable limits.
• Proactive monitoring—across funding, investments, and plan design—is essential to avoid surplus issues, stay compliant, and maintain long-term plan flexibility.

Download a PDF version of this article (Understanding IRC Section 415)

IRC Section 415 governs the maximum benefits and contributions allowed in qualified retirement plans. These rules are designed to prevent disproportionately large tax-advantaged benefits and ensure plans operate within IRS guidelines. While the limits may seem straightforward at first glance, the operational impact, especially for Defined Benefit and Cash Balance Plans, can be significant.

What is IRC Section 415?

IRC Section 415 sets maximum benefit and contribution limits for qualified retirement plans to ensure compliance and prevent excessive tax advantages. The limits differ depending on whether the plan is a Defined Benefit (DB) plan or a Defined Contribution (DC) plan. 

• Defined Benefit (DB) Plans: Annual benefit is capped at $290,000 for 2026 for a life annuity at age 65, adjusted for retirement age, payment form, and service years. 
• Defined Contribution (DC) Plans: Annual additions (employee + employer contributions) are limited to $72,000 for 2026 (excluding catch-up contributions).

Why It Matters

Section 415 isn’t just a technical rule, it directly affects funding strategies, plan design, investments, and tax outcomes. Exceeding the limit can create major issues, including taxes, penalties, and administrative complexity. 

Examples of Key Risks

• Surplus Assets: If plan assets exceed the 415 limit, any excess at termination may face a 50% reversion tax assessed by the Internal Revenue Service (IRS), plus corporate income tax on the remainder — potentially a 90% effective tax rate. 
• Funding risks: Large contributions or high investment returns can push plans beyond allowable limits, requiring extended plan duration to absorb surplus. 
• Investment Strategy: Cash Balance Plans invested aggressively (e.g., 100% equities) often generate returns far above the intended crediting rate, accelerating surplus risk.

Common Challenges for Plan Sponsors

Even well-managed plans face recurring complexities under Section 415, including: 

• Managing contributions to prevent overfunding
  Especially in years with strong investment performance. 
• Handling early retirement factors
  Benefits must be actuarially reduced, and the calculations can be complicated. 
• Accounting for joint & survivor or other optional forms of benefit
  Payment forms must be converted to an actuarial equivalent of a straight life annuity for 415 testing. 
• Monitoring potential legislative changes
  For example, if cost-of-living adjustments (COLA) are frozen due to legislation, current limits could stagnate even while plan liabilities continue to increase. 

Best Practices for Staying Compliant

Plan sponsors can reduce risk by being proactive and building 415 monitoring into annual strategic planning. 

• Monitor Annually
  Compare projected DB benefits or DC contributions against annual 415 limits.
  
• Align Investments
  Investment policies for DB/Cash Balance plans should support—not conflict with—interest crediting assumptions and long-term funding strategies.
  
• Plan for the Long Term
  Consider how contributions, plan amendments, and demographics may impact compliance over time. 

Recommended Actions

1. Annual Compliance Review
   Conduct an annual audit of plan assets, contributions, crediting rates, and projected benefits to identify potential 415 issues early. 
2. Investment Policy Alignment
   Ensure investment strategies match plan objectives and avoid excessive growth that could create surplus. 
3. Contribution Planning
   Coordinate with your actuary to structure employer contributions that meet objectives without pushing the plan toward overfunding. 
4. Scenario Testing
   Model early retirement, optional forms of payment, and alternative plan designs to ensure 415 compliance in all circumstances. 
5. Legislative Monitoring
   Stay current on IRS updates, cost-of-living adjustments, and proposed policy changes that could affect benefit limits.

Bottom Line

IRS Section 415 limits are technical, nuanced, and often misunderstood—but compliance isn’t optional. With the right monitoring and planning, employers can maintain tax-advantaged status, avoid costly penalties, and ensure long-term plan sustainability. 

If you have questions about how Section 415 applies to your retirement plan, your Odyssey consultant is here to help.

The post Understanding IRC Section 415 Limits and Key Issues appeared first on Odyssey Advisors, Inc.

As your business grows, upgrading your retirement plan from a SIMPLE IRA to a 401(k) can be a smart move. To make this change, ensure that all SIMPLE IRA participants receive notification of the termination by the deadline.

Previously, the notification deadline was November 2, as the IRS mandated a 60-day notice. However, with the implementation of SECURE 2.0 rules last year, you now only need to provide a written notice of the SIMPLE plan termination at least 30 days before the effective date.

How to Terminate Your SIMPLE IRA?

To terminate your SIMPLE IRA and upgrade to a 401(k) plan for 2026, you’ll need to follow a couple of steps. Here’s a general guideline on how to go about it:

1. Notify Employees: If you have employees who are participating in the SIMPLE IRA, you must inform them about your decision to terminate the plan. The IRS requires that you provide a 30-day notice before the end of the calendar year, which would be December 2nd, 2025.
2. Provide Notice to Financial Institution: Notify the financial institution that manages your SIMPLE IRA of your intention to terminate the plan at the end of the year. They will guide you through the process of closing the account.

If you’d like a SAMPLE termination notice to send to your employees, we have one available for download here.

Good to note: You do not need to notify the IRS that you’ve terminated your SIMPLE IRA plan.

You can work with your financial professional to determine the appropriate 401(k) Plan design & provider before year-end to maintain continuity without the constraint of an IRS deadline. Be aware, if you’d like it to be a “safe harbor” plan similar to the SIMPLE-IRA, that does have a December 1st notice date to employees.

As always, if you have questions on this or need more, please contact an Odyssey consultant.

The post Want to Upgrade Your SIMPLE IRA to a 401(k) Plan in 2026? The Deadline is Now appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Frequent RMD withdrawals may look smart, but transaction fees can quietly drain thousands from your retirement income
• A $100 fee on monthly withdrawals can eat up more than 16% of annual distributions, undermining the benefits of a steady withdrawal strategy
• Simple fixes like consolidating withdrawals, rolling over to an IRA, or choosing a no-fee custodian can protect more of your money

You planned carefully, saved for years, and finally retired. But what if something as small as a $100 fee could quietly add up to thousands of dollars from your nest egg? For many retirees taking Required Minimum Distributions (RMDs), that’s exactly what may be happening.

RMDs are mandatory withdrawals that the IRS requires once you reach a certain age, designed to ensure the government eventually collects taxes on tax-deferred retirement accounts.

A recent Wall Street Journal article highlighted a new trend: more retirees are taking their RMDs in smaller, regular installments rather than in a lump sum each year. On paper, this approach resembles dollar-cost averaging in reverse, spreading out withdrawals to reduce timing risk.

Here’s the catch: while the strategy looks smart in theory, transaction fees can turn it into a pretty costly mistake if you’re not careful.

The Appeal of Dollar-Cost Averaging in Retirement

At first glance, spreading out your RMDs through smaller, regular withdrawals seems like a safe and disciplined approach. The idea, often called “reverse dollar-cost averaging,” is that by taking steady payments throughout the year, you can reduce the risk of bad timing.

Instead of worrying about pulling a lump sum right before a market downturn, you smooth withdrawals across different points in the market cycle. For many retirees, this method also provides a sense of stability, almost like receiving a paycheck again, which can make day-to-day budgeting easier. On top of that, it removes the stress of trying to guess the “right” moment to take money out, reducing the temptation to make timing mistakes that could hurt long-term returns.

The Cost Nobody Talks About: Transaction Fees

Here’s where things get tricky. Many employer-sponsored retirement plans, particularly 401(k)s, charge a fee each time you take a distribution.

Example:

Imagine a retiree withdrawing $600 every month from their 401(k). If each transaction comes with a $100 fee, that’s 17% gone immediately before investment returns and before taxes.

Compare that with an IRA or brokerage account, where ACH transfers are often free. Suddenly, the “safe” strategy looks expensive.

When the Math Doesn’t Math

Let’s break it down further:

• $100 per withdrawal x 12 months = $1,200 in annual fees
• If your RMD is $7,200 for the year, that’s more than 16% lost to fees
• Over a decade, that’s $12,000 drained from your retirement income

Not only do these recurring fees reduce income, but they can also amplify the sequence of return risk — the danger of selling investments at the wrong time. Paying extra fees accelerates the erosion.

Better Withdrawal Strategies

The good news is that retirees have several ways to minimize or even eliminate transaction fees on their RMDs. One of the most effective approaches is rolling assets from an employer-sponsored plan into an IRA, since many custodians don’t charge for routine distributions. Another option is to rethink the frequency of withdrawals. Instead of taking money out every month and racking up charges, some retirees opt for quarterly or even a single annual distribution. This reduces the number of transactions while still meeting IRS requirements.

It’s also worth comparing custodians, because some providers offer no-fee transfers while others tack on steep charges for each withdrawal. Even if you’re happy with your current setup, reviewing the plan documents and fee schedule can uncover hidden costs you may not have realized you were paying. A little attention to these details can mean thousands of dollars saved over the course of retirement.

Questions Retirees (and Advisors) Should Be Asking

Before setting your RMD schedule, ask:

• Am I required to pay a fee every time I take a distribution?
• Would consolidating withdrawals save me money?
• Is my retirement account the best vehicle for my withdrawal strategy?

A few simple questions can prevent thousands of unnecessary costs.

Final Thoughts

Reverse dollar-cost averaging can be a smart way to manage retirement income, but only if the math works in your favor. Transaction fees are often overlooked, yet they can quietly eat away at your nest egg, turning a sound strategy into an expensive one.

Before settling on a withdrawal plan, retirees and advisors should carefully evaluate the real costs. Sometimes, the smartest move isn’t about timing the market; it’s about avoiding unnecessary fees.

The post The Hidden Costs of RMDs: Why Transaction Fees Matter More Than You Think appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Cash Balance plans enable high-income self-employed individuals, particularly those over 40, to supercharge their retirement savings beyond what traditional plans allow.
• Contributions are fully tax-deductible, creating immediate tax savings.
• While powerful, these plans come with strict funding obligations, administrative costs, and complex compliance rules, making them ideal for those with stable income and a long-term mindset.

When you’re self-employed, you’re in charge of everything – from client work to finances to your future retirement. And unlike traditional employees, you don’t have a built-in retirement plan waiting for you. That makes it even more important to find tax-smart, high-impact savings tools. One option that’s gaining traction among high-earning business owners? The Cash Balance Plan.

So, What Is a Cash Balance Plan?

Think of it as 401(k)’s sophisticated cousin. It looks like a retirement account with a balance that grows over time, but it’s actually a type of defined benefit pension plan with a modern twist.

Here’s how it works:

• You (as the employer) contribute a pay credit each year. This can be a percentage of pay or a fixed dollar amount (e.g., 25% pay for owners, 3% for others).
• Then, the account earns an interest credit, a guaranteed rate defined in your plan document. It might be a fixed rate or tied to something like U.S. Treasury yields.
• While it feels like a personal retirement account, it’s actually a company-funded benefit governed by specific pension rules.

Bottom line: You get the structure of a pension with the transparency of an account-based plan.

Why Cash Balance Plans Work So Well for the Self-Employed

1. Higher Contribution Limits – Especially As You Age

If you’re over 40 and looking to make up for lost time, a Cash Balance Plan (CB Plan) offers much higher annual contribution limits than IRAs or Solo 401(k)s. Contributions are calculated using actuarial methods and increase as you age.

Here’s what that might look like:

(Actual limits vary based on income and plan design)

This makes it a standout option for late starters or those finally hitting their financial stride.

2. Major Tax Deduction Power

Contributions to a Cash Balance Plan are fully tax-deductible as a business expense. For self-employed professionals in higher tax brackets, such as doctors, attorneys, business owners, etc., this can lead to substantial savings. Since the contributions reduce your adjusted gross income (AGI), they may also improve eligibility for other tax benefits and deductions. A CB Plan not only helps build retirement wealth but also serves as a highly effective tax planning tool, lowering your immediate tax liability while increasing long-term savings.

3. Catch-Up Power for Late Savings

Many entrepreneurs spend their early years reinvesting profits or weathering financial ups and downs. Saving for retirement typically takes a back seat. As a result, many find themselves in their 40s or 50s with a strong income but a sizable gap in their retirement planning. If you’re in a more stable position but feel behind on your retirement planning, a CB plan can help you catch up fast, especially if you’re aiming to retire in the next 10-20 years.

4. Can Be Paired with a Solo 401(k)

One of the best-kept secrets? You don’t have to choose between plans.

One highly effective strategy used to help self-employed individuals save for retirement is pairing a CB plan with a Solo 401(k) or profit-sharing plan. This approach allows you to maximize your retirement savings across two different vehicles. Together, they can push your total annual retirement contributions well over $300k – $400k, depending on your age and income.

Heads up: When using both plans together, the IRS combined plan limit comes into play. This rule typically caps employer contributions to defined contribution plans to 6% of pay when paired with a Cash Balance plan. So while it may slightly reduce what you can contribute to your 401(k), you’ll still unlock a much larger deductible contribution through the CB plan.

Not only does this dramatically increase your retirement nest egg, but it also provides substantial tax relief in the current year. That’s a powerful one-two punch: accelerated savings and reduced tax liability.

What You Should Know Before You Dive In

These plans aren’t for everyone. They work best for those who have:

• Consistent income
• A long-term view
• The willingness to follow the rules (or have someone help you do so)

These are the things you should consider:

Ongoing Funding Requirements

Cash Balance plans come with strict ongoing funding requirements that distinguish them from more flexible retirement options, such as 401(k)s. Since CB plans are a type of Defined Benefit plan, you’re obligated to contribute an amount each year based on actuarial calculations designed to meet the promised benefit at retirement. 

Contributions must be made consistently to stay compliant and cannot be skipped without potentially facing IRS penalties or plan disqualification. Annual funding must meet minimum thresholds, and underfunding in one year may require catch-up contributions in future years.

More Administrative Complexity (But It’s Manageable) 

Yes, these plans are more complex than an IRA. You’ll need: 

• An actuary to calculate annual contributions 
• A third-party administrator (TPA) for compliance testing and filings
• Annual IRS filings like Form 5500 

But here’s the thing: Most high-income business owners feel the tax and savings benefits far outweigh the admin fees, especially with the right team in your corner. 

Lots of Rules = A Need for Pros

Since Cash Balance plans are a type of Defined Benefit pension plan, they are governed by a web of IRS and Department of Labor regulations. They must comply with the rules that apply to DB plans, such as nondiscrimination testing, minimum funding standards, and benefit accrual limits. Trying to DIY this would be like doing your own root canal. 

Additionally, these plans need to be formally documented and amended as needed to reflect regulatory updates. An annual Form 5500 filing will also be required. CB plans also have strict rules regarding how and when benefits can be distributed, including required minimum distributions and vesting schedules.  

That’s why most self-employed folks work with retirement plan experts (like us) who specialize in small business and self-employed solutions.

Is a Cash Balance Plan Right for You?

For the right self-employed, high-earning business owner, a Cash Balance Plan could be the most powerful retirement tool you haven’t considered yet. While it’s not a fit for every business owner, those with the income and stability to fund it can be a total game changer. 

Let’s Talk Strategy

At Odyssey Advisors, we’ve helped countless self-employed professionals design and manage Cash Balance Plans that fit their goals and cash flow. If you’re curious about what your retirement picture could look like, let’s explore it together. 

The post Are Cash Balance Plans a Good Option for the Self-Employed? appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• Contributing too quickly to your 401(k) or changing your contribution rate during the year could cause you to miss out on employer matching dollars if your company matches per paycheck.
• Ask your employer if they offer a year-end “true-up” or pace your contributions.
• Staying aware of plan rules, raises, and contribution limits ensures you don’t leave free retirement money on the table.

When it comes to saving for retirement, a 401(k) employer match might be one of the easiest wins—free money just for contributing to your retirement plan? Yes, please. But what if we told you that you could be accidentally leaving some of it on the table?

Let’s break down what’s really going on with employer matches and how to make sure you’re not unknowingly leaving money on the table.

First, What Is a 401(k) Match?

A 401(k) match is one of the most valuable benefits an employer can offer. Essentially, it’s when your company contributes to your retirement savings based on how much you contribute. For example, your employer might match 25% of the first 6% of your salary that you contribute.

That means if you earn $80,000 a year and contribute 6% of your salary ($4,800), your employer would contribute an additional 25% of that amount — $1,200. That’s an immediate 25% return on your contribution.

So why would anyone turn that down? They probably don’t mean to, but it happens more often than you think.

Learn more: Matching Contribution: What It Is, How It Works, FAQs (Investopedia)

The Hidden Pitfall of Front-Loading Contributions

Some employees, especially high earners or young professionals living at home with low expenses, try to ‘front-load’ their 401(k) contributions. The thought is: contribute as much as possible early in the year, then take a break once they’ve hit the annual limit.

While that strategy can be efficient in some ways, it may backfire when it comes to employer matching.

Here’s why: many employers tie their matching contributions to each paycheck. If you stop contributing mid-year, after reaching the IRS annual limit, your employer may also stop matching. You might have maxed out your personal contribution, but if your employer only matches based on per-paycheck contributions, you could miss out on months of matching dollars.

Real Talk: That’s Money You Could’ve Had

Let’s say you hit the IRS contribution limit by the end of July. Great! But if your employer doesn’t “true-up” your contributions at the end of the year (more on that below), you could be missing five full months of matching funds.

How to Make Sure You’re Getting Every Dollar You Deserve

Avoiding this mistake isn’t complicated, it just takes a little planning. Here’s how to do it:

1. Find out if your employer offers a year-end “true-up”
   
   Some employers run a true-up process at the end of the year. That means they review your total contributions across the year and make up any matching shortfalls, even if you stopped contributing mid-year. If your company does this, great! You’re likely covered.
   
   Action: Contact HR or check your Summary Plan Description (SPD) to see if a true-up is part of your plan design.
   
2. Pace yourself
   
   If your employer doesn’t offer a true-up, you’ll want to time your contributions so they’re spread out over the year. That way, your contribution gets matched with every paycheck.
   
   Pro Tip: Use your payroll calendar to calculate how much to contribute per pay period to hit the annual limit by your final paycheck.
   
3. Monitor changes throughout the year
   
   Raises, bonuses, and other compensation shifts can throw off your contribution pacing. If you receive a bump in pay or a large bonus that’s eligible for 401(k) contributions, reassess your per-paycheck contributions to avoid maxing out to early.
   
4. High Earners: Know Your Options
   
   Some companies offer non-qualified plans to supplement their standard 401(k) offerings, typically for certain employees who exceed plan limits or hold specific roles. These plans allow for additional retirement savings opportunities, though they often come with different rules and considerations.
   
   If you’re in a higher income bracket or leadership position, it’s worth asking whether your company offers a non-qualified plans as part of your overall package.

The Bottom Line

An employer match is essentially free money for your future. But like any benefit, it’s only as valuable as your ability to access it.

By pacing your contributions, understanding your plan’s match structure, and staying proactive throughout the year, you can avoid one of the most common 401(k) mistakes and maximize your retirement savings.

The post Are You Missing Out on Your 401(k) Match Without Realizing It? appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front

• If you have a full-time job and a side business with no employees, you can contribute to both a regular 401(k) and a Solo 401(k).
• Employee contributions are capped at $24,500 total across all 401(k) plans in 2026 ($32,500 if 50+ with catch-up).
• Employer contributions are separate for each plan – each employer can contribute up to $72,000, but this amount is reduced by any employee contributions made to that plan.
• If you contribute the full $24,500 as an employee, the maximum combined employer contributions across both plans would be $119,500, bringing the total possible contributions to $144,000 ($152,000 if 50+).

Absolutely! If you have a 9-to-5 with a company 401(k) plan and a side hustle with 1099 income, you might be leaving money on the table if you’re not using a solo 401(k). Many people don’t realize that having multiple income streams means you can also have multiple retirement plans – allowing you to stack contributions and maximize tax savings.

Unlike IRAs, which have a hard cap on contributions no matter how many you have, 401(k) plans work differently. Your side business opens the door to another retirement account, allowing you to save even more. The best part? You get to play both roles: employer and employee, meaning you can potentially sock away thousands more in tax-deferred (or tax-free, if Roth) savings. Let’s break down how it works.

Why Having Two Retirement Plans Can Be a Smart Move

Many people assume that if they have a 401(k) through their employer, they’ve maxed out their retirement contributions—but that’s not entirely true. If you also have a side business with a Solo 401(k), you have additional tax-advantaged savings opportunities. The key is understanding how the limits work.

A 401(k) has two types of contributions:

1. Employee Contributions: This is the portion you contribute from your paycheck or side business income. In 2025, the total employee contribution limit is $24,500 across all 401(k) plans ($32,500 if you’re 50+).
   
   
   • For example, if you contribute $10,000 to your employer’s 401(k), you can only contribute $14,500 more as an employee across either your employer’s plan or your Solo 401(k).
     
     
2. Employer Contributions (Profit-Sharing): This is where things get interesting. Employer contributions are separate for each plan because they’re based on each employer’s earnings.
   
   
   • Employer contributions are separate for each plan, meaning each employer can contribute up to $72,000, but this amount is reduced by any employee contributions made to the plan.
     
   • If you maximize employee contributions ($24,500), the combined employer contributions across both plans would be $119,500.
     

Unlike employee contributions, where the limit is shared across plans, the employer contribution limit applies separately to each plan – which is why a Solo 401(k) can be a powerful tool for increasing retirement savings.

Perks of Having Both a 401(k) and a Solo 401(k)

• Double the Savings Potential: While you’re limited on employee deferrals, employer contributions give you another bucket of tax-deferred savings. You get to wear both hats and can make contributions as both an employee and employer.
  
• Lower Your Tax Bill: Contributing more means reducing your taxable income from both your day job and side hustle.
  
• More Investment Choices: Employer-sponsored 401(k)s often have limited options, while solo 401(k)s can offer more flexibility, including real estate and alternative investments.
  
• Tax Planning Flexibility: You can choose a Roth or traditional for both plans, letting you balance taxable income now vs. tax-free withdrawals later.

Common Solo 401(k) Misconceptions

“If I max out my work 401(k), I can’t contribute to my Solo 401(k) at all.”

Not true. You can still make employer contributions from your self-employment income, even if you hit the employee limit at your day job.

“Solo 401(k)s are for full-time business owners.”

False! Even if your side hustle only brings in a few thousand dollars a year, you can still take advantage of tax-advantaged savings.

“I should just open a SEP IRA instead.”

Maybe, but Solo 401(k)s generally allow higher contributions at lower income levels because they let you contribute both as an employee and an employer. SEP IRAs only allow employer contributions.

Having two retirement plans isn’t just possible, it’s a smart strategy for anyone juggling a 9-to-5 and a side business. Next, let’s break down how to maximize your contributions without running into issues with the IRS.

Maximizing Contributions Without Overstepping IRS Rules

The key to maximizing contributions is understanding how the IRS limits apply across both plans. Here’s how to make the most of your retirement savings without accidentally contributing too much.

1. Know the Two Types of 401(k) Contributions
   
   There are two main types of contributions to be aware of:
   
   
   • Employe Deferrals: You can contribute up to $24,500 in 2026 ($32,500 if 50+) across all 401(k) plans combined.
   • Employer Contributions: Your employer (including your own business) can contribute up to 25% of your compensation from each job up to a total of $72,000 for each job (reduced by the amount of your employee contributions to that plan excluding the catch-up).
     
     
2. Max Out Your Employee Deferrals Wisely
   
   Since the employee contribution limit is shared between both plans, you’ll need to decide where to contribute first:
   
   
   • If your W-2 job offers a match, contribute there first to get free money.
   • Once you’ve maxed out your match, you can split additional deferrals between both plans or focus on the one with the better investment options and lower fees.
     
     
3. Use the Employer Contribution Loophole
   
   Even if you max out employee contributions at your W-2 job, your side business can still contribute to your solo 401(k) as an employer. Here’s how:
   
   
   • Sole Proprietorship / Single-Member LLC: Employer contributions are 20% of the net self-employment income (after deducting half of your self-employment tax).
   • S-Corp: Employer contributions can be 25% of your W-2 wages from the business (not total revenue). Remember that S-Corp dividends are NOT considered compensation for retirement plan purposes.
     
     
     
4. Consider Roth vs. Traditional Contributions
   
   If you expect higher income in retirement, Roth contributions (tax-free withdrawals later) might be better. If you want to lower your taxable income now, traditional (pre-tax) contributions make sense.
   
   You can mix and match: Roth for one plan, traditional for another.
   
5. Avoid Common IRS Pitfalls
   
   
   • Excess Employee Deferrals: You can contribute $24,500 to each plan (traditional, Roth, or combined). The limit is shared across every 401(k).
   • Miscalculating Employer Contributions: Employer contributions are separate, but they still can’t exceed 25% of your eligible earnings from each employer.
   • Missing the Tax Filing Deadline: Solo 401(k) contributions must be made by your business’s tax return deadline (including any extensions). A great tip? Set a calendar or phone reminder for when you want to contribute.
     
     
6. Track Contributions and Work with a Tax Pro
   
   401(k) rules can be complicated – especially with multiple plans. Keep a running total of contributions throughout the year and work with an accountant, TPA, or financial advisor to stay within IRS guidelines.

The Bottom Line

By strategically using both a Solo 401(k) and an employer-sponsored 401(k), you can maximize tax-deferred (or tax-free) savings, reduce your taxable income, and accelerate your retirement goals as both an employer and employee. It definitely pays to know your retirement plan options.

Keep in mind that you need to understand the difference between employee and employer contributions to avoid overstepping IRS rules. That’s why it’s important to work with an experienced retirement third-party administrator, financial advisor, or tax pro to ensure you’re making the most of your savings while staying compliant.

The post Can I have a Solo 401(k) and a Company 401(k)? appeared first on Odyssey Advisors, Inc.

I’ve been in your shoes. When I first joined Odyssey, I felt like a fish out of water and Google was my constant friend. If you had peeked at my search history four years ago, it would’ve looked something like this:

“What is OPEB?”
“Is it Other Postemployment Benefits or Other Post-Employment Benefits?”
“What’s the difference between TOL and NOL?“

Without an actuarial background, I needed time to catch up. But with the invaluable support from our amazing team, I soon found my footing. This guide is designed to help you find yours. I hope it helps!

Top Actuarial Terms & Definitions:

• Actuarial Accrued Liability (“AAL”): AAL is the present value of benefits earned by employees to date, calculated based on actuarial assumptions.

• Actuarial Assumptions: Actuarial Assumptions are estimates used by actuaries to calculate future benefit obligations, including rates of retirement, turnover, and salary growth.

• Amortization: The process of spreading out payments or expenses over time. In the context of OPEB (our area of expertise), it often refers to the period over which changes in unfunded liabilities are recognized through the expense.

• Actuarially Determined Contribution (“ADC”): “ADC”, not to be confused with “ACDC” is the contribution amount determined or calculated by an actuary for a pension or OPEB plan for a year which includes the normal cost and an amortization payment for any unfunded liability. This figure is designed to help a plan reach “full” funding over some time.

• Assumption Testing: This is the process by which both actuaries and auditors evaluate the reasonableness and appropriateness of actuarial assumptions used in valuations. For our auditor friends, we recently published this article: Auditing the Actuary: Assumption Testing

• Cash Balance Plan (“CB Plan”): CB Plans are a type of defined benefit retirement plan (“DB plan”) that combines features of both traditional DB plans and defined contribution plans (“DC plans”) and is often used by small business owners with high, predictable income. It allows for significant tax-deductible contributions each year and the accumulation of retirement assets which are both tax-deferred and protected from creditors. To learn more about CB plans and their benefits, check out this article:  What is a Cash Balance Plan?

• Census Testing: Census Testing is the process used by auditors to verify the accuracy and completeness of the participant data used in an actuarial valuation by checking the demographic and employment information, such as age, service duration, and benefit data to ensure that it is correct and corresponds to the actual records of the participants.

• Defined Benefit Plan (“DB Plan”): A Defined Benefit Plan is a retirement plan that promises a specified monthly benefit at retirement, which is typically based on salary and years of service (collectively bargained or union plans often will use a fixed dollar amount multiplied by years of service). The key thing to remember is that the plan sponsor or the employer bears any investment or mortality risk. These plans are also known as a pension plan.

• Defined Contribution Plan (“DC Plan”): A DC plan is a retirement plan where the employer, employee, or both, contribute to an individual account for the employee, with benefits based on the account balance at retirement. Unlike a DB plan, with a Defined Contribution Plan, the employee or participant is normally responsible for some or all investment decisions.

• Discount Rate: The discount rate is the interest rate used to determine the present value of future benefit obligations. Essentially, the discount rate is a tool that helps our actuaries determine how much money needs to be set aside today to cover the future pension or OPEB benefit payments owed to employees. To learn more, check out this article: Top 5 Factors That Determine Your OPEB Discount Rate

• Funding Ratio: The ratio of a plan’s assets to its liabilities, indicating the financial health of the plan.

• Governmental Accounting Standards Board (“GASB”):  GASB is the organization that sets accounting and financial reporting standards for U.S. state and local governments, including standards for pension and OPEB plans.

• GASB 67: GASB 67 is a specific set of rules created by GASB that focuses on how state and local government pension plans should report their financial information to ensure they are accurate, consistent, and provide a true reflection of their financial position.

• GASB 68: GASB 68 is a similar set of rules issued by GASB that focuses on how government employers should report their pension obligations in their financial statements.

Still curious about the GASB 67 & 68? Check out this article: GASB 67 & GASB 68: What’s the Difference?

• GASB 74: GASB 74 is a standard set by GASB that focuses on the financial reporting of Other Post-Employment Benefits (OPEB). The focus of GASB 74 is on the OPEB plans’ financial reporting.

• GASB 75: GASB 75 is a standard set by GASB that focuses on the financial reporting by the government employers who sponsor OPEB plans related to their participation in those plans.

Want to learn more? Read this article: What is the Difference Between GASB 74 and GASB 75?

• Healthcare Cost Trend Rate: The rate at which healthcare costs are expected to increase over time. This is an important assumption in OPEB valuations.

• Income-Related Monthly Adjustment Amount (“IRMAA”): IRMAA is an additional charge that some higher-income Medicare beneficiaries must pay for their Medicare Part B (medical insurance) and Medicare Part D (prescription drug coverage) premiums.

• Net OPEB Expense: This is the expense (on an accrual basis) that is recognized annually on the financial statement.

• Net OPEB Liability (“NOL”): NOL is the difference between the total OPEB liability (TOL) and the plan’s fiduciary net position (assets), representing the unfunded portion of OPEB obligations. 
  • Calculation: NOL = TOL – FNP

• Net Pension Liability (“NPL”): This is the difference between Total Pension Liability (TPL) and the plan’s fiduciary net position (assets). In simpler terms, it’s the amount by which the pension plan’s obligations for both current and future retirees exceed the current assets available. 
  • Calculation: NPL = TPL – FNP

• Normal Cost: The portion of the present value of projected benefits allocated to the current year, reflecting the cost of benefits earned by employees in the current year. 

• OPEB (“Other Post-Employment Benefits”): Refers to the benefits, other than Pensions, that employees receive after they retire from service. These benefits typically include health insurance, dental, vision, prescription, life insurance, long-term care, and other similar benefits. 

• OPEB Trust: An OPEB Trust is a financial arrangement established by a government or public sector employer to pre-fund Other Post-Employment Benefits for their employees. Essentially it’s an account to set aside funds today to meet the future OPEB obligations of retired employees to ensure that these benefits can be paid when due. The funds can be invested, potentially earning returns that help reduce the total cost of providing OPEB over time.

• Pay-as-You-Go (“Pay-Go”) Funding: A method of funding OPEB benefits where benefits are paid from current revenues rather than pre-funding through a trust. 

• Plan Fiduciary Net Position: The market value of assets held in trust to pay OPEB or pension benefits. 

• Present Value: When we talk about determining the present value of future benefit obligations, we’re talking about figuring out how much those future payments are worth in today’s terms. 
  
• Safe Harbor 401(k) Plan: A type of 401(k) plan designed to automatically pass the IRS nondiscrimination tests, which ensure that the plan benefits both rank-and-file employees and highly compensated employees. To qualify, employers must make mandatory contributions that are fully vested immediately. This plan simplifies administration and ensures that all employees benefit fairly from the plan.

• Service Cost: Another term for normal cost, which is the value of the benefits that eligible employees accrue each year.  
  
• SIMPLE 401(k) Plan: A SIMPLE (“Savings Incentive Match Plan for Employees”) 401(k) plan is a retirement plan designed for businesses with 100 or fewer employees. It combines the features of a traditional 401(k) with those of a SIMPLE IRA. Employers are required to make either matching contributions or non-elective contributions to employee accounts. Contributions are tax-deferred, and the plan is subject to simpler and less costly administration than traditional 401(k) plans.
  
• Third-Part Administrator (“TPA”): A TPA for retirement plans is an independent entity that provides administrative services to employers sponsoring retirement plans, such as 401(k)s and pension plans. TPAs handle various tasks such as plan design, recordkeeping, compliance testing, reporting and filings, regulatory updates, and more to ensure the plan operates smoothly and remains compliant with requirements.

Want to learn more? Read this article: Here’s Why You Need a Third Party Administrator (and How to Hire the Right One)

• Total OPEB Liability (“TOL”): TOL is the value of OPEB benefits that have been earned by active and retired employees. 

• Total Pension Liability (“TPL”): Similar to TOL, TPL is the present value of all future pension payments owed to employees based on their service to date.
  
• Traditional 401(k) Plan: An employer-sponsored retirement savings plan that allows employees to contribute a portion of their salary on a pre-tax basis. Contributions are invested in various investment options chosen by the employee, and the funds grow tax-deferred until they are withdrawn in retirement.

• Unfunded Actuarial Accrued Liability (“UAAL”): The portion of the actuarial accrued liabilities not covered by plan assets, indicating the amount by which the plan is underfunded.

• Vesing: The process by which employees earn the right to receive benefits from a pension, OPEB, or retirement plan, usually after the completion of required years of service.

So, the next time someone calls you to ask about TOL or how NOL is calculated on your next OPEB valuation report, you’ll be able to answer with confidence! 

Want to learn more? Visit our insights page and check out our new video series, “Ask an Actuary,” for in-depth articles and videos covering these topics and much more. 

If you still have questions, feel free to reach out to us here. Whether your question is simple or complex, we’re here to help!

The post Actuary Vocabulary 101: Essential Terms and Definitions appeared first on Odyssey Advisors, Inc.

Bottom Line Up Front 

• Understanding the elements of 401(k) plan design can help you mold your plan to fit your company’s and employee’s needs.
• 401(k) plans are not one-size-fits-all; they require careful consideration and customization to suit individual circumstances and goals.
• Some of the features you’ll need to narrow down when starting a 401(k) include the plan type, contributions, vesting, and distributions, among others, to ensure alignment with your company’s objectives.

A 401(k) plan is a popular retirement savings vehicle.  It is an employer-sponsored retirement plan that allows employees to save for retirement. Whether you’re looking to start offering one or upgrade your current plan, it’s important to know that the specifications of your 401(k) plan can vary based on your design choices.

1. Eligibility

Who will be allowed to participate in the plan? Legally, there are a few parameters that state a company must allow an employee to participate in their qualified plan if they: 

• Are 21 years old
• Have one year of service (1,000 working hours or more within 12 months)

As the employer, you have the option to allow employees to participate in the plan earlier than these requirements. Having more relaxed eligibility rules may be a way to attract new employees while meeting the extended eligibility rules may help retain employees.

2. Plan Type

There are 3 common types of 401(k) plans that you can choose from to best suit the needs of your company:

Traditional Plan

• Offers maximum flexibility
• Allows participants to make pre-tax contributions
• Annual testing

Safe Harbor Plan

• Not subject to many of the complex tax rules such as nondiscrimination testing

SIMPLE Plan

• A cost-efficient way to offer retirement benefits to employees
• Not subject to annual nondiscrimination tests
• 100 or fewer employees who received at least $5,000 in compensation from the employer for the preceding year
• Employers can’t maintain any other retirement plans

Additional reading: Step-by-Step Guide to Starting a 401(k) Plan

3. Contributions

Employee Contributions

Employee elective deferrals are subject to limits. In 2024, the maximum allowable contribution is $23,000 for traditional and safe harbor plans and $16,000 for SIMPLE 401(k) plans. Additionally, employees aged 50 and above can also make “catch-up” contributions, allowing them to contribute beyond the standard limit. In 2024 eligible participants can contribute an extra $7,500 for catch-up contributions.

To streamline the process and promote retirement savings, some plans offer automatic enrollment. This feature enrolls eligible employees into the plan by default unless they choose to opt-out. Automatic enrollment is designed to boost participation rates and encourage more employees to start saving for their future. 

Employer Contributions

Many employers opt to match a portion of their employees’ contributions or make nonelective (aka “profit sharing”) contributions which can be tax-deductible on the employer’s federal income tax returns. However, these matching and/or nonelective contributions must adhere to IRS limits. 

In addition, all 401(k) plans are required to undergo non-discrimination testing to ensure fairness between highly compensated and non-highly compensated employees. Understanding these tests is crucial for maintaining compliance with regulations. 

4. Vesting

Vesting refers to the ownership of the funds an employer contributes to an employee’s account. It indicates how much of those funds an employee owns and can take with them if they leave the company or retire. As the employer, you can set the vesting schedule. Employers typically choose between two types of vesting schedules: graded vesting and cliff vesting.

Graded vesting schedules gradually grant more ownership of employer contributions for each year of service. For example, a plan may state that an employee becomes 25% vested for each year of service until they are 100% vested. You can choose the rate at which vesting occurs, as long as it’s at least as generous as the minimum of 20% vested at two (2) years increasing by 20% per year until the employees are fully vested at six (6) years.

Cliff vesting schedules hand over full ownership of contributions after a period of no ownership. For example, a plan may state that the employee must complete two (2) years where then they will be 100% vested. Cliff vesting schedules require that employees are 100% vested upon completion of three (3) years of service. 
It is important to remember that vesting refers to employer contributions. The money that the employee puts aside through elected deferrals is always immediately 100% invested.

5. Investment Options

Where will the plan assets be invested? Index funds are a popular choice due to their diversity and low maintenance requirements. Plan sponsors should regularly monitor investment options to ensure they are optimal for employees. Whatever you choose, compliance with ERISA 404(c) mandates a diverse range of high-quality investment options as well as employee education so that they can make informed choices.

6. Plan Administration

Some companies hire a third party administrator or “TPA”. Rather than spending time and money to train someone regarding retirement plan rules, a lot of companies choose to hire an outside expert. The TPA is responsible for running the plan. This entails making sure that the plan remains compliant with ERISA standards, communicating with the company answering questions, and helping to minimize claim and administrative fees.

7. Distributions

Retirement plans offer various distribution options for participants. When an individual leaves employment, they may have the choice of receiving a lump sum distribution, where they take the entirety of their vested account balance at once. Some plans may also offer installment payments or partial distributions. 

Some plans allow participants to request distributions while still employed, known as “in-service” distributions. These may be granted upon reaching a certain age, typically 59 ½ or older, or in the event of a hardship that is defined by the law. 

Additionally, if a participant decides to move to another job, they may elect to do a rollover, a type of distribution, where the funds from an existing account are transferred to a new retirement plan or IRA tax-free.

Every Detail Matters

In crafting a 401(k) plan, every detail matters, from the type of the plan to contribution structures, vesting schedules, and distribution options. There is no such thing as a one-size-fits-all 401(k). It’s also important to remember that you must clearly outline the details you choose in your plan document. 

If you have any questions about your plan design – or are looking for a third-party administrator to help design your retirement plan – contact us today.  

Looking for more? Explore these excellent articles on retirement plans and design: 

How Much Does it Cost to Start a 401(k) Plan?
Understanding Asset Allocation
Top 3 Employer Fiduciary Responsibilities for 401(k) Plans

The post 401(k) Plan Design: An Overview appeared first on Odyssey Advisors, Inc.