☕ Good morning SenseMakers!

If your benefits feel like alphabet soup, you are not alone. 401k, 403b, 457b, SIMPLE, SEP, cash balance. 

Most leaders skim the enrollment guide, promise to read it later, then leave real money on the table. Today we fix that with a tangible field guide you can actually use. 

You will see where the big levers are, what traps to avoid, and how to align your plan with your goals.

The Five Minute Field Guide

Think in lanes first, products second.

Corporate and private sector

• 401k with or without safe harbor

• Profit sharing paired with a 401k

• SIMPLE IRA

• SEP IRA

• Cash balance defined benefit

Public service and education

• 403b for schools, hospitals, and certain nonprofits

• 457b for governments and select nonprofits

Your purpose decides your plan. If you want maximum owner savings, you pick a different chassis than if your aim is broad employee adoption with simple administration.

401k - The Modern Workhorse

Why employees like it

• Pretax lowers today’s tax bill, Roth grows tax free for later. Many plans let you split the contribution so you can build both buckets over time.
  

• After tax plus in plan Roth conversion in some plans creates the mega backdoor path to build extra Roth dollars above the standard deferral.
  

• Leave your job in or after the year you turn 55, and plan withdrawals can avoid the early withdrawal penalty. Helpful for phased retirement.
  

• Roth accounts in employer plans no longer have pre-death required minimum distributions, which gives you flexibility later in life.
  

Why owners like it

• Safe harbor designs keep testing simple and support full participation for highly compensated employees.
  

• Add profit sharing to raise total annual funding room and target contributions by role or tenure within the rules.
  

• Many providers now allow Roth employer contributions and Roth matches, which boosts tax diversification across the team.
  

• You control the lineup. Use clean, low cost funds and managed models for guidance.

Pro move
Turn on auto enrollment and auto increases. Pair that with a short, friendly education sequence at new hire, 30 days, and annual refresh. Participation jumps when you make good behavior the default.

SIMPLE IRA - Good Starter That Many Outgrow

Why it works at first

• Light administration, easy to start, required employer funding is straightforward.

Where it falls short

• Lower limits than a 401k and less design flexibility. As payroll grows, this chassis will slow you down.

Pro move
Use SIMPLE as a bridge for very small teams, then graduate to a safe harbor 401k once growth is real. More on that in the client story below.

SEP IRA - Ultra Simple for Owners, Not So Simple for Larger Teams

What to know

• Employer only contributions, immediate vesting, and no loans. Great for owner only or tiny teams.
  

• Every eligible employee must receive the same percentage. Growth turns that into a heavy lift.

Cash Balance Defined Benefit - The Deduction Accelerator

Who it fits

• Owners who want to supercharge deductible savings and can commit to multi year funding. Often paired with a 401k profit sharing plan.

Keys to success

• Get actuarial oversight, design for permanence, and match the contribution range to real cash flow. This can be a game changer when designed well.

403b - The Public Service Twin With Unique Extras

Employee highlights

• Same elective deferrals as 401k, Roth often available.
  

• Special 15 year service catch up can allow extra contributions at certain employers.
  

• The age 55 separation rule for penalty free access applies here too.

Sponsor watch outs

• Many 403b programs are ERISA plans with full fiduciary responsibility. A narrow safe harbor exists for certain deferral only arrangements, while governmental and church plans sit outside ERISA. Know which lane you are in.

457 - Two Very Different Flavors

Governmental 457

• Separate elective deferral limit from your 401k or 403b. Translation, you may be able to save in both.
  

• Distributions are not subject to the 10 percent early distribution penalty.
  

• Special last three years catch up can allow up to double the annual deferral, subject to prior unused amounts.

Non governmental 457

• Unfunded and limited to a select group of management. Assets remain the property of the employer and are subject to the employer’s creditors. Rollovers and distribution choices are restricted.
  

• Read documents carefully and understand employer credit risk before relying on this as a core savings bucket.

2025 Rule Shifts That Actually Matter To You

• Auto enrollment for most new 401k and 403b plans. New plans generally need an automatic enrollment feature with default escalation. Set the default high enough to capture the match, then let it climb.
  

• Long term part time coverage. Employees with two years of at least 500 hours now need access in many plans, including ERISA covered 403b. Plan for this in payroll and eligibility.
  

• Roth catch up for high earners. Catch up contributions will be Roth for many high earners beginning in 2026 based on prior year wages. That is a planning lever, not a punishment. Use it to build tax diversification.
  

• Roth accounts in plans and required minimum distributions. Designated Roth accounts in employer plans do not have pre-death required minimum distributions. More freedom in retirement.
  

• Small employer tax credits. New plans can receive meaningful credits for startup costs, employer contributions, and even auto enrollment. Run the math before you assume a plan is too expensive.

Mistakes I See Every Week and How To Fix Them

Missing a separate 457b limit
If you work for a government or have access to both a 403b or 401k and a governmental 457b, you may be allowed to defer in each. That is a lot of extra tax advantaged space. Coordinate both, do not guess.

Ignoring the 403b service based catch up
Long tenured employees at qualifying organizations can add to contributions beyond the age based catch up. Read the fine print, then use it.

Thinking Roth is income limited at work
Roth IRA income limits do not apply to Roth inside most employer plans. If your plan offers Roth, you can usually use it.

Letting the investment menu sprawl
Too many overlapping funds create analysis paralysis. Keep a clean core of index options, then add a few active or factor choices where it makes sense. Offer managed models for those who want guidance.

Running yesterday’s plan in a growing company
SIMPLE feels fine until your payroll and headcount make the lower limits painful. Time the upgrade to a 401k before the problem becomes obvious.

Client Story, The SIMPLE That Could Not Keep Up

A growing firm came to us with a SIMPLE IRA that made sense five years ago. The business had doubled, the team had grown, and the owner wanted to save more without leaving employees behind.

What we changed

• Moved to a safe harbor 401k with profit sharing, which raised the ceiling for total annual savings and let us allocate employer dollars with more precision.
  

• Turned on Roth 401k, so the owner and team can build both pretax and Roth buckets and get real tax diversification.
  

• Upgraded the investment lineup to institutional share classes with managed models for those who prefer a guided path.

The outcome

• Higher potential savings for owner and team, more flexible tax planning, and a benefit that helps recruit and retain talent. Most importantly, the plan finally matched the ambition of the business.

Quick Chooser, Three Steps To The Right Design

Step 1. Pick your purpose
Owner focused savings, broad employee benefit, or both. Your purpose decides the chassis.

Step 2. Map your people
Eligibility, auto enrollment, vesting, and testing. A safe harbor 401k removes common headaches, public employers can pair 403b with a governmental 457b to open more saving capacity.

Step 3. Add the flex
Offer Roth. Keep the core menu clean. Add managed models. Put education on a simple drip so the team actually uses what you offer.

Podcast Spotlight, Most Employees Miss Their Full Benefits

Benefits expert Kathy Mychajluk joined us on the Making Sense of Your Money Podcast to discuss why most employees miss their full benefits.

Watch here:

Three fast takeaways

• Your benefits are an invisible paycheck. Read the guide, mark deadlines, ask questions early.
  

• Health savings accounts can be a triple tax win when paired with a high deductible health plan. Money goes in pretax, grows tax free, and qualified withdrawals are tax free.
  

• Tax diversification matters. Use both pretax and Roth where it fits so you can manage taxes year by year in retirement.

Do this this week

Employees

• Log in to your plan portal, turn on Roth if available, and set an auto increase tied to your next raise.
  

• If you have both a 403b or 401k and a governmental 457b, coordinate contributions so you use both limits.
  

• Check your investment model. If the lineup looks crowded, move to a managed model that matches your risk and time horizon.

Business owners

• If your company still runs a SIMPLE IRA and growth is real, price a move to a safe harbor 401k with profit sharing and Roth.
  

• Add automatic enrollment and automatic escalation with a friendly education sequence. It raises participation and outcomes.
  

• Review your investment menu. Trim overlaps, add low cost core options, and provide managed models.

Making Sense of Employer Retirement Plans

Purpose first, people second, plan third. Employees, grab the match, use both pretax and Roth, check for after tax with in plan Roth, and if you have a 457b plus a 401k or 403b, use both. Owners, choose a chassis that fits growth, a safe harbor 401k with profit sharing often wins, add Roth options, keep a clean lineup, and turn on auto enrollment. 

If your company has outgrown a SIMPLE, graduate to a 401k. For larger deductions, evaluate a cash balance add on. When structure meets intention, your benefits become a real wealth engine.

If you want help mapping your purpose to the plan that fits, I am here to guide you. We will simplify the choices, build the structure, and keep you on track quarter by quarter so every dollar works harder for your future.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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