If you find yourself with questions about 401(k)s or feeling uncertain about where to begin, you’ve come to the right place.
Whether you’re exploring the differences between a 401(k) and an IRA, curious about the origins of the term “401(k),” or have other queries, our aim is to provide clear, concise answers.
Dive into our FAQs below to navigate the world of 401(k) plans with confidence and ease.
Basics
Why is it called a 401(k)?
The term “401(k)” refers to a section of the U.S. Internal Revenue Code. The provision was added to the code in 1978 as part of the Revenue Act, allowing employees to defer receiving a portion of their compensation as a form of retirement savings. The “401” in 401(k) simply denotes the section of the tax code that governs these types of retirement plans. The “k” was added by the IRS to distinguish it from other deferred compensation plans.
What distinguishes a 401(k) plan from an IRA?
One key difference between a 401(k) plan and an Individual Retirement Account (IRA) is the source of the contributions. In a 401(k), contributions are made by the employee through salary deferrals, often with an employer match. On the other hand, IRAs are established by individuals, and contributions are made by the account holder. Additionally, 401(k) plans have higher contribution limits compared to IRAs, and the investment options within a 401(k) may be limited to what the employer offers.
How do participants select investments?
Participants in our 401(k) plan offerings will have a wide range of NO COMMISSION, LOW COST investment options to choose from, such as mutual funds, exchange-traded funds (ETFs), and target-date funds. Plan participants can usually allocate their contributions across these investment options based on their risk tolerance, investment objectives, and time horizon.
We offer one-on one and personalized education and other planning resources to assist your participants in selecting appropriate strategies, as well as answer their other planning questions.
Support
How long does it take to set up a plan?
While setting up a 401(k) plan can vary in time depending on factors such as YOUR potential time constraints (we move at your speed and with your needs in mind!) and the complexity of the plan, most plans typically are up and running within 4-6 weeks. Key steps include plan design, legal documentation, enrollment of participants, and coordination with service providers for administration and recordkeeping.
How do I know my plan assets are safe?
To ensure the safety of plan assets, we have engaged a reputable custodian to hold and manage the assets. These entities are Federally regulated and monitored to adhere to strict fiduciary standards, safeguarding the assets from misuse or mismanagement. Additionally, there are regular audits by independent parties and there is compliance with legal requirements such as ERISA (Employee Retirement Income Security Act (of 1974)) further contribute to the security of plan assets.
How do participants login and manage their accounts?
You will receive login credentials from us for our clear and easy to navigate portal. You can securely access accounts online through a secure website where you can view account balances, investment options, contribution rates, and transaction history. Participants can also make changes to their investment allocations, contribution amounts, and beneficiary designations through the online platform.
Can I opt out of a 401(k)?
In most cases, employees will not be required to participate in a 401(k) plan offered by your employer. However, opting out means missing out on valuable retirement savings opportunities, including potential employer matching contributions and tax benefits. It is essential to weigh the long-term benefits of participating in a 401(k) plan against the immediate financial considerations of opting out.
Features
Do you manage distributions and loans?
YES. We assist with and handle distributions and loans from the plan. Distributions refer to payments made to participants, either through withdrawals during retirement or other qualifying events. Loans, on the other hand, allow participants to borrow a portion of their vested balance for specified purposes. The plan’s rules, IRS regulations, and administrative procedures govern these processes.
Do you offer payroll integration?
YES. We integrate with most payroll providers. Payroll integration will help automate the process of deducting employee contributions from their paychecks and depositing them into their 401(k) accounts. This automation reduces manual errors, saves time, and ensures timely and accurate processing of contributions.
Do I need a fidelity bond?
YES. Under ERISA regulations, plan sponsors are generally required to have a fidelity bond to safeguard the plan against losses due to fraud or dishonesty. The fidelity bond provides coverage for those who handle plan funds against acts of fraud or dishonesty. The bond is typically required to be 10% of the plan assets, up to a maximum of $500,000 per plan, unless the plan holds qualifying employer securities.
Who files the form 5500?
We will handle this for you. All you need to do is review, make any necessary updates/corrections, and then authorize it, and we will handle the rest. The form (5500) provides information about the plan’s operation, funding, and compliance with various regulatory requirements. The filing deadline and specific requirements depend on the size and type of the plan.
Do you perform nondiscrimination testing?
YES. Nondiscrimination testing is a crucial requirement for 401(k) plans to ensure that contributions and benefits do not disproportionately favor highly compensated employees. We will perform these tests annually to meet IRS regulations. The testing includes actual deferral percentage (ADP) and actual contribution percentage (ACP) tests, among others, to maintain compliance and avoid potential penalties.
Partners
Who is your custodial partner?
Broadridge Matrix Trust Company. This is well-known financial institution that specializes in retirement accounts. The custodial partner is responsible for holding and safeguarding the assets within your plan, complying with regulations, and providing necessary reporting to plan participants and regulators.
How do 401(k) Simplified partnerships differ from others?
401KSimplified partnerships stand out from our competition. Our partnerships with you emphasize simplicity, cost-effectiveness, user-friendly interfaces, and tailored solutions for small to mid-sized businesses.
We have seasoned advisors – who are investment fiduciaries – there to assist you. You will always have access to a live person when needed, we are NON-commissioned (fee-only), we use a streamlined and seamless approach to setting up and managing your 401(k) plans and we keep your operating costs low so more of your employees’ money goes towards their retirement savings.
How much plan design flexibility do you offer?
We offer a range of customization options, such as various contribution structures, vesting schedules, eligibility criteria, and additional features like profit sharing or Roth 401(k) components.
Pricing and Setup
How can I start a plan with 401(k) Simplified?
Starting a 401(k) plan with 401kSimplified is a straightforward process. You can begin by reaching out to our team to discuss your company’s needs and goals. We will guide you through setting up the plan, selecting investment options, and educating your employees on enrollment and contributions.
What are the plan design options?
401KSimplified offers various plan design options to cater to different company sizes and preferences. These options may include traditional 401(k) plans, safe harbor 401(k) plans, profit-sharing plans, Roth 401(k) contributions, and more. This flexibility allows businesses to tailor their retirement plans to align with their unique circumstances.
Do you charge per employee or per participant?
401(k) Simplified typically charges fees based on the number of plan participants rather than the number of employees in your company. This fee structure ensures that costs are directly linked to the usage and administration of the plan.
Why is your service so affordable?
401KSimplified focuses on providing cost-effective retirement plan solutions by streamlining our processes, leveraging technology, and offering transparent pricing. By simplifying the administrative tasks and optimizing efficiency, we can pass on the cost savings to out clients. We believe that we will have a long-term relationship with our clients, where sensible pricing benefits the employer and employee and the longevity of the relationships benefit all parties. There is NO NEED FOR HIGH COSTS.
Do you offer solo 401(k) plans?
Yes, 401KSimplified does offer solo 401(k) plans for self-employed individuals or business owners with no employees other than their spouse. This type of plan caters to individuals who want to save for retirement while also maximizing their tax advantages.
Which pricing option is right for me?
The right pricing option for your business depends on factors such as company size, number of employees, budget, and desired level of service. 401KSimplified can provide guidance on selecting the most suitable pricing structure based on your specific needs and financial considerations.
