401k PLAN FEES AND IRS FORM 5500 REPORTING OF 401K

Employee Details Required for 401k

September 19, 2011 Leave a Comment

My friend runs a non profit organization and he recently set up a 401k plan for his company quickly and easily. I own a designer clothes shop in Harlingten. Can I set up my 401k the same way? What details about my employees will I need to collect to establish the account?- Misty Young, Texas.

Misty, setting up a 401k for your small business is pretty much the same as doing it for a non profit organization. Today, the entire process is very easy and it can actually be completed within a few hours at the most. You can sign up with a 401k provider like Vanguard or Fidelity to set up your plan. Most small businesses, however, prefer to use a DIY plan like http://lifecycle401k.com. These plans can be set up quickly right from the comfort of your home or office. You can manage the plan and carry out monthly updations in minutes and keep track of the plan easily too.

You also save a lot of money with such DIY plans because there is minimal administration cost. Your employees can keep tabs on their 401k account status easily with such plans too which makes it easy for them to switch investments or keep track of loans they have taken. Look for DIY suites that come with a demo so that you can try out the package before you actually sign up for it. Check if it is user friendly and if it has all the investment choices you want to include for your employees.

To set up the plan you will need to enter some information about your employees and also your company. For example, details of compensation drawn by them, their designation, the date of hiring and similar data will be required. You can decide if you want to make matching contributions and if so, how much, when you set up the plan.

Remember that you can always make contributions without specifying so in the plan document. Or, you can change your plan document later on to include employer contributions. If your business is just starting up then you may want to avoid committing yourself to a specific amount of employer contribution right away and simply add the provision later on.

Filed under 401k

Catch up Contributions

September 12, 2011 Leave a Comment

Tell me more about Catch up Contributions with 401k plans. Who can make them and why is it important to know about these contributions?- Wallace M. Linn, Wichita, KS 67202

Catch up contributions allow employees to make up for a late start in saving for their retirement. If an employee is nearing his retirement age and has very little set aside to live on once he crosses this age, it is very important for him to maximize the savings he can put aside right away. Catch up contributions actually give him a second shot at making retired life financially secure. That is why it is important for your employees, especially those who are older, to know about these contributions.

The IRS regulations say that employees who have crossed the age of 50 can make catch up contributions to their 401k account. In effect, these employees can make their regular contributions and also add in an extra bit to make up for lost years. Different kinds of 401ks allow different catch up contributions which is why it makes things much easier for you, the employer, to sign up for a DIY 401 suite like http://401k-easy.com/. These packages are constantly updated with the most recent IRS limitations and rules. You can always be sure of staying within the law when you administer the plan using this software. Remember that during times of inflation, the IRS usually allows bigger catch up contributions and vice versa so the rules are prone to fairly frequent changes.

If you do intend for your older employees to be able to save more for their retired life, make sure that you add the provision for catch up contributions to your plan right at the outset. Although the law does not make it mandatory for you to include this provision, adding it to your plan is a good way to keep your employees happy. Do remember that without this provision in your plan document, you cannot allow catch up contributions to the plan.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k contribution, 401k easy

Avoiding Middlemen in your 401k Plan

September 5, 2011 Leave a Comment

Is there any way in which I can interact directly with mutual fund companies when I or my employees want to invest 401k funds in these investment products? I would like to avoid paying charges to any third parties and keep my 401k plan affordable.- James J. Silver, runs a interior decoration business in Madison, WI 53703.

Yes, you can set up a 401k plan that lets you interact directly with mutual fund companies when you want to add these investment products to your plan. There are a number of run- it- yourself 401k plans on the internet that let you do this. By choosing a tried and tested plan like the one offered by http://401k-easy.com/, you can make plan administration easy and quick and also avoid paying charges and fees to middle men.

Administration of these DIY 401k plans is quite easy once you take a look at the demo offered by the provider. You can actually set up the plan and have it ready to go without having to hire outside help. Once your plan is up and running, it takes just about 15 minutes for you to update records each month. Make sure that you choose a DIY 401k plan that you can customize to your specific needs. This will let you choose the investments that your employees and you are most likely to use. It will also give you the greatest flexibility in terms of making changes at a future date if the need arises.

The best part about such DIY software suites is that they are very cost effective when compared with the plans that large providers establish and administer for you. You can literally save thousands of dollars every year with these easy to use plans because there is no administration fees involved when you manage the plan on your own. Try out a free download of the software suite before you sign up to ensure that you can follow the instructions and manage the plan easily.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k easy, 401k plan

Why Set Up 401k Plans?

August 29, 2011 Leave a Comment

Why should I choose a 401k plan for my graphics design business? My employees can save with IRAs or other savings schemes. – Elizabeth R. Halliway, Stevens Point, WI 54481

The 401k plan became a very popular way for businesses to help employees save for their future once the changes outlined in the EGTRRA came into force in 2001. Since then this retirement saving plan has become particularly popular among small businesses. Businesses owners who have this plan give their employees a simple, effective and tax advantaged means of making sure of a financially secure retired life. This makes them great employers to work for. Result- the business can attract the best of the talent in the market. This is also one of the simple ways in which businesses make sure that good employees stay with them and don’t get lured away by bigger or better paying competitors.

While your employees can definitely save in other ways including IRAs, the 401k plan gives them some special benefits that no others do. One of the most attractive aspects of the 401k plan is that your employee’s contribution comes out of pre- tax dollars. Every month, his taxable income is reduced to the extent that he contributes to his 401 plan. This means that he cuts down his tax bill too. When he withdraws from his 401k account post- retirement he pays tax at the lower tax rate that he then falls within.

If you are setting up a 401k plan using a DIY software suite like http://401keasy.com/, you give your employees a great deal of control over their retirement savings too. They have the flexibility to choose their preferred investments out of a comprehensive range of options. This lets different employees invest in different avenues in line with their risk appetite and returns expectations. Since they can easily track the status of their 401k account, employees find it immensely convenient when you establish such a DIY 401k plan for your business too.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k plan

Importance of a Written Plan Document for 401ks

August 22, 2011 Leave a Comment

I want to set up a small business 401k for my bakery. I have just 2 employees working for me at present and I have no plans of hiring any more. Do I still need a written plan document for the 401k?- Marilyn G. Yanez, Broomfield, CO 80020

Government regulations require that every tax advantaged 401k plan should have a written plan document. This document communicates necessary information about the plan to your employees. This includes details of how they can participate, the manner in which they can contribute, contribution limits and other important aspects. The document should clearly state all the provisions of the plan. It is up to you to ensure that all your employees are given a copy of the plan document so that they can learn how to participate in your 401k plan. No matter how many employees you have, a plan document is a mandatory requirement for a 401k.

A 401k plan document also tells your employees exactly what benefits they can hope to get when they choose to participate in the plan. Outlining the benefits in this way makes it easy for you to encourage employees to join up. In addition, having the plan’s various features and benefits listed out on paper safeguards you too. Your employees cannot claim to have signed up for the plan under a misunderstanding at a future date.

Formulating a document for your 401k plan is not as difficult as you believe. You can simply adopt an IRS approved master document or choose a prototype plan offered by your provider. If you are using a DIY suite like http://401keasy.com/ to set up your 401k plan, then the process is fully automated for you. All you have to do is choose the right options and the software takes care of everything else you need to do to establish the plan and get it running.

Filed under 401k Plans for Small Businesses

Customizable 401k Plans

August 16, 2011 Leave a Comment

Why should I choose a 401k plan that offers customization? Where can I find affordable plans that can be customized? Marvin M. Huerta, Reeves, LA 70658, runs a bakery supplying home baked products to his neighborhood.

Marvin, a customized plan is the best choice when you want to set up a 401k retirement savings scheme for your small business. When you employ people, you cannot choose only those whose investment ideas match with the rest of your employees. Every employee will have a different savings plan and varying risk appetites. The same investment avenues may not be right for all employees. Giving your employees the freedom to invest the funds in their 401k however they please across a range of options that are suitable for them lets them control how and how much they save for their retirement. A customized plan lets you determine the kind of investments you want to make available.

Customization also gives you a great deal of control over what is and is not available for your employees. For instance, you can choose a 401k plan that does not allow loans if you want to ensure that your employees save the maximum possible for their retired years. You can even choose to do away with employer contributions if you want to opt for a performance related contribution rather than a fixed one.

There are a number of DIY suites available on the internet that give you customized 401k plans. These plans are by far the most economical ones you will find. Choose a tried and trusted one like http://smallemployer401k.com/ that has good reviews from users. Make sure that product support and pricing is excellent before you make your final decision to buy the 401k suite for your business.

Filed under 401k

Low Cost 401k Plans

August 15, 2011 Leave a Comment

I want to offer my employees a 401k plan but I cannot afford to pay huge fees to administer it. Where can I find a low cost 401k plan that will suit my needs perfectly?- Santo E. Diamond, Saginaw, MI 4860, runs a delicatessen catering to his neighborhood.

Santo, establishing a 401k plan is a great idea for your employees and also for your business because of the many tax advantages it offers. Your employees are sure to appreciate the fact that you are helping them save for their future in the most effective way possible. In fact, many small businesses like yours find that talented youngsters prefer to come work for them when they have such plans to offer instead of bigger concerns that do not show as much concern for employees. But it is definitely important for you to set up a plan that you can easily afford.

Typically, 401k plans offered by large providers end up quite expensive for the small business owner. That’s why, in recent times, DIY plans have become really popular, especially among small businesses like yours. You will find such DIY plans at sites like http://401keasy.com/ where there is also a lot of information about 401ks in general and the DIY plans in particular.

These plans let you eliminate the huge administrative fees that you would be paying your plan provider. In fact, by handling the plan administration in- house, businesses like yours have saved thousands of dollars each year. Such plans come with detailed instructions on how you can manage the account, update records and track the plan so that you can administer the plan yourself like a pro within a short time. Even if you have an existing plan with another provider you can convert to a DIY 401k suite like this one with the minimum of fuss and hassle. In your case, you can simply set up your very first DIY plan with a site like this one in minutes and ensure that you provide a great way for your employees to save for retirement without burning a hole in your pockets.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k easy

401k Price Comparisons: the Truth about the Impact of Hidden 401k Fees

August 8, 2011 Leave a Comment

Many, if not most 401k plans contain significant hidden fees. These fees are being secretly lifted from the back pockets of 401k plan participants. The US Department of Labor is trying its best to force 401k plan providers (banks, mutual fund companies, insurance companies, brokerages, etc.) to come clean about these hidden fees.

Here are the facts:

According to a recent study by the ICI (Investment Company Institute) and Deloitte [http://www.ici.org/pdf/rpt_09_dc_401k_fee_study.pdf] the average 401k is charging the typical employee-participant .72% of the value of his or her personal 401k account in hidden fees. In their study ICI and Deloitte call these hidden fees “all-in” fees. This average hidden fee of .72% equates on a national scale to $350 per plan participant per year, extracted directly from participants’ accounts, without, in most cases the employee’s knowledge or consent. But for small 401k plans, those with less than $1 million in total assets, the hidden “all-in” fee jumps to a whopping 1.89% per employee ,or about $920 per plan participant per year! Are you thinking about offering a small 401k? Did you know in all likelihood your employees may be unknowingly subsidizing the plan to the tune of $920 a year?

The employer typically pays the 401k plan’s annual recordkeeping and administration fees. These fees vary, and below is a representative sample of annual recordkeeping and administration fees for a company with 15 employees and $1 million in assets:

401k Easy Online (www.401k-easy-online.com): $995

The Online 401k (www.theonline401k.com): $1,100

Wellington 401k (www.wellington401k.com): $1,350

Employee Fiduciary 401k (www.employeefiduciary.com ): $1,500

Sharebuilder 401k (www.sharebuilder401k.com): $1,800

When selecting a 401k for the company, employers should insist that the plan provider fully disclose the “all-in” fees. The true impact on the real net cost of the 401k plans mentioned above, when adding in the hidden “all-in” fees creates a very different picture:

401K Easy Online: $995 + [“all-in” fee of $500 max. paid to custodian] = $1,495 per year.

The Online 40k: $1,100 + [“all-in” fee of 0.72% to 1.89% of $1 million] = $8,300 to $20,000 per year.

Wellington 401k: $1,350 + [“all-in” fee of 0.72% to 1.89% of $1 million] = $8,550 to $20,250 per year.

Employee Fiduciary: $1500 + [“all-in” fee of 0.72% to 1.89% of $1 million] = $8,700 to $20,400 per year.

Sharebuilder 401k: $1,800 + [“all-in” fee of 0.72% to 1.89% of $1 million] = $9,000 to $20,700 per year.

So it’s not rocket science to understand why the 401k industry is blowing smoke to make any discussion about 401k fees confusing and bewildering. There is a great deal of money at stake, on a per-plan basis, and all this smoke clouds the fact that most employers offering 401k plans with hidden fees are doing so because they have been misled by their plan providers.

Now that hidden 401k fees are starting to get noticed by my the news media and the legal profession via class-action lawsuits, some 401k plan providers that made fortunes mining hidden fees are scrambling to cover their tracks, and create the kind of PR confusion many of us remember from years past, when major tobacco companies tried to explain to Americans that smoking was not hazardous their health. The 401k industry is launching the same kind of PR assault, confusing and clouding the issue, but what is really at stake is the end of their 401k hidden fee gravy train, pure and simple.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k price

Single Participant 401k Plans for CPAs

August 1, 2011 Leave a Comment

I have my own CPA business and I do not employ anyone else at present. Why is a 401k a better plan for me than the other retirement benefit plans? What is the easiest and cheapest way to establish a 401k plan that I can manage easily month after month?- Andy Hart, Charleston, South Carolina.

The government has made it easy for small business owners to save for their retirement by allowing some significantly large contributions to be made to their 401k plans. For single participant 401ks, the contributions are much higher than what you can make to other retirement benefit plans. Catch up provisions make it possible for those who are starting late to set aside a comfortable sum for their golden years. For your single person CPA business you can definitely set up a 401k plan and you can even recommend it to your owner only business clients.

The easiest way to set up a 401k plan for your business is to go for a ready to use software suite like the one offered by http://low-cost-401k.com/. These plans are designed to be user friendly so that setting up a brand new plan should not take much time or effort. If you are still not very confident about setting up the plan on your own, then choose a DIY suite like this one that offers a demo. Once you have looked through the demo, establishing your plan should not pose any problem at all.

Since you do not have to hire a plan administrator for such DIY 401k plans, these are also cost effective options for your business. These plans give you a range of investment options, the flexibility to customize your plan and complete control over the plan at a fraction of the cost you would pay to a third party to setup and manage your plan.

Filed under 401k Plans for Small Businesses Tagged with 401k, 401k plan

401k Offers Small Businesses an Edge over Bigger Concerns

July 27, 2011 Leave a Comment

Will offering a 401k plan for employees help me attract good talent when there are many bigger companies in my locality carrying out the same business as me? Wouldn’t potential employees simply save in other ways and choose a bigger employer instead of me?- Gerardo H. Fields, Honolulu, HI 96813, recently opened a graphics business from home.

Big companies are usually at an advantage when it comes to hiring skilled talent. They maybe able to offer a bigger paycheck, better perks, even a better brand name. But this does not mean that small businesses are stuck with hiring only those who have not been successful with bigger employers. In fact, today, with special 401k plans designed for small businesses, employers like you are in a good position to compete with larger companies when it comes to hiring the best talent in the market.

Now, it is possible for a business of any size to have a 401k plan that is quite affordable. By choosing DIY suites like the one offered by http://401keasy.com/, you can have a comprehensive plan that gives your employee a good range of investment options. The best part is that these suites make it easy for you as well as your employee to track and manage the funds in the account with ease.

If your business employs less than 100 people, then you may be eligible for the $500 tax credit for first three years since the establishment of the plan. This is an advantage that neither big businesses nor owner only businesses enjoy. For your employee, the fact that contributions go from his pre- tax dollars cuts down his yearly tax bill quite significantly, letting him save more and give less to uncle Sam.

During the recession, many big companies were forced to cancel the employer matching contributions as part of cost cutting measures, thus demotivating employees quite dramatically. In a small business like yours with limited employees it is a relatively easier task to sustain employee match contributions because the total outlay is not as massive as with bigger concerns that have many more 401k participants on the rolls. By maintaining contributions and making it easy for your employees to save for their retirement with a DIY suite, you can present yourself as an empathetic employer who is actually helping them save for their future financial security.

Filed under 401k Plans for Small Businesses

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News & Views From 401k-Plan-Blog.com

401k Plan Blog (sponsored by Pension Trade Association)

Employee Details Required for 401k

Catch up Contributions

Avoiding Middlemen in your 401k Plan

Why Set Up 401k Plans?

Importance of a Written Plan Document for 401ks

Customizable 401k Plans

Low Cost 401k Plans

401k Price Comparisons: the Truth about the Impact of Hidden 401k Fees

Single Participant 401k Plans for CPAs

401k Offers Small Businesses an Edge over Bigger Concerns

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