What is a Startup 401(k)?
Until recently, many small businesses shied away from offering a 401(k) plan to their employees based on financial constraints and other concerns. Fortunately for small business owners, startup 401(k) plans are much more affordable, thanks in large part to legislative changes and the increased availability of small business-oriented 401(k) plans. If you are considering offering a 401(k) retirement savings plan to your employees, it is important to understand what they are, how they work, how to go about starting one, and what questions to ask of a startup 401k Advisor in Ohio.
Key Features of a start-up 401(k)
There are many startup 401K plan providers that try to bury costs, which can make it difficult to determine what you are truly paying for the plan.
Setting up a plan can seem onerous. Look for a plan that offers personalized help with setup.
A plan’s technology platform should be easy to utilize for both the employer and employees alike.
The provider should ensure your plan’s compliance with both IRS and Labor regulations.
Look for a provider that gives you access to a wide assortment of fund and design options, allowing you to design the right plan for your company.
Is Your Ohio 401(k) Financial Advisor a Fiduciary?
At TTG Financial, Inc. all of our 401(k) financial advisors are Fiduciaries. As the employer you are automatically considerd a Fiduciary as well. A fiduciary is obligated to put your interests above their own and to disclose any potential conflicts of interest. When your Startup 401k Advisor in Ohio is also a fiduciary your interests are aligned.
Most advisors operate under a lesser standard known as the ‘suitability standard,’ The suitability standard only requires that an investment be ‘suitable’ for a client. These advisors are not required to disclose potential conflicts of interest or make a client aware of less expensive or more tax-efficient alternatives
Benefits to Starting a 401(k) Plan
Your employer contributions are a deductible business expense, which reduces your business taxes. Your business may also be eligible for 401(k) startup tax credits for starting a 401(k) plan. The tax credit is for employers with 100 or fewer employees, and is applied to 50% of your eligible startup costs for a 401(k), up to a maximum of $500 a year. The credit is given for setting up and administering the plan and educating your employees about it. Beyond that, offering a retirement plan is attractive to current and potential employees, giving you a competitive advantage when hiring and retaining talent.
Startup 401(k) Features
Matching Contributions for your Startup 401(k)
Your company isn’t required to make contributions to the plan, but you can choose to contribute a percentage of each employee’s pay, you can match the amount each employee contributes (up to a specified limit), or you can do both. Under a traditional 401(k), you can change the amount the company matches at your discretion.
Automatic Enrollment for your Startup 401K
One increasingly popular feature of workplace retirement plans is automatic enrollment, as a way to increase employee participation. Under automatic enrollment an amount is automatically deducted from each employee and matched by the employer. The employer gets relief from certain discrimination tests. Each employee can opt out or change the amount at their discretion.
Vesting for your Startup 401(k)
You must include language in your plan document on how employees become vested in the plan, but your business can set the details. Vesting in a retirement plan means ownership. If an employee’s retirement account is fully vested, it can not be forfeited if he or she leaves the company. Vesting depends on the type of contribution and the length of an employee’s service with your company: An employee’s own contributions are vested at 100% immediately. These amounts cannot be forfeited for any reason. Employer contributions for 401(k)s can have a variety of vesting schedules, as determined by your business in your plan document. You can have immediate vesting, 100% vesting after a certain number of years of service, or a vesting schedule that increases the employee’s vested percentage each year.
Investment Options for your Startup 401K
You will need to decide what investment options you want to make available to employees. The 401(k) Investment Advisors at TTG Financial, Inc. will manage the investments and help you decide on a menu of investment options that will work best for your employees. TTG then assists each employee with their individual investment selections.
Questions To Ask a Startup 401k Advisor in Ohio:
- Are you a fiduciary?
- Do you offer an all-inclusive 401K Startup Package?
- What type of clients do you typically work with?
- How will we communicate with each other? And how often?
- Will you be able to give us direct investment advice?
- How are you compensated?
- How much will I be charged for your services? And how do these compare to alternatives?