Contents
401(k) Plans Explained
What is a 401(k) plan?
A 401(k) plan is a type of company retirement plan under section 401(k) of the Internal Revenue Code. It allows you to save for retirement by putting away money on a pre-tax basis, thereby lowering your taxable income, and allowing your money to grow tax free until it’s withdrawn in retirement.
Employee Contributions
Money put into the plan by employees. Also called “deferrals.” You can elect to have up to $16,500 deferred from your paycheck and contributed to the plan. If you are more than 50 years old, you can have an extra $5,500 deferred for a total of $22,000 for 2011. Roth option available.
Employer Contributions
Money put into the plan by employees. Also called “deferrals.” You can elect to have up to $16,500 deferred from your paycheck and contributed to the plan. If you are more than 50 years old, you can have an extra $5,500 deferred for a total of $22,000 for 2011. Roth option available.
Annual Contribution Limits
Money you put into the plan for your employees. Employer contributions are either made as a match based on employee contributions, or as a profit sharing contribution to all eligible employees. You can also use this feature to give performance bonuses to employees pre-tax.
Enhanced Savings Options
The total annual benefit an individual can have added to the plan (including employee and employer contributions) is $49,000 (or if over age 50, $54,500).
Our 401(k) plan is designed to “snap together” with customized defined benefit plans to form a powerful retirement plan solution that could allow participants to contribute up to $250,000 per year, pre-tax.
401(k) for Small Business
Now it is possible to have the same level of employee 401(k) benefit in your small business as it is for a large publicly-traded organization
Not all financial planners and advisors are cut from the same cloth. We also recognize that a “one size fits all” approach does little for businesses who may want the same benefit as their larger Fortune 500 competitors. In addition, most small business owners lack the time to fully understand how a small business 401(k) plan may help them and their employees. Regulatory compliance issues as we
New policies regarding 401(k) rules for retirement management within small businesses are largely untapped by thousands of workers in the United States. Managing retirement plan assets for you and your employees can now be accomplished without the fiduciary liability and traditional responsibility had larger publicly-traded organizations. Otherwise ignored physicians, service professionals (including optometrists and dental practitioners) can find the benefit of a 401(k) account for their employees. Growing your business should be your number one priority and responsibility. We work to ensure your employees get the retirement benefits they might enjoy if they worked for a larger organization, giving them the flexibility to take loans out of and control their retirement funds directly. Contact us for more information and details
Small Business 401(k) for Associations & Chambers of Commerce
Associations
Do you represent an association or employer who may be seeking to lower tax rates while at the same time provide more retirement income to employees without increasing your costs? Many employers do not realize the potential solutions available which give simple, more effective 401K plan benefits to their employees.
Specifically, we provide opportunities for the Association 401(k) plan to be presented directly to the members of the association and we serve as the primary point of contact for the employer. With this plan, the association can manage a private-labeled 401K plan.
A direct partnership with us enables local city and state associations to compete more effectively in their mainstream business of selling memberships because it gives higher margins per member and increases member loyalty by giving a more comprehensive benefits package.
This is possible because incremental gross margin goes directly to the bottom line of your organization. Because this gives you a competitive edge over mainstream business, it can help boost your company relative to competitors vying for the same people to join their association.
Chambers of Commerce
There has never been a better time to start a 401(k) for your local municipality or chamber of commerce. Time is money and the longer you wait, the more costly it becomes to procrastinate setting up your fund management system. If you are looking to change 401(k) management providers, you have come to the right place. Soltre helps chambers set up their 401(k) management absolutely free. We at Soltre recognize the important of timed and prudent financial management, especially in these tenuous financial times.
It must be obvious that our present economic crisis was, by and large, foisted on Main Street by Wall Street–the mostly innocent public taken to the cleaners, as it were, by the mostly greedy financiers.
John C. Bogle
-Strengthening Worker Retirement Security
Congressional Testimony February 24, 2009
Founder, and Former CEO of The Vanguard Group
While many chambers of commerce are reticent about switching their retirement provider account to a private 401(K) management firm. There are a number of benefits to doing so. In fact, not doing so may eventually cause greater losses instead of greater savings for your 401(k) and other retirement benefits.
401(k) Plans for Advisors
If you’re like most advisors, you have much more to offer than your clients can understand or appreciate.
Instead of delivering the value of your experience, you find yourself trapped in the quicksand of quarterly reports, paperwork, travel and deadlines. Not to mention endless regulatory updates and compliance procedures.
How can you grow your business without adding administrative burden? With our small business 401K program, you can manage 401(k) assets without the traditional 401(k) responsibility or fiduciary liability. You take care of the employer, and we’ll take care of that employee who wants to take a loan from his $15,000 account.
The result: you increase your revenue without increasing your overhead.
Your Clients Responsibility
- Choose whether to adopt the plan
Your role as Advisor
- Identify and educate prospective client
- Obtain basic company information and one signature from the employer
- Be the point of contact for the client
- Present the annual plan report
Our Responsibility
- Assume all the plan responsibilities and liabilities
- Prepare and file all required documents with the Federal Government (e.g. form 5500)
- Manage the “day to day” affairs of the plan
- Monitor other named fiduciaries
- Make required disclosures to participants
- Ensure compliance of plan operation with the plan document
- Hire and manage the custodian
- Hire and manage the record keeper
- Maintain fiduciary liability insurance and bond
- Hold all service providers accountable
- Advisor education and training
- Billing and payment monitoring
- Employee support
- Regulatory compliance and updates
- Appoint and monitor ERISA 3(16) administrative; 3(38) investment and 3(21) plan fiduciaries
- Ensure all fees charged to plan participants are reasonable
- Be a “catch-all” regarding fiduciary responsibility
- Ensure that prudence exists within the plan
- Discretionary authority over plan management and disposition of assets
- Manage plan assets
- Select, monitor and replace investment
- Create and implement investment strategy
- Prudent and efficient portfolio design and maintenance
- Performance reporting, research and analytics
- Account management
Step 1: Apply
Contact us directly. We will make sure we understand your objectives and answer any questions you have about working with us. We’ll then evaluate if a partnership makes sense.
Step 2: Receive Approval
Receive an approval letter and access to customer market resources and supplies for your existing clients.
Step 3: Grow Your Business
Add the revenue, not the fiduciary liability or work that comes from the retirement plan business.
For more information on advisor pricing structures, please contact us directly.
Self-Directed 401(k)
The ultimate vehicle for tax-deferred investment.
A solo 401(k) is quite similar to a traditional 401(k). The main difference between a self-directed 401(k) and a traditional 401(k) is in the investment options they provide you with. As opposed to a traditional self-directed 401(k), the investment options with a self-directed 401(k) are not limited to only investments in stocks, bonds and mutual funds. A self-directed 401(k) provides you with more extensive investment opportunities. With a self-directed 401(k), you will also be able to purchase investments in real estate, tax liens, foreign currency, foreign real estate, private mortgages, small businesses and companies, franchises and other investments.
A solo 401(k) provides you with many investment benefits, including a way to achieve maximum growth for your retirement plan and funds. With a self-directed 401(k), you will be able to:
- Obtain check book control authority over your plan – which enables you to have direct control over your investment decisions
- Eliminate the costly fees that come with a traditional self-directed plan, such as custodial fees
- Expand your investments under a self-directed 401(k) plan to include traditional as well as alternative investments
- Contribute large payments to your self-directed 401(k) through the use of income deferrals
Bigger Benefits – Smaller Fees
The type of self-directed 401(k) you have will depend on the investments you decide to make. Sometimes a business entity may be necessary in addition to a self-directed 401(k), like an LLC or C Corporation. You will be provided with a solo 401(k) structure that will suit your circumstances and your investment decisions. You will be provided with the assistance to create and maintain the right self-directed 401(k) for you.
With a self-directed 401(k), you do not need to pay any custodial fees, including fees relating to transactions or assets, and you will be provided with numerous investment opportunities. A self-directed 401(k) will allow you to play a more active role and have direct control of your retirement funds.
Free 401(k)
Sadly, many of today’s small business owners do not believe 401(k) plans exist that suit their company’s needs. This fallacy is actually costing small business owners and their employees millions of dollars in lost retirement revenue in the 401(k)s which were never started due to lack of understanding.
Because the burden of retirement savings is shifting more toward the employee, small business owners must now be more aware of the options available to them so as to make the best choices for themselves and their employees.
The Pension Protection Act of 2006 extended many of the benefits of traditional 401(k) accounts to small business owners. Because time is of the essence when it comes to saving for the future, getting started sooner rather than later is vital. Sheltering savings on a pretax savings is absolutely necessary for individuals and business owners without pensions or other secure retirement vehicles. Because most Americans need to put away much more than is allowed by a standard IRA account, a small business 401(k) can literally prove a lifesaving investment vehicle for you and your employees.
Typical 401(k) plan vs. a Small Business 401(K)
*Based on a comparison of 20 employees with $1 million in contributions.
| Employer Service | |||||
| Who’s responsible for compliance? | You are | Professional retirement experts | |||
| Who’s the fiduciary (personally liable)? | You are | Professional retirement experts | |||
| What does it cost? | $1,500 setup, $3,000 per year | Nothing | |||
| Employee Service | |||||
| Who enrolls your employees? | Your employees | We do | |||
| Who supports the employees? | Local, 9 to 5, low-budget support | National, 24/7 best-in-class | |||
| Investment Performance | |||||
| Who creates the menu? | A single mutual fund provider | Independent investment fiduciaries | |||
| Whose interests do they protect? | A single mutual fund provider | Yours and your employees | |||
| Who maintains the portfolios? | Your employees | Full-time investment fiduciaries | |||
| Investment experience/training | 2 hour education meeting | 30 years | |||
| Average annual returns | 5.2% | 8% | |||
| Fees | |||||
| Price paid for funds | Retail | Institutional | |||
| Transparency of fees | Unavailable | Crystal clear | |||
| Average total annual fees | -3.7% | -1.6% | |||
| The Bottom Line | |||||
| Average annual return (after fees) | 1.5% | 6.4% | |||
| Average income in retirement | $350,000 | over $1,000,000 (3x typical plan) | |||
| When you might retire? | 75?? | 65 | |||
Start a 401(k)
Starting a 401(k) plan for your company or organization can sometimes be a daunting task, especially if you have little experience in doing so. Not only is it difficult to migrate between differing providers in the market, but it can also be a headache to know what to do once you have a plan in place.
We work with small businesses, entrepreneurs, local associations and chambers of commerce to provide Fortune 500-level benefits to smaller organizations. As a local business owner, it can often be difficult to sponsor an expensive 401K plan to attract and keep the best and brightest employees. With a small business 401k, small business owners can now afford to start a 401K for themselves and their employees absolutely free.
If your company has 5 to 200 employees, please contact us today. We can help you set up a 401K plan which saves you money and alleviates previous issues relative to fiduciary liability and responsibility inherent in old ERISA and traditional 401Ks. Contact us today.
Citations
1) 5.2% is the average return of those who chose their own portfolio mix from a Burgess and Associates study of 14,487 401(k) participants (1997-2006). Also supported by the DALBAR report Quantitative Analysis of Investor Behavior 2007, 2008 and 2009.
2) 8.0% represents average return of a market tracking portfolio. See Strengthening Worker Retirement Security by John C. Bogle (founder of Vanguard), February 24, 2009 (Congressional testimony).
Supported by actual historical returns of a 60/40 portfolio of S&P 500 and Barclays aggregate bond index. All rates of return are hypothetical and are not meant to represent any particular investment. BenefitGuard does not guarantee investment performance.
3) Uncovering and Understanding Hidden Fees in Qualified Retirement Plans February 1, 2007 (Congressional testimony).
4) Assumes a $1 million plan with 20 participants. Pricing varies by plan assets and number of employees. Ask us for a customized proposal for your company
5) Income in retirement represents the cumulative income paid during retirement in equal installments over 20 years. Average Employee income is based on data collected by the Employee Benefits Research Institute (EBRI), which suggest that the average participant in a 401(k) plan earns an income of $44,000 per year. Assumes an initial balance of $10,000 and annual contributions of $4,400 for 35 years.
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