Happy Holidays from the Frugal Fiduciary! As 2016 comes to a close, we looked back through this year’s blogs to find the most read. It turns out our most popular blogs related to the following topics:
During the 401k plan design process, we get a lot of questions from small business 401k fiduciaries about employee eligibility. They want to know when they should let new employees into their 401k plan and their options for keeping certain employees – generally the ones that won’t participate – out.
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Small businesses can have dramatically different goals for their 401k plan. While some want to maximize key employee contributions, others want to incentivize rank-and-file contributions. 401k fiduciaries have nearly endless options for meeting these goals – many with very different expenses. The process of matching 401k goals to available options is called 401k plan design.
Over the past year, several new Internet-based 401k providers have launched in the small business retirement plan market. Led by tech entrepreneurs instead of industry veterans, these providers claim to slash the time it takes to establish a 401k plan using new technology. One says they can deliver a 401k plan in just 15 minutes! Here’s the problem. While technology might speed data collection and document delivery, it can’t reduce the amount of information 401k fiduciaries must supply a new 401k provider or guide 401k fiduciaries when picking 401k administration and investment options for their plan – the most time consuming steps in the 401k plan establishment process.
“Safe harbor” 401(k) plans are the most popular type of 401(k) used by small businesses today. They automatically pass annual ADP/ACP and top heavy tests and allow business owners to maximize contributions to the plan. To achieve safe harbor status, owners are required to make a contribution on behalf of participating employees. For many employers, that trade-off is well worth the cost. Here’s why.
Ever hear of voluntary 401k contributions? If you are like most people, probably not. They are after-tax employee contributions like Roth deferrals, but subject to different ERISA rules. Voluntary contributions have been around decades longer than Roth deferrals, but are less popular – mostly because their earnings can’t be withdrawn tax-free at retirement like Roth deferrals.