Interested In Starting A New Retirement Plan?
It's Easier And Much Less Expensive Than You Think...
Your decision to start a retirement plan employee benefit for your employees is simply good business.
Today's employees are more financially savvy then ever.
Recent studies show that today's employees consider an employer's retirement plan benefit to be the second most important component of an overall employee benefits package. Employers who want to hire and retain top-notch employees have little choice than to stay competitive in their retirement plan benefit offering.
Organizing and implementing your new plan requires your attention to some simple questions.
Once you have made these decisions, you have basically designed the framework for your new plan.
With your plan design in place it's simply a matter of filling out the forms and announcing your new employee benefit.
What Kind Of Plan Options Do You Need?
There are several choices available to you as consider starting a new plan for your employees. If you have a specific question concerning what type of plan and what options might best serve your needs, e-mail it to us at info@retirementplanners.com
The traditional 401k Plan [401k Plans] is the most popular plan used by employers in America today and will probably be your choice as well. A 401k Plan allows your employees to make payroll deferrals. Your choices with regard to what kind of plan is best suited for your organization are typically decided based on the nature your organization [are you a for profit company or not-for-profit organization, etc.] and the nature of your organization's employee benefit goals and your attempt to meet the retirement plan goals of your employees.
For a fully comprehensive look at an array of different plans available to today's employers, along with some comparative analysis reviews of employee deferral and employer match limitations, as well as some of the other differences in the various plans, visit RPA's Types Of Plans.
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Employer Match Contribution or No Match?
A part of your decision with regard to the type of plan that will best meet your organization's needs, will depend in part on whether or not you would like to provide your employees with an employer's match contribution. If you elect to provide such a plan enhancement, you may do so either by providing a "fixed" match or a "discretionary" match. The most common form of employer contribution in today's 401k plans is the "fixed" contribution. The most common "fixed" employer match formula used by today's 401k plans, find employers typically matching $.50 per $1.00 of employee contributions, up to the first 6% of their pay. These types of 401k plan employer matches are most frequently made on a payroll period basis.
A 401k Profit Sharing Plan [Profit Sharing Plans] can be used as a stand alone plan, whereby employees do not make any payroll deferrals and the only contributions made to the plan are those made by the employer, either in a "fixed" amount or in the form of a "discretionary" amount based on the profitability of the company and other financial determinations at the sole discretion of the employer.
The 401k profit sharing "discretionary" match allows you to decide how much in employer contributions flow to the plan, but as a stand-alone plan, since a profit sharing plan does not allow for any employee contributions, it is sometimes "paired" with a traditional 401k plan that does allow employee contributions as well. This provides employees with the best of both worlds.
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Vesting or Eligibility Period?
Determining when you want your new employees to be eligible to participate in your organization's retirement plan is an important decision. You have a number of choices available to you as you decide the delicate balance between not making the eligibility/vesting period too long thereby limiting employee interest in your plan, and yet not too short as to diminish the perceived value of your plan.
The most common eligibility periods chosen by employers who have 401k plans are:
- Immediate eligibility/vesting: found in 36.5% of today's 401k plans.
- Three (3) months eligibility/vesting: found in 11% of today's 401k plans.
- Six (6) months eligibility/vesting: found in 14.4% of 401k plans.
- One (1) year eligibility/vesting: found in 27.2% of today's 401k plans.
- All other eligibility/vesting periods of varied description: found in 10.0% of today's 401k plans.
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Investment Choices?
Every 401(k) plan must have a plan trustee who is legally responsible for selecting the type of investment that the plan will offer and is responsible for the final approval of the investments chosen for the plan. Employers often do not make these decisions alone, but instead do so with the assistance of a professional investment advisor who is familiar with retirement plans and the various investment options available to those plans and who can assist the employer [the plan trustee] in making these investment selections.
The plan trustee is also responsible for choosing the investment advisor and the company (or companies) that will actually invest the money contributed to the 401(k) program. Federal law requires that these choices be based solely on the "best interest" of the plan participants. Once the plan trustee's decision is made with regard to the investment that will be available in the plan, the plan participants, under a 401k plan for example, then get to choose the specific allocations in their individual accounts from among the available investment options offered in their plan.
RPA does not provide investment advice, nor do we sell any securities or other investment vehicles. We provide you with the ability to include a fully diversified offering of mutual funds for your plan through our state-of-the-art daily valuation record keeping trading platform. We provide you [and your investment advisor if you use one] with access to thousands and thousands of mutual funds from hundreds and hundreds of mutual fund families. From this broadly diverse offering, you will have little difficulty choosing the typical 6 to 15 mutual funds that you will make available to your plan. If do not already have a trusted investment advisor with whom to work and you need RPA to assist you in locating and interviewing various investment advisors, we are pleased to provide you with some objective assistance in that process.
To review a listing of many of the mutual funds that are available through RPA's diverse trading platform, visit RPA's Mutual Fund List .
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Participant Loans?
Do you want your plan to allow its participants to borrow against their individual accounts? Well over half of today's 401k plans offer a loan option to plan participants. In the larger plans, this percentage increases significantly with 91% of plans with more than 5,000 participants offering loans. Less than half the plans with 10 or fewer participants do so.
In plans that do in fact permit loans, on average 25% of participants take advantage of this plan option, with a national average of $5,936 per borrower. Different plans permit loans for different expenses. Some of the typical loans are taken to support the purchase of a home, education expenses, medical expenses, financial hardship, home improvement and automobile purchases, to mention a few. As the plan sponsor, you will select whether or not loans will be available as well as under what terms such loans may be taken. RPA is prepared to assist you in finalizing this decision and providing you with whatever information you need to make this decision wisely.
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Hardship Withdrawals?
Most 401k plans offer hardship withdrawals. Typically, however, only about 4% of participants in plans that offer this option actually take such a withdrawal. Again, as the plan sponsor, you will elect whether this option is made available to your plan participants and under what conditions such a withdrawal will be honored. As in your decision as to whether or not your plan will allow for loans, RPA is prepared to assist you in finalizing this decision.
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When Will Your Plan Start?
When would you like to start your new plan? There are several factors that will play into this decision including fiscal or calendar year considerations, availability of company funds for an employer match contribution if you have chosen to do so, how quickly you want to start using this employee benefit to hire and retain good employees and other similar considerations unique to your organization.
Once you have organized your thinking and decisions, should you choose to work with RPA, we can move very quickly to get your plan document prepared, set up your accounts and get your plan implemented. We have a lot of experience in assisting new plan sponsors, just like you, in getting started and getting started right.
Request a Proposal
To receive an RPA proposal for a new 401k plan please proceed to Design a 401k. If you are interested in a new plan other than a 401k plan (i.e. 403b, 457b, Profit Sharing, etc.) please email us your request for help with these plans at info@retirementplanners.com or call 888-689-5530 ext. 223 and one of our professional advisors will be in contact with you right away.
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