Do I Need a Financial Advisor for a 401K?

Do I Need a Financial Advisor for a 401K?

You might be wondering if you need a financial advisor for your 401(k).

Many employers, especially small business owners, are hard at work managing their own business and working closely with their customers or clients. A financial advisor can help you tackle the issues related to your 401(k).

Here are a few things a financial advisor can do:

  1. Provide employees with financial advice
    2. Act as an investment manager
    3. Share fiduciary responsibility
    4. Help with plan design

Do I need a financial advisor?
Sometimes it’s hard for small business owners to understand what an advisor may be able to help them with. Apart from getting financial guidance, the following are some reasons why you need a financial advisor.

1. It’s Good For Your Business

Many employers, particularly small businesses, with limited time and resources, find the administrative and time-consuming 401(k) management unnerving. Financial advisors will help you avoid problems associated with 401(k) and give you peace of mind. This involves not only preventing you from getting penalized and fined, but also maintaining a plan’s qualified tax state.

Given that in the past decade, according to Lex Machina, there have been over 83,000 ERISA-related cases that have been filed under The Employee Retirement Income Security Act (ERISA) in federal courts. You don’t want to end up in court for penalties and fines.

Financial matters can be complex and complicated and often involving. An advisor can help you make sense of all the tasks involved and save you a lot of time, which you can spend making money.

Also, having a financial advisor for your employees and yourself whom you can seek financial and investment advice from, is critical for the success of your business. An advisor will ensure your plan is being utilized to the fullest and also that your employees are getting the most out of the benefits

2. Offers You Fiduciary Services

If you’re to reduce the liability associated with your 401(k) plan, hire a financial advisor to serve as a fiduciary. While not all financial advisors offer fiduciary services, any fiduciary has the legal responsibility to act in the best interest of your 401(k) plan.

3(21) fiduciaries share liability with you as the plan sponsor while a 3(38) fiduciaries take complete obligation for building and monitoring the fund lineup under ERISA.

Having a great financial advisor can help your 401(k) plan flourish. A financial advisor who: takes up fiduciary responsibility, offers administrative assistance, and is committed to making your employees experience with 401(k) worthwhile is worth your time and money.

Contact us today if you’re looking for a financial advisor who can entrust your business’s compliance, liability, and 401(k) administration.

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.





    Plan Trustee: What Do They Do and Why Are They so Critical?

    Plan Trustee: What Do They Do and Why Are They so Critical?

    Most people tend to think that because their employers contribute money that goes into their retirement plan that they play the most significant role. However, in order to ensure your plan’s assets are managed adequately throughout your life, other essential functions need to step up to make sure tasks around your investments are done correctly, and your money is protected. For these reasons, some consider the plan’s trustee to be one of the most essential roles. 

    What is a Plan Trustee

    A trustee is someone responsible for the investments that are held by the plan. Their primary function is to act in the best interest of the plan’s participants, which they carry out by these specific duties: 

    • Recording: They are responsible for maintaining full and accurate records of your disbursements, transactions, and investments.
    • Accept Contributions: They are in charge of accepting the contributions to your plan.
    • Responsible for Distributions: They are in charge of authorizing the timing and the method of payment as well as the amount to the specific participants of the plan.
    • Determine Eligibility: They are in charge of determining the employees eligibility into the plan.
    • Accounting Services: They are responsible for the trust fund’s accounting, which will be used in the plan’s annual filings.
    • Agent: The trustee is often served with notices of any claim against the plan.  

    Why is a Trustee’s Role so Critical

    A trustee plays an extremely vital role in the management of your plan. They not only have the ability to exercise authority over the plan’s assets but also have the added responsibility of being the plan’s administrator. Their role is not only critical but comes with a lot of discretion and responsibility. 

    • The trustee’s main primary fiduciary duty is making sure the plan assets are managed in the best interest of its participants and the named beneficiaries. 
    • The trustee must follow the specific rules in administering the plan and following the standard of care that a reasonable fiduciary would pursue when fulfilling their critical responsibilities. Failing to do so can leave them liable for the damages that result. 

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.


    What is a Trustee? Your Fiduciary Duties. (2015). By Beth Harrington. Benefit Resource Inc. 





    Contribution Limits You Need to Know

    Contribution Limits You Need to Know

    What types of things should you be thinking about?

    Employees Can Add More Money to Their IRA’s and 401k’s
    The IRS will allow employees to contribute up to $19,500 for 401k’s. That’s up from $19,000 in 2019. Employees 50 or older can contribute an additional $6500. That’s up from $6000 in 2019.

    The contribution limit for IRA’s remains the same at $6000. However, employees 50 years and older can contribute up to $7000 starting in 2020.

    Simple IRA and Simple 401k plans will also increase in 2020. Employees can invest up to $13,500 in these plans next year. That’s a $500 increase from 2019. For employees 50 and over the contribution limit stays the same at $3000.

    Profit-Sharing Plans
    Profit-sharing plans like a SEP IRA, and cash balance plan will also see contribution limit increases in 2020. One of the major benefits of these plans is that contributions are made totally by the employer. The maximum contribution to these plans in 2020 is $57,000, up from $56,000 in 2019.

    Health Care Savings Accounts
    For employees that have health care savings accounts the contribution limit will increase slightly in 2020. Employees with individual coverage can save up to $3,550 in 2020. That’s a $50 increase up from $3,500 in 2019. Employees with family plans can save up to $7,100. A $100 increase up from $7,000 in 2019.

    If you want more information on how to be prepared and other tax information, contact us today!

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.





    The Safe Harbor 401(k) Plan: Everything You Need to Know and How to Maximize Contributions

    The Safe Harbor 401(k) Plan: Everything You Need to Know and How to Maximize Contributions

    In the United States, many businesses use the extremely popular Safe Harbor 401(k) plan. This is an employer-sponsored retirement plan that enables small business owners to make sure they are compliant with the Internal Revenue Service.

    They also use the Safe Harbor 401(k) to ensure that each of their employees, including themselves, no matter their salary or their income level, can maximize their company’s 401(k) plan. If an employee’s 401(k) plan includes the Safe Harbor provision, that means the employer will make annual contributions on behalf of their employees, which will be immediately vested.

    To fully understand how an owner can maximize their contributions, there needs to be an understanding of how the Safe Harbor Plan works.

    How the Safe Harbor 401(k) Plan Works

    Under the Safe Harbor 401(k) Plan, there are three options employers can choose from to contribute towards their employee’s retirement. Two of these are considered employer matches, which people refer to as the “Safe Harbor Match.” In addition, there are certain requirements that an employer needs to follow to make sure that their Safe Harbor 401(k) plan is properly set-up.

    Non-Elective Safe Harbor
    Under the Non-Elective Safe Harbor plan, an employer contributes at least 3% of each employee’s compensation. This amount is immediately fully vested, and the employee gets it whether they decide to contribute to the plan or not.

    Basic Safe Harbor Match:
    Under the Basic Safe Harbor Match, the company provides 100% matching of the first 3% of each employee’s contribution, plus an additional 50% of the next 2%. However, under this plan employees are required to contribute to their 401(k) to receive this match.

    Enhanced Safe Harbor Match:
    In this situation, the company matches 100% of the first 4% of each employee’s contribution (may be increased up to 6% without violating the ACP test safe harbor). Under the Enhanced Safe Harbor Match, the employees are also required to defer money to their 401(k) to qualify for this match.

    How to Adopt the Safe Harbor
    For New Plans: The Safe Harbor provisions have to be in place for at least three months if a company is adopting a new 401(k) or 403(b) plan. This means the plan must be in place no later than October 1 to include Safe Harbor provisions for that first plan year.

    For Existing Plans: The Safe Harbor provisions can only be included to an existing 401(k) plan before the beginning of the plan year. Also, they must be in effect for the entire year.

    Timing Requirements
    Under the Safe Harbor Plan, certain timing requirements need to be met by the employer. Under these provisions, the employer is required to provide a Safe Harbor Notice within a reasonable period before each plan year. This requirement is deemed to be satisfied if the notice is provided to each eligible employee at least 30 days and not more than 90 days before the beginning of each plan year. This Notice will usually discuss the following: a description of applicable provisions for the upcoming year, withdrawal conditions, employee contribution conditions, pre-tax contribution conditions, and a disclaimer that the employer is not required to offer the Safe Harbor Plan.

    How to Max Out Contributions

    The purpose of the 401(k) plans, is to make sure that all Americans are ready for retirement, not to create tax breaks that are solely for business owners and top executives. That’s why the government created the Safe Harbor 401(k) Plan. Not only to help companies avoid the IRS non-discrimination rules testing mandates, which can be a large burden on small businesses, but also to make sure the company ensures a balanced playing field for all its employees, providing access and equal benefits to all.

    Good News for Business Owners:
    The Safe Harbor Match is tax-deductible for a company that takes part in the plan. A business owner has the ability to contribute the maximum annual deferral amount to their 401(k) plan ($19,500 for 2020 in addition to any catch-up contributions), they can also receive additional savings from the company’s matching contributions (as the company is also an “employee”), and further, the company can also deduct all their matching contributions at tax time (up to the IRS limit of $57,000).

    Good News for Employees:
    The Safe Harbor 401(k) Plan allows all employees to contribute the maximum allowable amounts to their 401(k), including the employer, which is essentially a tax-free bonus for them. This is a tremendous incentive for employees to save for their future retirement.

    Is the Safe Harbor 401(k) Plan Right For You?

    Overall, a well-designed 401(k) plan can help a business not only recruit, but retain its employees. However, navigating through all the pros and cons of any retirement package, including the Safe Harbor 401(k) plan, can be difficult for any company to decide if it’s the right fit. If you would like to decide if the Safe Harbor option is right for you or to see how the Safe Harbor plan can benefit your company, contact us today!

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.

    1. What Is a Safe Harbor 401(k) and Why Is It Important in 2019? (2019) By Brian O’Connell. The Street
    2. Safe Harbor 401(k) Plans: Everything You Need to Know. (2018). By Vijay Mirpuri. Human Interest Blog




    Retirement 101: Vesting

    Retirement 101: Vesting

    Retirement plans are not a “one size fits all,” and there are a variety of programs for you to choose from. However, it is imperative to go over your specific employer’s retirement options and understand their particular requirements and how they match up with your specific goals. One of the essential criteria to make sure you fully understand is the retirement vesting schedule.

    Retirement Vesting- What is it?

    According to the IRS, “vesting” in retirement planning equals ownership, which means that at the end of each year, an employee will own (or vest) a certain percentage of their account that is in their retirement plan. However, how much money you vest depends on your employer and the specific retirement policy, as each may have their own vesting schedules.

    When is your Money Vested?

    When an employee’s account is 100% vested, this means that the employee owns 100% of their account, and the employer cannot take any of it back. However, if any amounts are not vested, these amounts can be forfeited. This forfeiture usually occurs when an employee leaves their employment (through quitting or getting fired) or when the employee does not work 500 hours during the year for five years.

    Employee Contributions: The employee’s contributions to their plan are always 100% owned by them.
    Employer Contributions: The employer vesting requirements depend on the type of plan that the employer offers. For example:

    1. 401(k)’s and Pensions: These two can have their own vesting schedules.
    2. Safe Harbor 401(k): Under the “safe harbor” provision, you will be 100% vested in the employer’s contributions.
    3.  Simple IRA’s and other IRA-based plans: All contributions to these plans are always 100% vested.

    100% Vesting Requirement: Under federal law, when employees reach average retirement age, they must be 100% vested, under their plan. Additionally, they need to be 100% vested when their policy is terminated to receive all the benefits.

    Types of Vesting Schedules

    Depending on your employer, you may be facing two common types of vesting schedules- Graded Vesting and Cliff Vesting.

    Graded Vesting: With this type of vesting schedule, you will keep a portion of your employers contribution, depending on how long you work for the employer. However, after six years, all the contributions from your employer will be 100% vested.
    Cliff Vesting: Under this schedule, typically, if you decide to leave the company before you have worked there for three years, then you cannot take any of your employer’s contributions. If you worked there for more than three years, then you would be 100% vested and could receive all your employer’s contributions.

    It is essential to understand your retirement packages. Knowing the requirements of each plan and the specific vesting schedules may mean the difference between making or losing thousands of dollars. It is also important to note that just because these amounts are vested, this does not mean you can cash them out immediately. By taking money out of your retirement plans too early, you can be faced with some stiff penalties. If you would like more information on retirement vesting or need help with your specific retirement plan, contact us today.

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.


    Retirement Topics – Vesting. (2019). IRS

    What It Means to Be Fully Vested in a Retirement Plan. (2019). By Amanda Dixon. SmartAsset.

    Learn About 401(k) Vesting and What it Means for You. (2019). By Dana Anspach. The Balance.




    A Retirement Plan for Any Company

    A Retirement Plan for Any Company

    If you are considering a retirement plan for your business, a payroll deduction IRA is the simplest option. No plan documents are needed. As an employer, you have no filing requirements, and you do not make contributions. What could be simpler than that?

    A payroll deduction IRA is available to any size company. As an employer, you agree to deduct an employee-authorized amount from the employee’s wages. That’s it. The employee establishes a traditional or Roth IRA at a financial institution. The employee authorizes the employer to deduct a set amount from each paycheck and deposit it into the employee’s IRA.

    How does a Payroll Deduction IRA work?

    A business offers its employees a chance to participate in a payroll deduction IRA. The employee sets up an IRA at a location financial institution and authorizes the business to deduct $200 from her monthly paycheck. At the end of the year, her contribution to the IRA is $2,400.

    At year-end, the business completes a W-2 with the employee’s full salary, plus all deductions. It is the employee’s responsibility to add her $2,400 contribution to any other contributions she made during the year to determine if she has met the maximum contribution for the year. The maximum contribution may change from year to year. For 2019 and 2020, the maximum amount is $6,000, unless the contributor is over 50. Then, the maximum increases to $7,000.00.

    What are the Pros and Cons of a Payroll Deduction IRA?

    The payroll deduction IRA is easy to set up and operate. As an employer, you have little administrative costs or filing requirements. It is a simple way to encourage your employees to plan for retirement.

    Not all employees will view the opportunity as an employer-provided benefit. The business cannot take a deduction and not all employees may be able to deduct their contributions. The IRA cannot be used as collateral, and a penalty applies for early withdrawal. If an employee withdraws any amount before age 59 and 6 months, he will pay income tax on the amount plus a 10% penalty.

    A payroll deduction IRA is an excellent retirement tool for employees. It requires minimal company involvement or cost, but it provides a painless way for employees to start saving for retirement.

    Have more questions about retirement administration? Schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with the retirement plan evaluator.