401(k) Plans for Small Businesses

401(K) Plans for Small Businesses

Business 401(k) plan services to help businesses save money, maximize investments and minimize liabilities

401K Retirement Small Business

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401(K) Business Plan Testimonials

We switched our 401(k) plan to Langan Financial and the transition was fantastic.

Alex reviewed my entire portfolio and gave some insightful recommendations and guidance for future planning.

Ledge Inc.

Langan Financial Group helped us convert our Simple IRA to a 401(K).

They helped us understand what it means to switch when it would be best to do so, and what the process would look like. In addition, they consistently set reviews with us and our employees.

We always know what is going on with our plan. It's fantastic to work with a financial team that you communicate with regularly and can trust.

We highly recommend them to other businesses!

Custer Faust and Associates

4 Types of Small Business Retirement Plans

There are four main types of small business 401(k) plans:

1. Traditional 401(k) Plans

It is the standard retirement plan that allows employees to contribute a portion of their paycheck to their retirement accounts.

2. Safe Harbor 401(k) Plans 

It provides all eligible participants with an immediate vested contribution.

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3. Solo 401(k) Plans

These are for small business owners who do not have any employees. This plan does have several tax advantages for owners looking to save for retirement and minimize taxes.

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4. 401(k) Profit Sharing Plans

It can set aside a portion of its profits to contribute to each employee's retirement account.

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The main differences amongst these 401(k) plans include:

  • The vesting period for contributions
  • Contribution limits
  • Regulations
  • Eligibility

In addition to these 401(k) plans, small business owners also have SIMPLE IRA plans and SEP IRA plans available for retirement.

5 Most Important 401(k) Plan Features

How to Set Up a 401k Plan

1. Investment Policy Statement

An Investment Policy Statement, also known as an IPS, outlines the guidelines required to manage the fund portfolio within a 401(k). These guidelines will describe:

  • Risk tolerance
  • Liquidity requirements
  • General investment goals
  • Asset allocation requirements
  • Appropriate management strategies

2. Proper 401(k) Fiduciary Coverage

Three types of 401(k) fiduciary protection:

3(16) Fiduciary

A 3(16) fiduciary does not fully remove liability from the plan sponsor. They focus on the plan administration and are responsible for:

  • Distributing plan descriptions
  • Ensuring participant changes or requests are processed correctly
  • Fulfilling reporting requirements

3(21) Fiduciary

A 3(21) fiduciary provides more protection than a 3(16) fiduciary, however, there is still some liability remaining on the plan sponsor. In addition to a 3(16) responsibilities, a 3(21) fiduciary also provides:

  • Recommendations on investment choices for the plan's assets
  • Oversee the plan complies with the investment portion of ERISA requirements

3(38) Fiduciary

A 3(38) fiduciary provides the highest level of protection for a retirement plan. Only banks, insurance companies, and registered investment advisors can act in this capacity for 401(k) plans.

This is the level, Langan Financial Group can offer for its recipients. A 3(38) fiduciary's responsibilities also include:

  • Investment decision
  • Performance reports
  • Overall plan transparency
3. Engaged Employee Participants

Engaging employees within a retirement plan is vital to the plan's success.

Employees should understand the plan's:

  • Eligibility requirements
  • Vesting requirements
  • Contribution requirements

In addition, the financial advisor should be meeting with employees to answer questions, help with financial planning, and overall retirement needs to help them receive the most value possible from the plan.

4. Actively Managed Investment Line

Financial advisors should regularly be monitoring the funds within the investment.

They should have alerts set up that notify them when funds are starting to perform poorly, allowing the advisors to suggest alternatives and avoid potential losses.

5. Affordable 401(k) Fees

401(k) plans are notorious for being difficult to understand what the plan's actual cost is. Request your advisor to put in writing exactly what you are paying.

Fees can typically be found in:

  • Plan documents such as the Summary Plan Description
  • 5500 form
  • Quarterly statements
  • 404(a)(5) fee disclosure
  • Recordkeeper fee requests

What Should My 401(k) Plan Fees Be

The average 401(K) expense ratio is 1% with an average all-in fee of 2.22% of their assets. The four main fees of a 401(k) plan include:

  1. Internal Investment Expenses
  2. Plan Administration and recordkeeping Fees
  3. Financial advisor fees
  4. Third Party Administrator Fees

401(k) Fee Structure Example

Like most financial advisors, we set up our 401(k) fees to be reduced as the plan's contributions grow.

As the 401(k) assets grow and hit certain benchmarks, fees should decrease. However, many financial advisors decrease it at a tiered structure rather than a flat rate like we do.

We charge a flat rate as the 401(k) plan's assets hit certain benchmarks. Meaning if we charge 15 bps (100 bps is 1% so 15 bps is 15% of 1% or 0.15%) for the plan at X value, the whole plan will be charged 15 bps.

Rather, some organizations may tier their pricing so it may look like:

  • 85 bps for the first $250,000
  • 75 bps for the next $250,000
  • 50 bps for the next $250,000

And so on. So while your financial advisor may say you are being charged 50 bps for $750,000 plan, that is partially true.

But in reality, it averages to 70 bps and you are paying $5,250 instead of $3,750 for your 401(k) plan's management.

How to Evaluate Your 401(k) Plan

These 401(k) management services focus on helping your employees better prepare for retirement. In addition, we will benchmark business 401(k) plans for free to ensure it is performing to the best of its ability.

Our 401(k) management will compare your plan against other options available. These retirement plan reviews will:

  1. Evaluate portfolio performance
  2. Review plan fees
  3. Review participant fees
  4. Review vendor services
  5. Review ERISA compliance
Pa Small Business Owners
Breakdown

How to Choose a 401(k) Advisor

When choosing a 401(k) advisor near you, you want an experienced team that specializes in 401(k) plans. This individual should be able to maximize the potential of your 401(k) features.

It is vital you have an advisor who will:

  • Create or update your investment policy statement
  • Manage your fiduciary needs
  • Engage your employees
  • Actively manage the 401(k)'s performance and fund lineup
  • Provide transparent and affordable fees

When choosing a 401(k) plan advisor, ask key questions about their experience and management perspective to understand if they are the right fit for you.

Such questions can include:

  • What type of fiduciary coverage do you provide?
  • What experience do you have being a fiduciary?
  • How do you design an investment policy statement?
  • How do you manage an investment policy statement
  • How do you help increase employee engagement

  • Are you willing to put your fees in writing?

How to Switch a 401(k) Plan Advisors

If you are not happy with your current retirement plan advisors or current 401(k) plan, the good news is, you are able to switch!

In fact, it is not even that difficult to do. In order to change an advisor, you need to sign a broker-dealer form, putting a new advisor on the plan.

Once the new advisor is on the plan, he or she can change the plan to meet your needs.

Why is a 401(k) Advisor Important?

A 401(k) advisor is an important part of your group benefits team. The four biggest pieces of value they can bring include:

  • Minimizing potential liability issues from government regulations through proper fiduciary protection
  • Help monitor investments and performance to maximize returns
  • Engage employees to help with retirement planning and education
  • Reduce administrative burdens

A well-experienced 401(k) specialist can help a business save money and time while providing the protection they need to stay in government compliance.

401(k) Plan Services

Langan Financial Group's employer retirement plan advisors work with 401(k) plans every day.  Whether you are looking to open up a new plan or update your current retirement plan advisor, we'll work with you to help you achieve your financial goals.

Langan Financial Group takes a collaborative and engaging approach with employers to maximize the 401(k) plan values to organizations and employees. We provide educational services such as:

  • On-site seminars
  • One-on-one meetings
  • Educational material
  • Regularly scheduled plan reviews
  • Regularly scheduled plan benchmarks
  • Investment policy statement reviews

Setting Up a Free 401(k) Plan Consultation

If you are interested in having your 401(k) plan benchmarked or talking with a retirement plan advisor about your plan's structure, we're here to listen!
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Disclosure: Check the background of your financial professional on FINRA's BrokerCheck. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.  The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.  Cambridge and Langan Financial Group, LLC. are not affiliated. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor.  Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of: AL, AZ, CO, DE, FL, GA, IA, KY, MD, NJ, NM, NY, NC, OH, PA, TX, VA, WI   Cambridge and Langan Financial Group does not offer legal advice. Estate planning services are in regards to your overall financial plan. Always be sure to speak to a legal professional in regards to specific legal matters. Fixed insurance services offered through Langan Financial Group.

 

Testimonial/Endorsement Disclosure: The testimonials may not be representative of the experience of other customers.  The testimonials are no guarantee of future performance or success.  All of the testimonials/endorsements are clients with the exception of Steven Martinez of York SPCA.  There was no cash nor non-cash compensation for any of the testimonials provided.

© Langan Financial Group 

Harrisburg, PA Office

Address: 1863 Center St, Camp Hill, Pa 17011
Phone: 717-288-1880

York, PA Office

Address: 3405 Board Rd, Suite 200, York, Pa 17406
Phone: 717-773-4085