Category: 401(k) Resources

How to use a Paycheck Calculator to Save For Retirement  

Siân Killingsworth / 17 Feb 2023 / 401(k) Resources, Personal Finance

It’s not always easy to figure out how much money you need to save for retirement. When your employer withholds money from your paychecks for federal and state taxes plus Social Security and Medicare, it can be difficult to know how much you can afford to put away for your future. And you may be hesitant to take money out of your paycheck that you may need for normal expenses like your mortgage or rent, food, childcare, etc.

That’s why we recommend using a paycheck calculator. It takes the guesswork out of figuring out how much you should be saving each month, and it helps put your exact income into context.

What is a paycheck calculator?

A paycheck calculator is an online, easy-to-use tool that helps you figure out how much money will be in your paycheck after various deductions, including retirement contributions. The tool will take several pieces of personal information into account:

• Your current salary
• The frequency at which you are paid (weekly, bi-monthly, etc.)
• Tax filing status (married, single, etc.)
• Other income sources such as earned interest
• Federal and state taxes
• Other deductions, such as health or dental insurance expense
• Current retirement contribution
• Proposed new retirement contribution

Why use a paycheck calculator?

A paycheck calculator is a tool that helps you understand your finances better so you can make informed decisions about your financial future. It identifies how much money will be in your paycheck after taxes and all other deductions.

It gives an accurate picture of what’s happening with your income and spending, which helps prevent nasty surprises when it comes time for an emergency or some other major expense. And finally, it can help you stay on top of planning for your retirement.

How much money do you need to save for retirement?

This totally depends on your retirement goals, your income, your savings, and the lifestyle you wish to have in retirement. Most employers do not offer pensions, and Social Security is dwindling, so your best course of action is to maximize your own retirement savings while you can.

Your annual 401(k) contribution is subject to maximum limits established by the IRS. For 2023, the maximum contribution for this type of plan is $22,500 per year for individuals under 50 and $30,000 for individuals 50 or older. Employer contributions do not count toward the IRS annual contribution limit, which is good news for those whose employers make these contributions.

Try Ubiquity’s Paycheck Calculator to see how increasing your 401(k) contribution will affect your paycheck amount – and your financial future. It will save you time and stress in the long run by eliminating guesswork.

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

How Much Do Companies Typically Match on 401(k) in 2023?

Siân Killingsworth / 28 Jan 2023 / 401(k) Resources, Personal Finance

Employer matching contributions are a common feature of many company 401(k) plans, with 98% of employers adding partial or full matching bonuses. The typical American company is matching 6% of employee contributions in 2023.

Employers are also increasingly recognizing the 401(k) employer match as a powerful incentive to encourage loyalty to the company; in 2022, 59% have vesting schedules ranging from one to six years before employees are entitled to walk away with the full amount of employer-matched funds.

If you own a small business or work for one, keeping tabs on what other companies are matching on their 401(k)s can help you gauge how competitive your own plan is and better adjust your contributions for the year.

Partial 401(k) Matches in 2023

In a partial match plan, the employer matches a smaller percentage of what employees contribute. A common partial match is 50 cents for every dollar of employee contribution, up to 6% of the employee’s salary. Even if employees opt to put in a greater amount – say 8% – the employer is still only responsible for putting in up to 6% in that case. So, for instance, a person earning $100,000 a year might contribute $6,000 and receive another $3,000 in partially matched funds.

Full 401(k) Matches in 2023

Full 401(k) matching means employers put in dollar-for-dollar what employees contribute, up to a set default rate or the IRS maximum. While 3% was the norm at one time, 65% of plans are now using a default rate higher than 3% in order to significantly boost savings for participants over time. In 2023, the most common default rate is now 6% of pay, according to the Plan Council Sponsor of America.

2023 Safe Harbor Matching Formulas

Safe Harbors are a popular type of 401(k) plan that allows businesses to bypass many of the annual IRS nondiscrimination testing requirements when they agree to a standard matching formula. Any employer contributions made in a Safe Harbor plan must be fully vested for all employees.

The most common Safe Harbor 401(k) matching formulas are:

• 100% match on the first 3% of employee contributions, plus 50% match on the next 3-5% (Basic match)
• 100% match on the first 4-6% of employee contributions (Enhanced match)
• At least 3% of employee pay, regardless of employee deferrals (Nonelective contribution)

401(k) Contribution Limits in 2023

Employees can put up to 100% of their compensation into a 401(k), up to the maximum limit. This year:

• Employees can contribute up to $22,500 (up $2,000 from 2022)
• Employees age 50 and older can add an additional $7,500 on top of this amount (up $1,000 from 2022)
• Employers can add $43,500 to their own 401(k), bringing the total balance up to $66,000 in 2022 (up $5,000 from 2021)

SIMPLE 401(k) Limits in 2023

Employers offering a SIMPLE 401(k) allow employees to save up to $15,000 in 2023, which is up by $500 from 2022. Those age 50 and older may contribute another $5,000 for a total of $19,000.

Employers can contribute dollar-for-dollar up to 3% of a worker’s pay or contribute a flat 2% of compensation regardless of the employee’s own contributions.

Employer 401(k) contributions are subject to an employee compensation cap of $330,000 for 2023.

Engage Employees and Encourage Them to Save With a 401(k) Match This Year

The employer match is an excellent incentive tool to encourage employees to participate in your small business 401(k) plan. Matching not only helps employees create better financial security, but allows you and higher-paid executives the opportunity to max out your retirement savings as well.

Ubiquity is a leading provider of 401(k) plans geared specifically to small businesses. We are happy to help you set up an easy and affordable small business retirement plan with matching and educate your workforce so they understand what a great and valuable benefit you’re offering. Contact us to learn more.

How to Save More in 2023 With a 401(k)

Siân Killingsworth / 18 Jan 2023 / 401(k) Resources, Business, Small Business 401k

Small business employers and employees with a 401(k) plan can save more in 2023 in more ways than one:

Increased Savings Opportunity: The IRS has increased annual contribution limits to help you can more. You may want to consider adjusting your paycheck deduction in accordance with the increased limit and to an amount that works for you.

Smart Savings Strategy: Ubiquity plans have defaults to include bonus pay in employee contributions because the bonus is included in compensation on W2 forms. Employers may make alternate arrangements in writing with employees who choose other options. Employees can also change their deduction online for a specific payroll.

Lower Your Taxes: Any money you contribute to a 401(k) has taxes deferred until withdrawal in retirement, so your taxable income is reduced by the amount you contribute to your 401(k)!

A small business 401(k) is the ideal way to generate considerable wealth for retirement using investment returns and compounding interest. The wise use of pre-tax dollars can ease your 2023 income tax burden as well.

How to save more for retirement with a 401(k) in 2023

The IRS 401(k) savings limit increased $2,000 in 2023 to $22,500. The catch-up contribution for those age 50 and over will increase by $1,000 in 2023, letting those who qualify add another $7,500 in savings. It’s important to note that 401(k) plan contributions can be made with pre-tax dollars, so the more you contribute, the lower your annual taxable income. Even $1,000 contributed can be enough to lower your tax bracket and the percentage of your income paid to the IRS.

Employers have the option to add a discretionary contribution of up to $43,500 to an employee’s account. Also, if you are a small business owner with a Solo 401(k), you’re able to contribute to your plan as both employee and employer – to a maximum amount of $66,000 in 2023. Your spouse may join the plan, potentially bringing your household maximum to $132,000. The $7,500 catch up contribution (for individuals age 50 or older) is allowed in addition to these maximum limits.

IRA limits are also increasing for 2023. The new maximum for savers age 49 and younger is $6,500. Those age 50 and older can put away an additional $1,000. Using a 401(k) instead of an IRA can help you save more and combat any inflation.

How much should I set aside to max out my 401(k) in 2023?

Investors under age 50 who are on a biweekly pay schedule will need to save approximately $845 per paycheck to reach the $22,500 retirement plan contribution limit in 2023.

Anyone 50 or older looking to capitalize on the catch-up bonus will need to save approximately $1,153 per paycheck.

What strategies do people use to maximize retirement savings?

There are numerous strategies that may help you save more for retirement in 2023, such as:

• Consider setting up an automatic deduction from your paycheck directly into your retirement account, so the savings happen without you even having to think about it.
• Set up an automatic transfer of profit shares and bonuses into your 401(k) through paycheck deduction
• Examine your monthly spending carefully and create a budget that helps you pay down any credit card debt so you can escape those pesky interest rates
• Cancel unnecessary or unused membership subscriptions
• Use shopping apps to take advantage of sales and promotions to save money on costs that have been hit by inflation (hello, $8 carton of eggs)

How can I change my 401(k) deferral elections in 2023?

Employees can log in to their Ubiquity account at any time modify their deferral election. Sponsors will receive notification or check their employer dashboard to review the respective updates so they can relay those changes to the payroll provider.

As a provider and administrator, Ubiquity offers 401(k) plans geared toward small businesses. Contact us to learn more about maximizing your 401(k) savings this year.

Start the New Year With a 401(k)

Siân Killingsworth / 15 Dec 2022 / 401(k) Resources

Start the New Year off right by launching a retirement plan for your small business to help you and your employees meet savings goals for your golden years. A 401(k) can help you attract and retain employees in the coming year and starting a plan on January 1 has numerous benefits.

Here’s why ringing in 2023 with a 401(k) makes so much sense:

401(k) plan contribution limits are going up

Every year, 401(k) contribution limits tend to rise with inflation. After a year of record-setting inflation, we’re poised for a record-setting 401(k) limit increase as well. For 2023, individuals can set aside $2,000 more in personal retirement savings (up to $22,500); this is up from $20,500 in 2022.

As a small business owner in 2023, you can contribute to your own account as both employee ($22,500) and employer ($43,500) to save a total of $66,000.

If you’re over 50, you can submit a $7,500 catch-up contribution—up $1,000 since 2022—on top of the $66,000 maximum, bringing the grand total to $73,500.

With a traditional account, that means you can deduct up to $73,500 off your taxable income for the year. If you’re making contributions on behalf of your employees, you can deduct those amounts off your business tax liability for the year as well.

Another option—if you think you’ll be in a higher tax bracket after you retire—is to pay your taxes up front with a Roth account and pull tax-free money out in retirement.

You have more time than you think

December 31st used to be the deadline for businesses to adopt a new 401(k) plan, but the SECURE Act has brought about positive changes and generous extensions. Now you have until March 15th, 2023 to adopt a traditional 401(k) plan for 2022 if you’re taxed as a Partnership or S-Corp or until April 15th, 2023 if you’re taxed as a Sole Proprietorship or C-Corp. If you file an extension, you can have until September or even October to adopt a plan and invest for the previous year. The caveat to this is, when opening a 401(k) plan for 2022, while in 2023, you are only allowed to contribute discretionary Profit Sharing however this could get you up to $61,000 in employer contributions that can be deducted on your 2022 taxes.

You also have until December 31st, 2023, to convert a traditional 401(k) plan into a 4% nonelective Safe Harbor plan dating back to the 2022 plan year. This comes in handy if your plan fails nondiscrimination testing for 2022 and you want to avoid corrective refunds.

Additionally, if you start a plan in 2023 without Safe Harbor and decide that you would like to add it in the middle of the 2023 plan year, you can! You have up until December 1st, 2023, to add a 3% nonelective Safe Harbor for the full 2023 plan year allowing you to maximize your employee contributions without worrying about certain non-discrimination tests.

Kicking off a new 401(k) plan in January solves that problem

There is one silver lining to a late setup. While your employees may be unable to make all these salary deferrals for 2022, you can still have more time to decide whether to make a year-end profit-sharing contribution without worrying how you’ll pass IRS nondiscrimination testing.

That said, there is some administrative work to tackle, so it’s best to start sooner rather than later.

To set up a small business 401(k) in 2023, you’ll need to decide whether to assume full responsibility for the 401(k) in-house or work with an experienced plan provider who can help set up and maintain the plan. Most small businesses choose the latter.

You’ll need to decide on matters like:

• 401(k) plan types
• Eligibility requirements
• Vesting schedules
• Business contributions
• Loan administration
• Nondiscrimination testing
• Investment decisions

On average, it takes 30-45 days to get a new 401(k) rolling, so there’s no time like the present to get started. Amid the Great Resignation, offering a 401(k) in 2023 is more important than ever; 84% of employers believe1 offering financial wellness tools like 401(k)s increases employee retention. Given that just 58% of small businesses offer 401(k) benefits2, it’s still a differentiating factor in attracting talent.

Interested in 401(k)s for your small business? Contact Ubiquity to learn more.

1 Bank of America, 12th Annual Workplace Benefits Report, “Navigating a New Era of Financial Wellness,” 2022.

2. https://www.prnewswire.com/news-releases/survey-small-business-owners-still-resistant-to-starting-a-401k-plan-only-one-in-four-currently-offer-as-an-employee-benefit-301544021.html

6 401(k) Secrets – What You Need to Know

Siân Killingsworth / 7 Dec 2022 / 401(k) Resources

What’s the secret to successful 401(k) investing? For many people, a 401(k) retirement account is their largest asset, perhaps worth more than their home. Successful 401(k) investment can mean the difference between a comfortable retirement or a struggle once you stop working.

The types of 401(k) plans for small businesses and sole proprietors don’t differ much from the plans for larger companies in the way they work. The latter is just more complex. Individual, solo, and self-employed 401(k) plans for small businesses and sole proprietors are very similar. In a self-directed 401(k) plan, employees choose where to invest their money rather than rely on the employer to decide where to invest these funds.

Want to know how to best manage your small business retirement plan? Here are six 401(k) secrets you need to know:

1. Take Advantage of 401(k) Matching 

One of the major advantages of 401(k)s is that many companies offer employees a match. This is free money and an ideal way to save. Typically, companies match up to 6 percent of employee contributions. Some employers use a very generous matching formula while others choose not to match employee contributions at all. Note that not all contributions to your employees’ retirement plan are due to matching. Specific terms of a 401(k) retirement plan can vary. The plan document will contain details on how your company’s 401(k) works.

2. Contribute Up to the Limit 

Contribute as much as you can to your 401(k) each year. For 2023, those younger than 50 can contribute up to $22,500. Those age 50 or older can put in an additional $7,500 in catch-up contributions. Maxing out your contributions can play a huge role in the quality of your retirement. Review all the 2023 limits here.

3. Diversify, Diversify, Diversify 

It’s impossible to overstate the importance of diversification when it comes to your 401(k). Spreading risk is the basis of successful investing, and that certainly includes your 401(k). A mix of stock and bond funds, rebalanced regularly to reflect your risk tolerance as you get closer to retirement, is the easiest way to diversify.

The federal government takes investment fiduciary responsibilities very seriously. Businesses are subject to Department of Labor (DOL) audits and investigations to verify that their retirement plans offer responsible investment options with reasonable fees. If they don’t, the business can face stiff penalties, as well as litigation from any employees who are paying excessive fees or have too few investment options that adequately match their risk-tolerance profile.

For all these reasons, more businesses are choosing retirement plans with 3(38) investment fiduciary services, such as a Ubiquity Censibly Yours plan in order to access a greater variety of investment options.

4. Vesting Incentivizes Employees to Stay 

It’s in the best interest of employees to remain employed for at least as long as it takes to become fully vested in their 401(k). Otherwise, they lose all or most of the match from their employer. Employers have the ability to choose the rate of vesting, and many select a one-, two-, or up to six-year employment requirement for vesting eligibility.

5. Don’t Touch Your 401(k) Until Retirement 

Yes, emergencies happen. When circumstances are dire, you may have no choice but to tap your 401(k) to pay expenses. However, doing so is always a last resort as it could significantly affect your retirement.

While it’s possible to take out 401(k) loans, you’ll incur fees and penalties if you fail to repay. On the other hand, if you take a hardship distribution in the event of a financial emergency, it is not a loan, so you cannot put the money back into your 401(k) later.

If you cash in your 401(k) prior to retiring, expect to pay taxes. The money is not tax-deferred. If you take withdrawals prior to reaching age 59.5, you may get hit with a 10% early withdrawal penalty as well as paying income taxes.

Some people plan to keep working well into their retirement years to make up for their lack of retirement planning and saving. However, working longer may not be an option. Many current retirees say they had to retire earlier than they planned because of health problems or unforeseen changes within the company they were working for. Taking steps today to prepare for what you want to happen in the future will leave you better prepared to handle surprises along the way.

6. Think Long-Term 

A 401(k) isn’t a short-term investment and shouldn’t be treated that way. Develop a long-term investment strategy with the help of a financial advisor and review your portfolio annually, if not quarterly. Chasing the hot stock or sector of the moment isn’t usually an effective strategy. Attempting to time the market is a great way to lose money, while staying the course and sticking to your goals is a smart way to avoid emotion-driven, impulsive decisions that may derail your retirement.

Customized 401(k) plans for small businesses do more than help you and your employees save for retirement. These plans help you attract and keep employees. For more information and to schedule a free consultation, contact Ubiquity.

Ubiquity is not a registered investment advisor, and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

2023 Retirement Contribution Limits

Siân Killingsworth / 17 Nov 2022 / 401(k) Resources, Small Business 401k

Wonder how much you can save for your retirement in 2023?

Download the Ubiquity Retirement + Savings 2023 Contribution Guide

The IRS has announced the 2023 contribution limits for retirement and health savings accounts. This includes contribution limits for 401(k) and 403(b) plans, income limits for IRA contribution deductibility, and the salary threshold to classify key and highly compensated employees. 

Good news! Contribution limits for individual retirement accounts (IRAs) will increase from 2022 to 2023, and even more so for retirement savers who participate in a workplace employment plan like a 401(k). 

Let’s take a look at the updated limits below: 

2023 401(k) and 403(b) Contribution Limits  

The IRS has also set limits for the total amount that may be contributed to your retirement savings 401(k) account from all sources combined (IRS section 415 limit). This includes any employer matching or profit-sharing contributions, and any employee after-tax contributions. For 2023, this limit has increased from $61,000 to a new maximum of $66,000. 

Every plan is different, so it’s important to refer to your Plan Document for any compensation or other applicable limits. 

2023 Roth and Traditional IRA Contribution Limits

2023 Health Savings Accounts (HSA) Contribution Limits 

**Catch-up contributions can be made at any time during the year in which the HSA participant turns 55.

If you need more detailed guidance, see IRS Notice 2021-61.

How to Pick a Small Business 401(k) Provider

Siân Killingsworth / 9 Nov 2022 / 401(k) Resources

The retirement plan market has become more crowded in recent years, underscoring the difficulty of finding the right 401(k) provider for your small business. Exercise due diligence before you choose a small business 401k provider, taking into consideration:

• Employer involvement
• Plan features and benefits
• Fees and costs

Services and prices can vary widely, so it’s worth the time and effort to make a well-researched decision.

Employer Involvement

Much behind-the-scenes work goes into providing a stellar front-end experience for your employees. As the employer sponsoring the plan, you’ll need to answer a few questions about how you’d like the plan designed. For instance, you’ll need to decide whether you’d like to offer traditional (before-tax) and/or Roth (after-tax) contributions.

Ideally, you’ll find a 401(k) provider that handles day-to-day administration, IRS and DOL compliance, and investment management for one low fee. Your 401(k) provider will:

• Write up the plan documents
• Prepare participant disclosures and account statements
• Process all loans and distributions
• Ensure that the plan follows all federal rules
• Assist in audits and conduct discrimination testing
• Aid in employee enrollment
• Answer employee questions
• Prepare Form 5500 for annual filing with the DOL

Some third-party administrators act as investment advisors and managers, while others focus on administration and give you the freedom to work with a financial advisor of your choice. If you need a recommendation, a TPA can often point you in the right direction. Sometimes you can save money by unbundling these services.

Lastly, it’s worth considering that the best 401(k) provider offers fiduciary support — meaning they take on the personal, legal liability to make sound investment choices on behalf of employees. You may find 401(k) custodians that hold plan assets but do not assume any responsibility for helping you make management decisions.

401k Plan Features and Benefits

The best 401(k) providers offer flexibility. For starters, find an administrator that handles both traditional and Roth retirement plans for small businesses. Employees with traditional accounts have the opportunity to reduce their taxable income annually and grow returns tax-free until they withdraw the money years later in retirement — when their tax bracket is likely lower. On the other hand, young employees who plan to climb the ladder and get married in the future may prefer to pay their taxes now, while they’re in a lower tax bracket, and enjoy a tax-free retirement.

Beyond the traditional vs. Roth account decision, small business 401(k) providers may also offer Safe Harbor plan designs that can help you automatically pass nondiscrimination testing each year. While you will need to contribute to your employees’ accounts, employer matching and profit-sharing can also reduce your tax liabilities while making your benefits more enticing to top talent.

Plan providers should allow access to a broad selection of investment options, including a mix of large and small stocks, different types of bonds, emerging markets, and some international exposure. Some administrators may also offer creative solutions for boosting plan enrollment, such as employee auto-enrollment — which, as a bonus, also provides you with an added tax credit.

Fees and Costs

The best 401(k) providers offer their services with low-cost, transparent fees. True small business 401(k) providers charge a flat fee for administration services. Some providers may charge a percentage of the Assets Under Management — AUM fees — which increase as the popularity of your 401(k) plan increases. While a 1.68% AUM fee may seem trivial, it can become quite expensive over time. Other providers may charge per-person fees under the guise that it costs more to manage more accounts — yet, that’s just another way that you can be penalized for growing enrollment. Worse yet, many companies charge both AUM and per-person fees to nickel and dime you, so it’s worth looking around to find a provider who truly has your best interests at heart.

Investment fees must also be considered. Are you charged transaction fees? While the average transaction fee is around 1.44%, some are lower than 1% — which can save a considerable sum in the long run.

Looking at your total expense ratio can also help you figure out whether you’re overpaying on your investments. If your employees are charged a 1% expense ratio, that means they’re paying $1,000 for every $100,000 invested. With many of the larger and well-known providers, a small business can expect to pay a higher total expense ratio than a larger company; for instance, a business with 2,000 employees might pay 0.7%, while a small business with 50 employees might pay 1.68%. You can find a small business expense ratio below 0.7% with a 401(k) provider specializing in small businesses.

While built-in employee counseling services can be great, it’s worth taking pause before accepting higher fees in exchange for this service. Do you really need it? Ideally, your 401(k) provider will offer these services a-la-carte so employees who want this extra level of financial guidance can access it, but you’re not compelled to pay for a service no one ends up using. Most small business 401(k) providers offer employee portals with DIY tools and articles to help employees make informed financial decisions — and these resources are almost always free.

The Bottom Line

Many small business owners feel like they’re flying blind in selecting a 401(k) plan for their employees. The right small business financial advisors can change that. Making the right choice can result in employee engagement, low-cost benefits, and effortless administration. Create a spreadsheet to help compare apples to apples — measuring all the factors we’ve mentioned above — and get the right 401(k) your growing small business deserves. Contact Ubiquity to learn about the different types of 401k plans available to you.

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

How to Start a 401(k) for Your Small Business

Siân Killingsworth / 27 Oct 2022 / 401(k) Plan Information, 401(k) Resources, Small Business 401k

Along with competitive compensation and robust healthcare benefits, offering a retirement savings package such as a 401(k) is a crucial way for large and small businesses alike to attract and retain top talent.

Implementing a plan is more affordable than ever, and you’ll receive a tax credit for plan startup costs and a tax deduction for expenses paid.

But how do you start a 401(k) for your small business? Here’s a step-by-step overview of where to begin, along with answers to some common employer FAQs.

5 Steps to Starting a 401(k) for Your Small Business

The IRS heavily regulates the process of establishing and maintaining a 401(k). As a result, many small businesses outsource the job to a knowledgeable small business financial advisor to set up and administer the retirement plan throughout its life.

Still, every owner should understand the steps involved in starting their small business 401(k):

• Decide Which Plan You Should Establish

Will you offer a traditional, simple, or safe harbor 401(k) plan? Or maybe a simple IRA plan is best for you. There are plenty of 401(k) plan types to choose from, so it’s essential to do your homework and determine the plan that fits your immediate needs and long-term goals.

• Understand Your Fiduciary Responsibilities

While you’re not responsible for how your employee’s 401(k) selections perform, you are responsible for acting as a fiduciary. That means you’re legally bound to make choices about your 401(k) plan as a person who owes a duty of care and trust to your employees.

Part of acting on your fiduciary responsibilities is setting up a trust for your plan’s assets and appointing at least one trustee to manage the plan investments, distribution, and other activities. This helps ensure the funds’ use solely benefits your employees and their beneficiaries.

• Draw Up a 401(k) Plan Document

This document outlines your plan’s details in compliance with the IRS. It should contain information including (but not limited to) details about your trust, fiduciaries, your contribution plans, and more.

• Establish an Organized Recordkeeping Process

You’ve drawn up the plan document and cleared it with the IRS. Now, keeping meticulous records documenting the progress of that plan is essential, including information about plan values and employee contributions. In addition, you must regularly update your participants’ census and employment data to ensure they’re still eligible for their 401(k) benefits.

• Create a Thorough Information Package for Your Plan Participants

The law requires that employers provide information to their participants about how the plan works, its features, and its benefits. It’s also essential to disclose information to both your employees and the IRS about any fees and investment changes (if applicable).

FAQs for Starting Your Small Business 401(k)

Q.) How much will it cost to set up a 401(k) for my small business?

Initial fees typically run anywhere from $500 to $3K. How much you’ll pay depends upon the type of benefits you choose, the size of your business, consultation fees associated with your retirement service provider (if applicable), and more. For more information, click here for the Department of Labor’s retirement plan fees and expenses guide.

Q.) How long does it take for a small business to set up a 401(k)?

That all depends upon how thorough you are. If you submit your plan with missing or incomplete information, it could mean several time-consuming rounds with an Implementations Specialist to get the correct information uploaded. You could also end up paying fees because of mistakes you accidentally made from rushing through the details of your plan.

Q.) How much should I contribute to the plan?

You can contribute as much as you’d like within IRS limitations. Remember that employer contributions are tax deductible on your small business’s federal tax returns. Just as importantly, think about the positive impact matching or profit-sharing will have on morale, your relationship with your employees, and your employee’s financial health.

Q.) How much should participants contribute?

Participants may contribute as much as they wish within IRS limitations. Encourage your employees to research the investment options available and educate them on the benefits of a 401(k) to help make comfortable retirement a reality.

Q.) What are the maintenance costs for maintaining a 401(k)?

Once you select a 401k for your small business and get it up and running, you’ll need to pay fees associated with ongoing operations, services, investments, and expenditures for matching contributions.

Starting a 401(k) promotes employee morale, which leads to improved retention and a better ability to attract new talent. It also helps contribute to your and your employees’ financial well-being. The knowledgeable professionals at Ubiquity are here to assist with customizing a low-cost, easy-to-manage retirement plan for your small business.

How to Recession-Proof Your 401(k)

Dylan Telerski / 10 Oct 2022 / 401(k) Resources

Panic is palpable during a recession. Watching the daily dip in the Dow can be a painful experience for people who are accustomed to checking their stock portfolios daily.

Retirement savers may have heard that they can take out a 401(k) loan to help them through the crisis. Whether you’re actively involved with your plan or not, any market downturn presents a good opportunity to reassess and potentially recession-proof your 401(k).

Focus on what you can control

What we know from decades of watching the markets through good times and bad is that a long-term focus with regular contributions is the best strategy to grow a retirement nest egg. Resist the urge to make a hasty, knee-jerk reaction and pull your money out. Stick to your plan to reach your investment goals. It WILL get better!

Make minor changes to benefit your situation

What if you can’t rely on the long-haul, and you plan to retire within a few years? If you need short-term finances, you can sell some of your investments now, but remember that prices are low. You may end up taking a loss on the sale versus the price you originally paid for the stock. However, if retirement is still five or more years into the future, you can hold off and expect more normal annual returns when the market resumes its course again.

Take a closer look at asset allocation. Market timing rarely works, but you should at least make sure your portfolio consists of diversified mutual funds, as well as a mix of stocks and bonds. Consider target-date funds if you are older, as the fund manager will move your assets from riskier stocks to less-risky bonds and money market funds as you get closer to retirement.

Even if you’re a younger investor, you can review the assets you currently own and rebalance. If your portfolio is skewed heavily toward stocks, consider adding some bonds. If you have invested too heavily in the market, shifting to cash temporarily can be a protective measure if market volatility is wild.

Assess the risk on your individual securities. Look for mutual funds with “growth and income” or “balanced” in the name.

Most importantly, discuss your situation with your financial advisor. They know your portfolio and the market, so are better able to assess your chances of success or failure when taking your investments into your own hands.

Look for opportunity

Where some see a market wipe-out, others see opportunity. Many investors are actually increasing their contributions during the recession. Elective salary deferrals stretch further when stock prices drop.

If you can afford to, contact your plan administrator to adjust the withholding percentage. This money will come out of your paycheck seamlessly and go directly into your retirement savings. This strategy makes sense especially if you have failed to maximize your employer match; this is free money that will continue to grow for you over the long haul.

As of 2022, contribution limits have increased to $20,500, with an additional $6,500 allowed for those age 50 and older. This may be an opportunity to buy key stocks at relatively low prices to set yourself up for bigger future returns.

Recessions are common to the American economy, cycling every four years and lasting 10 months on average, but stock prices hit new highs after rebounding from each downturn. Hang in there, stay the course, and keep investing. Sticking to your plan is always safe, but don’t pass up an opportunity when it knocks. You may be able to make small, thoughtful adjustments that can optimize your returns. Contact Ubiquity to learn more about how to maximize 401(k) plans during the pandemic.