Ubiquity

Category: 401k Resources

Find easy to understand 401k Resources and information from Ubiquity Retirement + Savings. Find easy to understand rules and regulations, along with tips and advice from our team of 401k experts. Free consultation! Call Ubiquity today at 855.466.5825

Are you saving in your job’s 401k plan?

Whether you’ve just started, or you’ve been investing for years–you’re taking important steps towards financial security in your golden years.

When it comes to your savings potential, making smart, informed investment decisions can have a real impact on how much your savings can grow. That’s why it’s important to learn about the investment options you have to choose from in your plan and understand all the costs involved with those investments. Nothing in life (or in your 401k plan) is free–all services have costs, including investment

Learn about the investment options you have to choose from in your plan and understand the costs involved with those investments–all services have costs even those related to investments through your retirement plan.

In recent years, there’s been a lot of media attention on 401k cost and the fees both business owners and their employees are paying for 401k investments and recordkeeping services – and for good reason.

Differences in fees as small as 0.1% per year can lower your account balance by thousands of dollars by the time you retire.

For example: Assume an employee with 35 years until retirement has a current 401k account balance of $25,000 and earns an average investment return of 7% per year until retirement. Without any additional contributions, here is how 401k fees could affect the account balance at retirement.

Total 401k Fees
Account balance

0.5%

$227,000

1.5%

$163,000

Department of Labor, A Look at 401k Plan Fees

Understanding 401k costs and fees

It is important to understand the types of fees that may be assessed in a 401k plan and who can pay those fees, so you can make smart choices when it comes to your retirement savings. In fact, the retirement plan rules require the employer offering the plan to keep an eye on plan costs to ensure they are reasonable based on the services received. The employer must pay some 401k fees, and some are deducted from employees’ 401k accounts. Here are the fees that typically occur in a 401k plan and how they can be paid.

Type of Fee
Example
Who Pays

Plan Administration Fees

Fees for day-to-day operation of the plan, including recordkeeping and trustee services

May be paid by employer or from plan’s assets (debited from employees’ accounts)

Investment Fees

Fees for investment management, marketing, and distribution of an investment product, including sales charges or commissions

Deducted directly from investment returns in employees’ accounts

Individual Service Fees

Fees for a transaction or service affecting one employee (e.g., loan, investment advice)

Typically charged to the affected employee’s account, but may be paid by the employer

Settlor Fees

Fees for services primarily benefiting the business (e.g., forming the plan, tax consulting)

Must be paid by employer

Dollar folded like a boat promoting that you can "Keep taxes at bay" with a Safe Harbor 401(k) plan

Getting ready to offer a 401k retirement plan to your employees? Way to go!

Offering benefits your employees want and need is a foolproof way to attract and maintain incredible talent. Along with an uptick in employee satisfaction, you’ll also gain more tax-deferred savings—it’s a win-win.

Before you go skipping into a field of “I’m-the-best-boss” bliss, keep in mind that offering a 401k plan comes with added responsibilities. One of these tasks is making sure your plan is run fairly, and that everyone has the opportunity to fully participate— not just owners and other company bigwigs.

Contributing to a 401k comes with significant tax advantages, so the government wants to make sure your plan doesn’t unfairly benefit the company owners and the highest earners. (You may hear these groups referred to as “highly compensated employees” or “HCEs.”) The IRS set up a series of nondiscrimination tests to ensure your plan is fair and encourages participation from all employees.

The IRS Gives Tests?!

There are 3 annual nondiscrimination hoops to jump through.

  • The Actual Deferral Percentage (ADP) test: This limits the percentage of compensation that HCEs can defer into their 401k based on the average contribution rates of the non-highly paid employees.
  • The Actual Contribution Percentage (ACP) test: This ensures that the employer matching contributions and any after-tax employee contributions contributed for HCEs are not disproportionately higher as compared to non-highly paid employees.
  • The Top Heavy Test: This ensures that HCEs cumulatively hold less than 60% of the total plan balance.
    In essence, ADP and ACP testing both make sure your plan doesn’t unfairly benefit HCEs, while the Top-Heavy test ensures they aren’t the main people contributors to your plan.

If your plan fails one of these tests, it’s an administrative nightmare filled with costly correctives and piles of paperwork. You may have to return a portion of the contributions made to HCEs or make additional contributions for the lower paid employees. But hurry, if you take too long to make the plan corrections, you’ll owe a 10% penalty. The IRS has Fix-it guides for both ADP/ACP failure and Top Heavy failure but it’s best to prevent problems before they happen.

Skip the hassle with Safe Harbor

Are you already covered in stress hives at the thought of complicated compliance testing? Trust me, we understand. You’re already running a business and trying to maintain some semblance of a work/life balance—the last thing you need is more administrative headaches. That’s where Safe Harbor 401k plans come in.

A Safe Harbor plan is specifically structured to automatically pass non-discrimination tests, or avoid them all together. In exchange for getting an automatic pass on the ADP and ACP tests and the extra administrative duties that go with the testing process, business owners must make a minimum contribution to the plan each year—which must be immediately 100% vested.

Here’s how it works:

Are there Safe Harbor deadlines?

Yes! If you are starting a brand new 401k plan and want to have Safe Harbor take effect in the current calendar year, your plan must be fully set up and active by October 1, 2019.

Keep in mind, designing a plan to suit your needs (along with all associated admin tasks) takes time. This means that the very latest you should be finalizing your plan is September 20, 2019.

Is Safe Harbor Right for me?

A Safe Harbor 401k can seem like an obvious choice—but it may not be the best option for every plan. Safe Harbor plans are a great fit for small businesses (particularly those with under 25 employees) and businesses that have failed noncompliance testing in the past. But while you save in administrative hassle, you may pay a bit extra in plan costs and required contributions.

Weighing the pros and cons of a Safe Harbor plan for your business can be challenging—without all the additional hassle of setting up a 401k. Luckily, our experts at Ubiquity can walk you through the plan design options and the setup process to make sure your plan is designed to fit perfectly to your needs.

This week we were excited to announce the launch of CensiblyYours Financial Wellness Tools, our newest innovation to help small business employers and employees make the most of their retirement plan and improve their overall financial health.

As part of our new suite of offerings, we’re providing participating savers access to Edukate, a fintech benefits platform that empowers employees through personalized financial education and guidance. So what exactly is financial wellness and how does it create a more productive, engaged workforce? We sat down with the experts at Edukate to discuss how investing in your employees’ financial well-being can set your business apart in the marketplace.

Define what financial wellness means to Edukate.

The concept of financial wellness can be a bit overwhelming as there are a number of definitions out there.

At Edukate, we believe financial wellness is the relationship between a person and their money.

A financially healthy employee is actively managing their day to day spending, is confident as to how they can protect themselves from future unexpected life events and is saving for their financial freedom.

How can companies adopt and promote financial wellness in 2019?

Open enrollment isn’t the only time you can make a difference in how your employees interact with their benefits.

Platforms like Edukate are breaking the mold of having to roll out benefits during open enrollment. The majority of Edukate’s plans are implemented outside of an open enrollment period.

When you’re looking for a financial wellness benefit, it’s important to find a platform that meets the specific needs of your organization.

For example, if employees aren’t participating in your 401k, find out why. Employees may cite reasons such as not fully understanding the program or that they have other financial concerns they want to address first.

A strong financial wellness platform for your organization can educate users on how to use their 401k program and how they can tackle other debts or financial stressors to be able to start participating.

Typically, employees only hear about voluntary benefits right after launch or when they’re just starting at a company. To keep employees engaged, we recommend quarterly campaigns to ensure employees understand and feel empowered to use their benefits.

What are the key components to a company’s financial wellness program?

Like any benefit, a financial wellness program should be easy to access, administer, and use.

At Edukate, we focus on three key areas for success.

The first is employee engagement. Many employees never engage with their benefits because they’re boring and uninviting. By offering personalized guidance and interactive content, we’ve rethought employee engagement from the ground up.

The next is platform scalability. Edukate makes it easy to customize your employees’ experience, communicate with them, and get in-depth insights into how they are doing.

Lastly, is system integration. We are a one-stop benefits destination for employees by providing guidance for financial challenges and connecting them with the employer benefits that matter to them most— all while cultivating a culture of positive wellness.

Why is financial wellness important for employee retention?

There are plenty of statistics about how financial stress affects employee engagement and productivity.

When an employee is disengaged at work, the organization suffers. Lackluster productivity, absenteeism, and negative attitudes are common side effects.

When you offer benefits that employees need and want, they’re more likely to use them.

And if those benefits can help employees reduce their financial stress, productivity and engagement increases. When employees feel empowered by their benefits offerings, sentiments about their employer increase as well.

For some employees, this favorable perception of their employer drives loyalty to the organization.

The same survey also found that many employees would prefer more robust benefits offerings over an increase in salary.

Happy employees are productive employees.

How does achieving financial wellness work in tandem with saving for retirement?

Edukate’s approach to financial wellness is to help employees navigate every aspect of their financial lives, including managing their spending and saving habits, preparing for the future, and saving for retirement.

By helping employees address their financial stressors and feel more confident with their financial decisions, we believe that employees can better prepare for the future.

As employees learn about their personal finances, Edukate recommends existing employer benefits like retirement accounts to help them achieve their goals.

How does Edukate help promote financial wellness, and what inspired the company to pursue this mission?

Edukate was created with a belief that traditional retirement and financial education are broken and that there were better ways to help employees achieve their financial goals.

At Edukate, we empower employees to practice confident decision making to best utilize the benefits that matter to them most.

We accomplish this by offering an exceptional online platform that connects employees with education, tools, and benefits most relevant to their needs.

What has been the biggest barrier for small business to provide financial wellness benefits?

Even though financial wellness benefits can provide a positive return on investment, securing budget for a new benefits platform can be tough.

When working with small businesses, we work to find ways to rollout financial wellness in phases to different employee groups to give HR managers room to grow the program over time.

Why was a partnership with Ubiquity important to your company?

Partnering with Ubiquity offered Edukate a way to scale a financial wellness resource to smaller employers.

We recognize the need for small business owners to provide robust benefits to their employees. Nearly 90% of employees in the US work for employers with fewer than 20 employees.

Because retirement planning is one of the key focus areas of Edukate’s platform, partnering with Ubiquity helps us connect employees with the resources they need to fully prepare for retirement.

This blog serves as information material from Edukate and does not serve as investment advice or financial recommendations by Edukate or Ubiquity Retirement + Savings (“Ubiquity”). To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with and independent professional advisor.  Both Ubiquity and Edukate are neither law firms nor certified public accounting firms and no portion of the newsletter content should be construed as legal or accounting advice.

It’s no secret that the life of a small business owner is a lot of work. Especially in situations where you only have a few employees (or none at all), you have to act like the Swiss army knife of your business––ready for anything and prepared for any situation. So, why add the hassle of having to pay for and run a retirement plan along with everything else? You might even wonder, is my business too small to for a 401k plan?

Here’s the scoop: A 401k is no longer a benefit reserved exclusively for large businesses with budgets to match.

There are budget-friendly, easy-to-use 401k solutions designed specifically for small businesses. Small business owners can now take advantage of the business tax benefits of a 401k plan and offer competitive retirement plan benefits for employees.

Not too familiar with 401(k) plans? No problem.

What is a small business 401k?

First things first: A 401k plan is a type of company retirement plan under Section 401(k) of the Internal Revenue Code. That part isn’t so important — here’s what is: A 401k allows you to save for retirement by putting away money on a pre-tax basis, which helps you to lower your taxable income. What’s that mean to you? It means you’ll get less of a tax bite on your annual salary in the short term, while your long-term investments grow tax-free until you’re ready to retire. Some 401k plan providers (including Ubiquity) also offer an after-tax (Roth) option, which means you won’t be taxed at the time you withdraw that money because you’ve already paid taxes on it.

A small business 401k is defined as a 401k plan for a company with anywhere from one to 100 employees. Here at Ubiquity, we specialize in the retirement plan needs of small and growing businesses, including owner-only and start-up businesses.If your business only employs you, your spouse or partner, and employees who would not be eligible to participate in a plan, a Single(k)® plan would your best option.

Small business 401k plans offer unique benefits to both business owners and their employees who participate in the plan.

Busting 401k Myths

Myth #1: 401k plans are too expensive for small businesses.

It’s true that many 401k plans are designed to only suit larger businesses. But the growing trend is to offer efficient, Web-based 401(k) plans that are more affordable to businesses of all shapes and sizes. Plans cost less than a daily latte, and employers have options for splitting costs with their employees.

Myth #2: 401k plans require an employer match.

An employer match or profit-sharing contribution is entirely optional with a 401k. If you choose to offer this feature to your employees, it could help to boost participation. Keep in mind that employer contributions are also tax-deductible for your business.

Myth #3: Our employees won’t participate because they don’t make enough money.

There is no minimum contribution required with a 401k. Offering an employer match can provide additional incentive for your employees to participate in the plan.

Myth #4: It’s too complicated.

Starting a 401k plan doesn’t have to be convoluted. With the right plan, you can get a new plan running in just a few hours of your time. And it’s easy to manage, with tools and reports available right at your fingertips.

You’re contributing to your workplace retirement account–that’s great! But how are you dealing with the taxes of the money you can contribute. There are two ways you put money into your 401(k) retirement plan– pretax or Roth.

Pretax contributions are the traditional form of 401(k). This means contributions come out of your paycheck before taxes, and are your distributions in retirement are taxed. This is useful if you’re earning more now than you plan to in retirement. Plus, you lower your taxable income in the present!

Think of the Roth 401(k) as the rebellious little sister of the pretax 401(k). Introduced in the early 2000s, it takes the tax treatment of a Roth IRA and applies it to your employer-sponsored plan. That means contributions come out of your paycheck before taxes, and distributions in retirement are tax-free. That means you don’t pay taxes on your investment growth!

Let’s look at the similarities (and differences) between the two retirement contribution types.

The 401(k) contribution limit is $19,000 with an additional $6000 if you are 40 or older. The conribution limit is the same whether your 401k deferrals are made pretax, Roth, or a combination of the two.

Traditional 401(k) plans are pretax savings accounts. This means your contributions are made before they've been taxed. Roth 401(k) plans are post-tax savings accounts. This means your contributions are made after they've been taxed.

If you contribute to a 401(k) plan at work, your employer can choose to match a percentage of your contribution. Any employer match will be taxable in retirement.

All About Withdrawals: In a traditional 401(k) distributions in retirement are taxed, just like ordinary income. In a Roth 401(k) there are no taxes on qualified distributions in retirement.

 

Learn more

Curious about different types of retirement accounts? Learn the difference between an Individual Retirement Account (IRA) and a 401(k).

If you’re a small business owner and need a 401k plan for yourself and your company, only Ubiquity offers flat-fee plans plus free expert advice. We’ll fully customize your 401k to meet the specific needs of your small business.

Check out our cost-effective, plan solutions

Ubiquity Retirement + Savings: Stay Up-To-Date.

Download our 2019 contribution guide

The IRS has announced the 2019 contribution limits for retirement and health savings accounts. This includes contribution limits for 401(k) and 403(b) plans, as well as income limits for IRA contribution deductibility. Additionally, the salary threshold to classify “key” and “highly compensated employees” has been announced. Review our quick guide of the updated limits below.

401(k) and 403(b) individual contribution limits (IRS 402(g) Limit)

2018

2019

Age 49 and under

$18,500

$19,000

Age 50 and older

Additional $6,000

Additional $6,000

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 pro t-sharing contributions, and any employee after-tax contributions. For 2019, the maximum is $56,000.

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

Highly Compensated and Key Employee definitions and limits

2018

2019

Key Employee Officer Compensation

$175,000

$180,000

Highly Compensated Employee

$120,000

$125,000

Annual Compensation Limit

$275,000

$280,000

Roth and Traditional IRA contribution limits

2018

2019

Age 49 and under

Up to $5,500 (must have earned income)

Up to $6,000 (must have earned income)

Age 50 and older

Additional $1,000

Additional $1,000

Traditional IRA modified adjusted gross income limit for partial deductibility

2018

2019

Single

$63,000 – $73,000

$64,000-$74,000

Married – Filing joint returns

$101,000 – $121,000

$103,000 – $123,000

Married – Filing separately

$0 – $10,000

$0 – $10,000

Non-active participant spouse

$189,000 – $199,000

$193,000 – $203,000

Roth IRA modified adjusted gross income phase-out ranges

2018

2019

Single

$120,000 – $135,000

$122,000 – $137,000

Married – Filing joint returns

$189,000 – $199,000

$193,000 – $203,000

Married – Filing separately

$0 – $10,000

$193,000-$203,000

Simple IRA contribution limits

2018

2019

Age 49 and under

$12,500

$13,000

Age 50 and older

Additional $3,000

Additional $3,000

Health Savings Accounts (HSA) contribution limits

2018

2019

Individual (employer + employee)

$3,450

$3,500

Family (employer + employee)

$6,900

$7,000

Age 55 or older**

Additional $1,000

Additional $1,000

If you need more detailed guidance, see IRS Notice 2018-83.

All About 401k Hardship Withdrawals

Dylan Telerski / 12 Jul 2018 / 401k Resources

hardship renovation

hardship renovation

 

Sometimes life sends us devastating curveballs with deep financial consequences. If you’ve fallen into dire circumstances, and have already dipped into your savings, there may be hope in your 401k plan. While ordinarily, you cannot withdraw money from your retirement account until your employment ends (or turn 55), many plans allow something called a hardship withdrawal.

What counts as a hardship?

While lots of overwhelming financial situations can arise in life, only specific circumstances can be classified as a hardship. According to the IRS, a hardship must be an “immediate and heavy financial need” and “the [withdrawal] amount must be necessary to satisfy the financial need.” That second part means that there can’t be any other resources used to cover your emergency.

Most plans allow withdrawals for the following:

  • Unexpected medical expenses not covered by your insurance (For you, your spouse, or your dependents)
  • Purchase of a home (Your principal residence—not a vacation home)
  • Tuition and related educational fees
  • Preventing eviction or foreclosure
  • Funeral or burial expenses
  • Repair of major damage your primary home

Every plan is different; so it’s important to check with your employer see if your plan has any additional requirements or restrictions. Your plan administrator may need some documentation along with your request to illustrate your financial need. This will generally involve information about the hardship, verifying how much you need, and proving you’ve exhausted all other options.

After you take a 401k hardship withdrawal

Most plans require the employee to stop contributing to their plan for six months following a hardship distribution. Hardship distributions are taxable and subject to the 10% early withdrawal penalty unless an exception applies.

Do you qualify for a 401k hardship withdrawal?

To find out if your plan allows for a 401k hardship withdrawal you will need to talk to your plan sponsor, which might be someone in the HR department or even the owner of your business. You can also call the phone number on your 401k account statement.

Should I take a 401k loan instead of a 401k hardship withdrawal?

Employees are required to repay these loans, and unlike the hardship withdrawal, they will not be taxed for the loan. One thing to keep in mind about 401k loans is that they are generally recommended as an absolute last resort in comparison to other types of loans. Want to learn more? Check out our post on Is it a Good Idea to take out a 401k loan?

Anything else I should think about?

Tax Implications

If you are younger than 59 ½, you’ll owe a 10% early distribution tax, in addition to federal, state, and local taxes if you distribute pre-tax savings.

What’s So Safe About Safe Harbor?

Dylan Telerski / 11 Jun 2018 / 401k Resources

Sailboats in harbor

Getting ready to offer a 401(k) retirement plan to your employees? Way to go!

Offering benefits your employees want and need is a foolproof way to attract and maintain incredible talent. Along with an uptick in employee satisfaction, you’ll also gain more tax-deferred savings— it’s a win-win.

Before you go skipping into a field of “I’m-the-best-boss” bliss, keep in mind that offering a 401(k) plan comes with added responsibilities. One of these tasks is making sure your plan is run fairly, and that everyone has the opportunity to fully participate— not just owners and other company bigwigs.

Contributing to a 401(k) comes with significant tax advantages, so the government wants to make sure your plan doesn’t unfairly benefit the company owners and the highest earners. (You may hear these groups referred to as “highly compensated employees” or “HCE”s.) The IRS set up a series of nondiscrimination tests to ensure your plan is fair and encourages participation from all employees.

The IRS Gives Tests?!

There are 3 annual nondiscrimination hoops to jump through.

  • The Actual Deferral Percentage (ADP) test: This limits the percentage of compensation that HCEs can defer into their 401k based on the average contribution rates of the non-highly paid employees.
  • The Actual Contribution Percentage (ACP) test: This ensures that the employer matching contributions and any after-tax employee contributions contributed for HCEs are not disproportionately higher as compared to non-highly paid employees.
  • The Top Heavy Test: This ensures that HCEs cumulatively hold less than 60% of the total plan balance.

In essence, ADP and ACP testing both make sure your plan doesn’t unfairly benefit HCEs, while the Top-Heavy test ensures they aren’t the main people contributors to your plan.

If your plan fails one of these tests, it’s an administrative nightmare filled with costly correctives and piles of paperwork. You may have to return a portion of the contributions made to HCEs or make additional contributions for the lower paid employees. But hurry, if you take too long to make the plan corrections, you’ll owe a 10% penalty. The IRS has Fix-it guides for both ADP/ACP failure and Top Heavy failure but it’s best to prevent the problem before it happens.

Skip the hassle with Safe Harbor

Are you already covered in stress hives at the thought of complicated compliance testing? Trust me, we understand. You’re already running a business and trying to maintain some semblance of a work/life balance— the last thing you need is more administrative headaches. That’s where Safe Harbor 401(k) plans come in

A Safe Harbor plan is specifically structured to automatically pass non-discrimination tests, or avoid them all together. In exchange for getting an automatic pass on the ADP and ACP tests and the extra administrative duties that go with the testing process, business owners must make a minimum contribution to the plan each year—which must be immediately 100% vested.

Are there Safe Harbor deadlines?

Yes! If you are starting a brand new 401k plan and want to have Safe Harbor take effect in the current calendar year, your plan must be fully set up and active by October 1st.

Keep in mind, designing a plan to suit your needs (along with all associated admin tasks) takes time. This means that the very latest you should be finalizing your plan is September 21st.

Is Safe Harbor Right for me?

A Safe Harbor 401(k) can seem like an obvious choice— but it may not be the best option for every plan. Safe Harbor plans are a great fit for small businesses (particularly those with under 25 employees) and businesses that have failed noncompliance testing in the past. But while you save in administrative hassle, you may pay a bit extra in plan costs and required contributions.

Weighing the pros and cons of a Safe Harbor plan for your business can be challenging—without all the additional hassle of setting up a 401(k). Luckily, our experts at Ubiquity can walk you through the plan design options and the setup process to make sure your plan is designed to fit perfectly to your needs.

Small Business 401k Misconceptions

Andrea Sobotor / 11 Jan 2018 / 401k Resources

The Small Business Owner

There are many small business 401k misconceptions which are largely due to small business owners having a lack of time, budget, and information on the subject.

In the past, small businesses have had few retirement plan options such as 401k plans that were built for their needs and those of their employees. The industry has had no problem marginalizing small businesses in favor of large ones with huge plan assets available in their 401k.

The good news is that that is rapidly changing. Still, many small business owners buy into 401k misconceptions.

Let’s put those to rest:

401k plans are time-consuming and designed for big businesses

Unfortunately, many small business owners are under the impression that 401k plans are a one-size-fits-all benefit that can’t be customized to meet their needs without the commitment of significant time and high fees.

There are plans available to small businesses that were designed with their needs and employees in mind. No longer do small businesses have to accept plans that are built for the needs of large corporations with hundreds, if not thousands of people. Nowadays, small business 401k plans exist that are customized for businesses with 50 or fewer employees. There are even 401ks built specifically for sole proprietors, known as a Solo 401k.

As far as the perceived time commitment, those same plans can be up and running in minutes if not a couple of days and require only a half hour each month to maintain.

Employer matching is a must

Even though matching employee contributions is a great way to recruit and retain talent, it’s not a requirement.

If a small business owner doesn’t want to or can’t afford to match, that’s perfectly fine. As an employer, you are already offering a wonderful service to employees by implementing a plan – matching, while there are tax benefits that come along with it, is simply icing on the cake.

For your hard-working employees, at the end of the day, some savings is better than no savings.

401ks are too expensive to implement and maintain

We know the thought of extra administrative fees weighs heavy in the minds of small business owners. Though there is some relief–through a tax credit—up to 50 percent of the cost to set up and administer the plan.

Ultimately, a plan’s cost depends on the bells and whistles that come with it—some basic plans can cost as little as $115 a month – that’s less than what your business likely pays to fill the water cooler!

High fees and poor advice are just part of the deal

Small business owners face many challenges and work way more than the average person to keep their business running efficiently. Why then do some retirement industry companies still expect you to settle for an inferior plan that charges exorbitant amounts and doesn’t offer solid advice on how to invest? Just because you may have fewer employees does not mean your retirement plan should suffer.

When the right plan is selected, small businesses are able to access low cost, effective funds for their 401k plan. No longer will small businesses and their employees settle for poor performing, high-cost funds that just absorb returns.

Likewise, employees should not feel like they’re alone and in the dark when selecting the retirement plan that will hopefully lead to their dreams coming true.

Small business owners shouldn’t be misled and buy into common myths that will discourage them from offering a 401k plan. Giving your employees a way to save for their retirement is a cheap and easy way to attract and retain talent and maintain an edge over the competition. For employees, participation in a 401k plan is a simple, effective way to save for retirement.

Get the Definitive Small Business Guide to 401k 

5 Steps to 401k Rollover

Andrew Answers / 24 Sep 2017 / 401k Resources

Hands stretched out on a laptop working

Congrats! You’ve got a new job, your desk is packed, and you’re ready to fully embrace a new chapter in life. But are you leaving your 401k behind? Here is your step-by-step guide to 401k rollover:

1. Check if your new employer has a retirement plan.

Even if they’ve got one, there are a handful of plans that don’t allow you to rollover funds from an old plan. If your new job offers a 401k that accepts rollovers, you’re safe to move on to the next step!

2. Get documents from your old 401k plan and start contributing to the new!

Contact your previous employer and get the necessary documentation that says what you want to do with the money from your old plan, such as move it to your new plan, keep it in place, or roll it over into an Individual Retirement Account (IRA).

NOTE! If you rollover your funds directly to another plan, you won’t be taxed. If you take a direct distribution, taxes will be assessed and you’ll also be hit with a 10 percent penalty for withdrawing money prior to retirement.

Take your time to consider the implications of the move – oftentimes you’ll experience a lot of jargon such as plan sponsor, trustee, and tax implications, so make sure you understand everything before filling it out.

3. Keep an eye out for the check.

If you requested a rollover or direct distribution of your old 401k), a check will be mailed to you. Who the check is made out to is very important.

If you requested a rollover, the check should be made out to your new plan custodian (for example, Ubiquity uses Charles Schwab, Matrix, and TD Ameritrade). The custodian is the entity that holds your money until you retire. If the check is in your name and you requested a rollover, something went wrong and you need to contact your prior employer’s plan custodian immediately.

If you requested a direct distribution and receive the check in your name but are reconsidering rolling the money to the new plan, there’s good news! As long as you don’t deposit the check, you have time to decide if you’d rather it go toward another 401k instead of taking the direct distribution and incurring the fees and taxes associated with that decision.

NOTE! A retirement plan provider (like Ubiquity) is simply an intermediary during this process. The plan provider does not cut the check. While you can contact your plan provider for help during this process, including to ask about the status of the check, their role is limited to forwarding your inquiry along to the custodian.

4. Alert your new employer about the rollover.

After you have the check – and it’s made out to your new plan’s custodian – talk to your new employer and update the appropriate person about the status of the rollover. Your new plan provider needs to be notified by your employer that the rollover money will be hitting your account. If they don’t know, then the new plan won’t look for money and that deposit will not be approved.

NOTE! That check you received then needs to be mailed to the new custodian. You can either handle that yourself or ask your employer to take care of it.

5. Make changes to plan investments if you choose!

Your new rollover money is a fresh start – choose new funds, contributions, or discuss with a financial advisor your options.

Rolling over your 401k is important because you don’t want to lose momentum saving or jeopardize compound interest. As long as you follow this checklist, you’ll stay on track to achieve a healthy retirement.

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© 2019 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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