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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

401k plans are for private, for-profit businesses. 403b plans are for tax-exempt organizations and non-profits.

The 401k and 403b are both tax-advantaged retirement savings plans. Both accept payroll deductions and help employees grow their retirement nest eggs through investment options like stocks, mutual funds, ETFs, and other vehicles. Both allow for employer match or profit-sharing contributions at the employer’s discretion, up to 25% of eligible payroll.

Loans can be taken out from both plans if necessary, offering a low-cost lifeline for buying your first home, paying college tuition, or staying afloat during emergency situations.

Differences between 401k and 403b

The plans differ in terms of:

Plan Sponsors

ANY employer, big or small, can sponsor a 401k if they choose to do so.

On the other hand, only non-profit companies, religious organizations, school districts, and governmental organizations may have a 403b plan.

Employee Eligibility

To be eligible for a 401k, participants must be at least 21, with at least one year of service and 1,000 hours or more of service per year. Union employees entered into collective bargaining agreements and non-resident aliens are generally ineligible. Individual employers can mandate when employees become “vested” in the plan.

To be eligible for a 403b, there are no age or annual requirements, but employees must work more than 20 hours per work. Professors on sabbatical, union employees, and non-resident aliens are generally excluded. Only certain types of industries may have a 403b.

Deductions

The 401k’s employer contributions are deductible for employers, whereas 403b employer contributions are tax-deferred for employees. Both accounts are pre-tax and tax-deferred for employees.

Contribution Limits

The deferral limit for both 403b and 401k is $19,500, with an additional $6,500 in catchup contributions allowed for those over 50.

However, the 403b plan allows workers with at least 15 years of service to add another $3,000 to their limit each year, to a maximum of $15,000.

Investment Options

A 401k account allows for a vast range of investments, including index funds, bond funds, large-cap and small-cap funds, real estate funds, foreign funds, and more – though they may be limited by the employer or broker selected.

By comparison, the 403b options are limited. In the past, employees could only invest in an annuity — a financial product offered through insurance companies that provides fixed payments to the annuity holder. Only recently have mutual funds become available, but not all employers offer them.

Administration

In the past, 403b plans were exempt from certain administrative processes that applied to 401k plans, thus lowering the overhead administrative costs. However, the limited investment options often led to higher fees than many 401k plans. Today may 403b plans are required to follow similar ERISA compliance requirements, so there is not much difference in administration.

Cost

Overall plan costs are determined by the types of investments selected, the level of service, and the plan provider/broker selected. Certain types of assets, like a variable annuity, may have higher fees that cut into your earnings. It’s worth exploring alternatives if you are looking to cut costs.

Which one is better?

Both options are great ways to save for retirement. However, if you find the investment choices are too limited and the costs too high for a 403b, switching to a 401k is always an option.

Since 1999, Ubiquity has offered flat-rate small business 401k plans with full transparency and no AUM fees or hidden costs. You may work with the broker of your choice to select investment options, while we administer the plan and provide full employer/employee support. Contact us to learn more.

If you are over 50 years of age, you may contribute a maximum of $26,000 to your 401k plan in 2020.

Nearing retirement and trying to save a little extra? You’re in luck. There is a special provision for savers over 50 called a catchup contribution that can help you achieve your retirement goals.

What Is a Catchup Contribution?

A catchup contribution allows people ages 50 or older to make additional contributions to their retirement accounts. This rule applies to both 401k accounts, as well as individual and/or individual retirement accounts (IRAs) and allow for larger deferrals than the standard contribution limit.

Cut through the complexity of choosing and customizing the right 401(k) for your small business. Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

How did 401k catchup contribution limits change in 2020?

The catch-up contribution limit for employees 50+ increased by $500– from $6,000 to $6,500.

How much can you save for your retirement in 2020?

If you want to maximize your retirement savings, you can invest in multiple accounts:

  • Save up to $7,000 in your IRA: The 2020 contribution limit for Traditional IRAs and Roth IRAs remained the same at $6,000, with $1,000 allowed for 50+ catchup contributions.
  • Save up to $16,500 in a SIMPLE 401k: The SIMPLE 401k contribution limit increased by $500 to $13,500. The catchup contribution amount is $3,000.
  • Save up to $26,000 in a 401k, 403b, 457, or TSP. The regular contribution limits increased by $500 — from $19,000 to $19,500, regardless of employee age. Employees over 50 can add $6,500.

Why did the IRS increase the maximum contribution limits?

The Internal Revenue Service announced these increases as “cost-of-living adjustments.”

History of catchup contributions

The catchup contribution provision was created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), so that older individuals would be able to set aside enough savings for retirement.

Employee catchup contributions have been allowed since 2002. Back then, employees could put away $11,000 for their retirement, plus an extra $1,000. The catchup contribution increased $1,000 every year from 2002-2006 and then remained at $5,000 for three years.

From 2009-2014, the over-50 catchup was $5,500. From 2015-2019, employees over 50 could contribute an additional $6,000 to their accounts.

When can you make catchup contributions?

“Catch-up contributions” allow people age 50 and older to set aside extra money to compensate for their younger years where they may not have saved enough. Generally, people earn more as they advance in age, which is why the magic number for catchups starts at 50.

However, you don’t have to wait until your 50th birthday to start catching up with your contributions. Technically, you can start putting in catchup contributions as of January 1 of the year you are set to turn 50.

Should you take advantage of the catchup contribution?

The tax benefit of a 401k catchup contribution can be huge. For instance, if you are a 50-year-old worker in the 24% tax bracket who contributes the full $26,000, you can reduce your tax bill by $6,240 — $1,560 more than younger workers.

High earners have the most to gain. If you max out your 401k in the 37% tax bracket, you could reduce your income tax bill by $7,215 in 2020; if you are married and your spouse maxes out, you’re in for double the savings.

Despite the great news, only 15% of plan participants are taking full advantage of their catchup contributions–either because they’re unaware the benefit exists, they haven’t prioritized their tax-advantaged retirement savings account, or they can’t afford to set aside the extra money.

Saving for your retirement can be easier than you think with our employee financial wellness tools. Contact Ubiquity to learn how to set aside the maximum amount for your retirement.

What to do with a 401k after retirement is based upon your individual plan, IRS distribution rules, and your age of retirement.

Ubiquity breaks it down by age group and helps you explore your retirement planning options.

Continuing contributions (Under 72 years of age)

  • You may elect to rollover your 401k account into a Solo 401k or an IRA to continue investing.
  • This solution is possible if you still earn some type of taxable wages, salaries, commissions, tips, or passive income from self-employment. Certain types of alimony payments may also qualify.
  • Under the SECURE Act, you can now contribute to a traditional or Roth IRA for as long as you wish.
  • Your plan administrator will distribute your savings into the new account for you within 60 days.
  • You may also elect to receive a check and deposit the amount into the new account yourself.
  • Rolling over your 401k within 60 days will prevent you from having to pay taxes on the full amount.

Taking early distributions (Under 55 years of age)

  • You can take money out of a 401k now if you need it, but you will be required to pay a 10% IRS penalty and income tax on the amount you take out.
  • You are not required to take a distribution as soon as you retire. Your plan administrator will still maintain your plan if you have over $5,000 invested, thus allowing your savings to accrue.
  • You will be unable to contribute to a 401k held by a previous employer unless you choose to roll it over to a new 401k or IRA.
  • If your account balance is between $1,000 and $5,000, your company is required to roll the funds into an IRA if they are forcing you out of the plan.

Taking advantage of the Age 55 Rule (Ages 55-59)

  • You can avoid the IRS 10% early withdrawal penalty if you retire or lose your job after age 55. This tax-free distribution applies only to the money from the most recent employer you just left.
  • If you had money in an earlier 401k account, it is still subject to the penalty unless you wait a few years.

Taking the money on-time (Ages 59.5 – 71)

  • The penalty-free retirement age is 59 1/2, so if you have reached that point, you can begin taking regular distributions from your 401k in the form of an annuity, either for a fixed period or over your anticipated lifetime. You may also choose to take non-periodic lump sum withdrawals if it is your preference.
  • Unless you have a Roth 401k, you will pay tax on the distribution as if it were paycheck income. Roth accounts allow tax-free withdrawals if the account holder is 59.5 or older and has had the account at least five years.
  • The rest of your 401k account balance remains invested according to previous allocations, so the performance of your portfolio will also dictate the duration of your payments to some extent.

Taking required minimum distributions (Ages 72+)

  • You are generally required to take regular or periodic distributions by April 1st the year you turn 72.
  • Some plans will allow you to defer distributions until the year after you retire if you’re still working.
  • Your distributions will be calculated based on your account balance and life expectancy.
  • You may choose to take out more than your RMD, but you cannot take out less.
  • The age for RMDs used to be 70.5, but increased to 72 in December 2019 with the SECURE Act.

The IRS isn’t the only one who calls the shots with how retirement money is taken. Companies may have their own rules about taking distributions, so it is always wise to review your plan documents, call your financial adviser, or speak with your plan provider before making any decisions.

It’s easy to be overwhelmed with options when it comes to individual retirement plans and how best to choose and manage your 401k. Ubiquity can streamline the process and help you tailor an approach that fits your unique needs.

A small business 401k is an excellent way to show your team you care about their future.

Not only are 401ks ideal for boosting morale and sustaining a committed workforce, but there are also benefits for your own retirement and tax savings. The time has never been better to start a 401k, as companies with fewer than 100 employees will receive a $500 annual tax credit to offset the cost of administrative fees for the first three years.

To start a 401k for your small business, you’ll need to:

  • Consider which plan you might want.
  • Find the right 401k provider that meets your needs and goals.
  • Determine whether you’ll match, create a plan document, and set up an asset trust.
  • Devise a recordkeeping system.
  • Let employees know about their participation options.
  • Maintain your plan.

Cut through the complexity of choosing and customizing the right 401(k) for your small business. Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Consider which plan you might want.

There are several types of 401k plans:

Traditional 401ks

Many businesses choose the Traditional 401k to offer multiple investment options to employees and a way of saving for retirement with tax advantages. Many employers match employee contributions and deduct a portion of employee salaries from their tax obligations for the year. With a traditional plan, no tax is paid on the income put into the account at the time – but rather, tax is paid when it is withdrawn in retirement.

The 2020 limit is $19,500, plus $6,500 additional if you are over 50, looking to maximize your savings later in the game.

Roth 401ks

Most plans have the option of paying taxes when you put the money into the account, rather than when you take it out. This is called making a Roth contribution.

Like pretax deferrals, Roth 401k contributions are made to the plan by employees through payroll deduction. However, Roth contributions are deducted from wages after payroll taxes have been calculated. The investment earnings on Roth contributions grow tax-deferred while held in the plan, just like traditional pre-tax contributions. This money then has the potential to be withdrawn entirely tax-free when the saver hits retirement.

The 2020 limit for all 401k contributions is $19,500, plus $6,500 additional if you are over 50. This includes both Roth and pre-tax contributions.

Safe Harbor 401ks

A Safe Harbor 401k is ideal for high earners looking to invest aggressively in a retirement account. Unlike traditional plans, a Safe Harbor does not need to pass discrimination tests to prove that it benefits employees and not just highly compensated executives. Employers can choose to make nonelective contributions, 2% match, 3% match, or 100% match.

In 2020, business owners with Safe Harbor plans can contribute $57,000 plus $6,500 in catchup contributions if you’re over 50.

SIMPLE 401ks

A SIMPLE 401k is a hybrid between an IRA and a 401k that allows you to bypass compliance testing and allows employees to take out loans from their accounts if necessary. Employees become immediately vested, and there is less flexibility for employers to customize.

For 2020, the maximum contribution is $13,500 plus $3,000 in catchup contributions for people 50.

Solo 401ks

You can open a 401k for yourself (and a spouse), even if you have no other employees as a sole proprietor, freelancer, or startup entrepreneur. You may make contributions as an employer and employee to maximize your tax-advantaged savings.

The contribution limit of $57,000 (plus $6,500 for 50+) in 2020 is higher than with a SEP IRA.

Find the right 401k provider that meets your needs and goals.

Still not sure which plan is right for you? Download our 401k guide to finding the right plan for you or your small business.

A 401k plan provider covers the administrative burden of establishing and running the plan, which can include:

  • Auto-enrollment
  • Employee support
  • Loan administration
  • Trust setup
  • Tax filing

You can expect to pay a monthly charge for this service. Some 401k providers work with preferred brokers, while others offer the freedom to choose any broker. Depending on the broker, this financial adviser may choose the investments for the plan or help plan participants choose their own investments.

Determine whether you’ll match, create a plan document, and set up an asset trust.

Next, you’ll need to consider: How much do your employees want to invest in their 401ks? How much are you willing to contribute? Keep in mind, any contributions you make can be deducted as a business expense.

The maximum on total contributions is $57,000 for employees under 50 and $63,500 for employees over 50. Depending on the type of 401k established, certain rules may apply. You may choose to match 50 cents on the dollar, dollar-to-dollar, a percentage of salary, or up to certain limits.

All of this should be clearly spelled out in a legally binding plan document written by the financial institution or professional tasked with handling the plan. This document will also explain employee eligibility or vesting requirements, contribution amounts, and an explanation of how contributions and distributions will be made. A trust will need to be set up to hold the guaranteed assets.

Devise a recordkeeping system.

You will need a system for tracking employer and employee contributions, earnings and losses, plan investments, expenses, and distributions. Many plan providers handle recordkeeping on your behalf. Otherwise, you may consider payroll software or SaaS payroll services.

Let employees know about their participation options.

Employees can only participate in your generous incentive if they know it exists. A plan provider can give you materials that describe the plan’s benefits, features, and employee rights, which you may then circulate. Employee seminars and presentations can be conducted to maximize participation.

Maintain your plan.

All plans will need to make employer contributions, report plan information to employees, pay plan provider fees, prepare summary reports for plan participants, and fill out Form 5500 for the IRS.

Some plans may require Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) nondiscrimination tests that compare salary deferrals of highly compensated employees vs. that of non-highly compensated employees.

Contact Ubiquity to find out how to get small business retirement plans going in as little as 15 minutes.

Wondering how your retirement savings stack up? Most financial planners recommend setting aside 15 to 20 percent of your gross income into a 401k plan, IRA, Roth IRA, and/or tax-advantaged account.

It’s important to remember that it’s never too late–or too soon to start saving for the future. The earlier you begin planning for retirement, the better, but you can always catch up in later years if necessary.

What is the average retirement savings?

American 401k balances are up due to asset performance and increased contributions. Naturally, those in their sixties have the highest balances, but the “average” plan balance was up to $106,000 in 2019.

On the other hand, a Bankrate survey of 1,000 people found:

  • 21%, or one in five Americans, don’t save any of their annual income for retirement.
  • 20% save 5 percent or less of their income.
  • 28% save 6 to 10 percent of their income.
  • 16% save the recommended 15 percent or more for retirement.

Are you ready for retirement?

Comparing 401k balance averages won’t necessarily tell you much about your own retirement readiness. Breaking down the numbers by age group is more helpful, as 401k balances increase considerably with age.

How much should you have in your 401k by different ages?

Twenties

  • Average 401k balance: $11,800
  • Median 401k balance: $4,300
  • Percentage of income: 7%

Thirties

  • Average 401k balance: $42,400
  • Median 401k balance: $16,500
  • Percentage of income: 7.8%

Forties

  • Average 401k balance: $102,700
  • Median 401k balance: $36,000
  • Percentage of income: 8.5%

Fifties

  • Average 401k balance: $174,100
  • Median 401k balance: $60,900
  • Percentage of income: 10.1%

Sixties

  • Average 401k balance: $195,500
  • Median 401k balance: $62,000
  • Percentage of income: 11.2%

Are you saving enough?

Your 401k savings goals based on age might look something like this:

  • Save half your annual salary by age 30. (So, if you earn $50,000, aim for $25,000 saved by 30.)
  • Save twice your annual salary by age 40. (So, if you earn $50,000, aim for $100,000 saved by 40.)
  • Save four times your salary by age 50. (So, if you earn $50,000, aim for $200,000 saved by 50.)
  • Save six times your salary by age 60. (So, if you earn $50,000, aim for $300,000 saved by 60.)
  • Save eight times your salary by age 67. (So, if you earn $50,000, aim for $400,000 saved by 67.)

Ideally, you will have increased your salary with raises, bonuses, and promotions over the years.

The 80% Rule

To live comfortably after you retire, experts recommend planning on having 80% of your current salary per year for 20 years. This may sound like a huge sum, but it doesn’t only include your personal savings in 401ks and IRAs; it also includes your company pension and social security benefits.

Most people plan for Social Security benefits to replace about 33 percent of their wages. Pensions may account for another 20 percent of your income. Personal earnings, assets, and investments account for the remaining half.

The reason it’s not the “100% rule” is that, feasibly, some of your expenses will reduce or disappear entirely. For instance, you won’t use as much gasoline or spend as much for auto maintenance without the daily commute. You won’t be contributing to your retirement savings anymore, and perhaps you have paid your mortgage off already.

Some situations where you may require more than 80% include:

  • You plan to travel extensively.
  • You have expensive hobbies.
  • You want to retire before 65.
  • Your family tends to live well into their 90s.
  • You won’t be able to maintain health insurance through an employer.

On the other hand, you may need less than 80% in retirement if:

  • You have always had a large savings nest egg and live happily on a modest budget.
  • Your house, automobile, student loans, and credit card debts are fully paid off.
  • You plan to live a simpler, scaled-down lifestyle in retirement by downsizing to a smaller home.

Still fuzzy on the math? Try the Ubiquity 401k calculator for estimations made easy!

You have 60 days to roll over a 401k into an IRA after leaving a job–but there are many other options available to you in these circumstances when it comes to managing your retirement savings.

What happens to your 401k if you leave your job?

You have a number of options when it comes to managing your 401k after you leave your job:

Leave the 401k in the care of your former employer.

If your 401k balance is low – say $5,000 or less – most plans will allow you to keep the money where it is after you leave. By default, you may be able to manage the money without making changes, but your investment choices will be limited. If the money is under $1,000, the company may cut you a check to force the money out. If the money is between $1,000 and $5,000, they will likely help you set up an IRA if they are forcing you out.

Move the 401k to your new employer’s 401k.

If you change companies, it’s typically no problem to rollover your old retirement plan into your new employer’s 401k. With a little bit of paperwork, the old plan administrator can simply shift the contents of your account directly into the new plan account with a direct transfer. This custodian-to-custodian transaction is not considered taxable.

Another option is to elect to have your balance distributed to you in check format, which you can then deposit into your new 401k account within 60 days, without paying the income tax. If you are a sole proprietor, freelancer, or entrepreneur, you may also consider setting up your own Solo 401k for yourself (and potentially your spouse or a partner) at this point. If you are in the middle of a lawsuit or worry about future claims against your assets, leaving your money in a 401k (versus rolling over into an IRA) is going to offer better protection against liquidation.

Roll the 401k over into an IRA.

What if you’re not moving to a new employer immediately or your new employer doesn’t offer a 401k? What if your employer requires you to put in a number of years before you become “vested” and eligible to participate in their 401k plan?

In these circumstances, stashing your money in an IRA with the financial institution of your choice is a freeing solution. You’ll be able to choose where, how, and when you invest unless you agree to pay a broker to manage the funds for you. A direct rollover is ideal to avoid paying taxes on the amount transferred over; you have 60 days to roll your 401k over into the new IRA.

Agree to take the distributions.

If you are retiring, you can take penalty-free distributions on your savings starting at age 59.5. If you are under age 59.5, you can still take a distribution, but you will need to pay a 10% penalty unless you meet the “hardship exemption” or “IRS Rule of 55” criteria. If you are 72 or older, you must take minimum withdrawals. Keep in mind you will need to pay income tax on the withdrawn amount – unless you set up a Roth 401k that you had for at least five years and paid taxes when you put the money in. If you fail to meet the five-year requirement, only the earnings portion of your distributions is subject to taxation.

Cash it out.

A lump-sum distribution will liquidate your old 401k account, but you will need to pay the full tax burden, and you may be subject to the 10% early withdrawal penalty. By taking the full amount, you will essentially be starting all over in saving for retirement.

Generally, it’s best to allow the money to grow in a tax-deferred account unless you are, in fact, retiring and need all of the money to meet an extreme hardship need right now.

Ubiquity is a 401k plan provider for entrepreneurs and small businesses. Contact us for assistance in setting up a new 401k or in rolling over an existing 401k to a new account.

The average small business pays FIVE TIMES the fees for their 401k plan than what Fortune 500 businesses pay.

Fortunately, a new breed of small business 401k plan provider has emerged. These plan providers have tailored their businesses to offer high-quality, low-cost, user-friendly solutions geared toward entrepreneurs, startups, and companies with 500 or fewer employees.

Ubiquity is frequently mentioned among the best 401k providers for small business clients – as we are the only company that has offered flat-fee 401k plans with no hidden costs since 1999.

What makes the best small business 401k provider?

Consider the following factors in choosing a 401k provider for your small business:

Cost

Cost, of course, is a major factor for businesses with smaller budgets. Fees can have a huge impact on your plan’s overall success, even if the fees are less than 1% of the assets managed.

Ideally, you will find a plan provider that does not charge AUM fees or per-employee fees. Some of the automated providers masquerade with unusually low prices but add on fees for each employee managed that escalate the overall cost of the plan. Brokers and plan providers may each charge AUM fees that cut into your returns and total thousands of dollars in the long run.

Ease of use

Small businesses tend to be short on time, particularly when it comes to running an optional 401k. Unfortunately, 401ks are tightly regulated, and they do require a lot of work to keep in compliance with government regulations. Audits can be costly and compliance testing a hassle – which is why it’s imperative to choose a plan provider that takes this complex, tedious work off your hands.

Flexibility

Some providers have specific plan design limitations or require that you go through their preferred broker, while others grant you the freedom to choose and change brokers or plans as you see fit. This freedom can expand your investment options, improve portfolio performance, reduce investment fees, and help employees meet their goals.

While most employees will be fine with a simple lineup of low-cost index funds, others may want access to a broader range of investments. As an employer, you may want to call the shots regarding whether or not to allow loans, vesting schedules, Roth contributions, and employer match adjustments.

Employee experience

The right plan provider will help you gain a competitive advantage in attracting and retaining talent.

Some providers are willing to help boost employee participation and savings rates. Financial wellness tools help your workers save enough for retirement, easing their anxieties and improving their workplace productivity as a result.

Who are considered the best 401k providers?

According to Fit Small Business, the 10 best small business 401k providers include:

  • Ubiquity – perfect for those who want easy setup and the freedom to choose their own broker
  • Vanguard – ideal for a low-cost, easy-to-setup Solo 401k with a well-known name
  • Sharebuilder – an all-online plan with low-cost investments and easy administration
  • Charles Schwab – offers additional banking and investment brokerage services
  • Fidelity – helpful if you want a large network of offices and in-person guidance
  • E-Trade – a DIY source for active trading
  • TD Ameritrade – a traditional provider and alternative to Vanguard
  • IRA Financial – for businesses who want alternative investment options
  • Merrill Edge – offers business and investment services under one roof
  • Rocket Dollar – offers self-directed Solo 401k with checkbook control

How does Ubiquity compare to the best 401k providers for small business?

Other names you may have heard of include Ascensus and PAi/CoPilot. Ubiquity has a lot in common with these two providers. We all boast low-cost and dedicated advisor support. Like Ascensus, Ubiquity offers:

  • Full investment flexibility
  • High Google review rating
  • No AUM fees
  • No per-person recordkeeping fees
  • Enrollment presentations
  • Support for both employers and employees

Yet, we are different from Ascensus in that:

  • We provide additional online financial wellness tools for employee engagement
  • We do not force you to pay investment advisor fees
  • We support multiple payroll integrations so you won’t have to change anything

Contact us to learn more about the four flexible small business retirement plans we offer.

When Ubiquity began in 1999, we were the pioneer of small business retirement planning.

Traditionally, 401k plans provided by legacy institutions were designed and priced for large businesses. Over the last few decades, smaller companies have accounted for more and more jobs in the American economy, and additional online 401k plan providers have popped up specializing in easily-administered, cost-effective retirement plans geared toward employers with 500 or fewer employees.

However, not all plan providers are the same–and not all 401k plan pricing structures are created equal.

Some plan administrators charge AUM fees, which can eat at your savings. While a 0.1% annual fee may not sound like much, it can lower your account balance by thousands of dollars by the time you retire.

Ubiquity is here to help you get the right-sized 401k plan for your business, understand different retirement plan structures, and uncover sneaky hidden fees that are all too common in the industry. Whether you’re a solo entrepreneur or small business owner with 100 or fewer employees, you deserve a fair-priced 401k plan that helps you attract and retain top talent, with complete transparency on exactly what you’re paying.

Cut through the complexity of choosing and customizing the right 401(k) for your small business. Get an instant quote.

How many employees do you have?
I am a sole proprietor
(just me/or my business partner/spouse)

Types of Fees Charged by 401k Plan Providers

A 401k plan administrator may charge one or more of the following fees:

Assets Under Management Fees

By far, the largest component of 401k plan fees is associated with managing employee funds. Most 401k plan providers charge Assets Under Management (AUM) based on a percentage of the plan’s total assets and are typically deducted from your investment returns, so they are easily hidden. AUM fees can be charged for investment advice, portfolio management, custodian incentives, or investment trading fees.

If you have a 1.5% AUM fee, for instance, this means you are paying $1.50 on every $100 in your 401k account. The better your portfolio does, the more you pay in fees. If you have $500,000 invested, this seemingly “small” 1.5% fee totals $7,500 deducted from your fund. Some providers even charge a penalty if your plan fails to meet certain asset levels.

Flat Plan Administration Fees

The day-to-day operation of a 401(k) plan can be overwhelming for businesses to handle in-house with their own staff of accountants, financial advisers, tax professionals, bankers, lawyers, trustees, and human resources professionals. It is a full-time job to manage all the moving parts and ensure a smooth rollout. These services are basic and necessary.

That is why employers hire plan providers – to take the burden off their hands.

Flat fees are a transparent alternative to AUM fees. Instead of paying a percentage of the total amount invested, a 401k administrator may charge a fixed monthly, quarterly, or annual fee at one flat rate. These fees can vary widely, depending on the provider, but generally cover setup, enrollment, recordkeeping, employee communications, employer support, legal expenses, loan administration, and trustee services. A plan provider may offer a host of additional services, such as telephone voice-response systems, customer service representative support, educational seminars, investment advice, electronic access to plan information, financial wellness portals, daily valuation reports, and retirement planning software.

Per-Person Fees

Some 401k providers who charge a flat fee run their plans in tandem with a per-person price tag based on how many employees are participating in the program. This fee is assessed for recordkeeping purposes, under the assumption that it costs more to manage a portfolio of 1,000 versus that of 100. A standard industry trick is to lure employers in with a surprisingly low flat fee but sneak in a higher per-participant cost.

Transaction Fees

A 401k provider may charge when participants perform certain actions like changing a fund lineup, withdrawing a loan, taking a distribution, or using premium investment advisory services. Frequent or high-cost transaction fees can slowly eat away at your savings. Transaction fees can happen with both asset-based and flat-fee structures.

How to Compare 401k Costs

Given the vast discrepancies in 401k plan structures, it can be challenging to compare apples to apples. Fortunately, since 2012, the Department of Labor has mandated that all plan providers give fair notice of all fees and services rendered.

  • If you currently have a 401k plan: Ask your provider for a 408 (b)(2) disclosure to see a list of vendors who service your account, which services you’re paying for, and what fees you’re being charged. You can also ask your adviser to benchmark your plan against other similar models to determine the reasonableness of your contract.
  • If this is your first plan: Look at the fund lineup expense ratios, setup fees, and administration costs to see the breakdown before signing on the dotted line. For many options, the 401k expense ratios are exorbitantly high. The percentage-based charges go well above what it actually costs to make investment transactions or operational expenses. These costs may be used to market the firm or incentivize managers to invest more actively to make the firm higher profits.
  • No matter what: Consider tomorrow, as well as today. Why waste money if you don’t have to? Compare and model out beyond the current year to gauge the impact of costs over an extended period of time. Assess the compounding effect of fees on your employees’ retirement savings. Make sure you do not have any mutual fund share classes with the infamous 12b-1 fees, which can drive up costs 0.25 to 0.75 percent, without outperforming high-quality passive index funds. Review proposals from multiple plan administrators to see the difference a change in provider can make.

Ubiquity Offers a Different Approach to 401k Plan Pricing

All these fees can be overwhelming to a small business provider. Since 1999, Ubiquity has exclusively served solo entrepreneurs and small businesses with the most cost-effective 401k plans. We offer our clients four different 401k plan options available for one FLAT monthly fee, ranging from $18 for a Solo(k) to $165 for a Custom(k). We do not charge AUM, per-person, or transaction fees for our administrative work, though this is something to keep in mind when selecting your broker who actively manages your investments.

Whether you’re looking for a change in provider or setting up your first plan, Ubiquity is happy to help with transparent plan pricing for only the most essential administrative services you need. Schedule time to meet with a retirement expert today. 

No, not all 401k providers are the same.

They vary greatly in cost, ease of administration, support, and flexibility. Even comparing the top tier plan providers, you’ll notice a variance in service. When you partner with Ubiquity, you are choosing a company that puts you and your employees first. Here you will see why Ubiquity is consistently ranked among the top 401k providers for small businesses.

Factors When Choosing a 401k plan Provider:

  • Plan cost: We have the ability to leverage down investment expenses with transparent, low, flat fees. With plans starting as little as $18/month for solo 401ks and $75/month for Safe Harbor 401ks, you will never overpay to administer a retirement plan for you and your employees. Ubiquity is the only small business 401k provider that has maintained a low, flat-fee model since 1999. Some providers charge fees for Assets Under Management (AUM), transactions, investment advice, and custodian compensation under the guise that it’s necessary to grow the portfolio aggressively.
  • Ease of setup and administration: With Ubiquity, you can have your plan up and running in as little as 15 minutes. We integrate with your existing Payroll and HCM practices, so you can honor your fiduciary responsibilities and keep it simple while modernizing your benefits with a 401k plan.Built-in auto-enrollment makes it effortless for employees to save for their future (and for you to enjoy that $500/year tax incentive for the first three years of a new plan.) You may find that not every plan provider has the capability to integrate or auto-enroll, or perhaps they charge extra for these services.
  • Level and type of support: Some companies offer online-only chat services, whereas we staff both online and phone support. We guarantee the highest level of support from highly-trained, US-based personnel. Whether you prefer a direct line to your representative, email, or a portal submission ticket, we are here to answer questions for both employers and employees.We also offer access to an engaging online financial wellness portal, so your employees can be more actively involved in retirement planning. Not every 401k plan provider goes the extra mile to assist with employee participation.
  • Can you make Roth contributions? Ubiquity gives you full flexibility to set up pre-tax (Traditional) or post-tax (Roth) retirement accounts. There is extra administrative work associated with Roth accounts, so not every plan provider offers it. You can make Roth contributions with our Solo(k), Saver(k), and Custom(k) plans, which allows you the ability to pay your taxes upfront and pay nothing when you take the money out in retirement.
  • Can you take loans from your plan? Allowing loans within a 401k plan is permitted by law, but employers are not required to do so. Loans are a feature of most 401k plans, as employees generally prefer to have maximum freedom and control over their funds. While some providers consider loans a hassle, Ubiquity allows you the freedom to borrow from a 401k. In addition to administration, we’ll help you craft appropriate guidelines on making the loans, so employees do not abuse the benefit and fritter away their savings.
  • Are you allowed a range of investment choices in the plan? Ubiquity allows you to control your own investments with efficient investing options and open trading. You choose any broker you wish, and we administer the plan according to your wishes. Some plan providers have preferred brokers they work with, which limits your choices in funds and forces you into prepackaged options that may not be best for you and your employees.

How Does Ubiquity Stack Up To Other 401k Providers?

Compared to other popular 401k providers like America’s Best, Ascensus, Human Interest, Merrill Edge, PAi Co-Pilot, and Share-Builder:

  • Ubiquity has the highest Google review rating of 4.1 (Ascensus, the next best, has a rating of 3).
  • Ubiquity is the least expensive option by $225 (PAi Co-Pilot) to $1,545 (Share-Builder).
  • Ubiquity offers full investment flexibility (only comparable to Ascensus).
  • Ubiquity does not force you to pay investment advisor fees (like Ascensus).
  • Ubiquity and Ascensus do not charge AUM advisory and per-person recordkeeping fees.
  • Unlike Ascensus, Ubiquity runs with the big dogs in supporting multiple payroll integrations.
  • All the BEST plan providers offer dedicated employee/employer phone, email, and chat support.
  • Ubiquity is in league with Ascensus and PAi Co-Pilot in offering dedicated advisor support.
  • Though Ubiquity and Ascensus offer enrollment presentations for employers and employees, ONLY Ubiquity provides financial wellness tools.

Cut through the complexity of choosing and customizing the right 401(k) for your small business. Get an instant quote.

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Do You Need a New 401k Plan Provider?

Ubiquity not only initiates new plans, but we can also transfer your accounts to a new program if you’re unhappy with your current provider. There are four common pain points employers have that cause them to switch:

  • The fees are too high. The all-in costs of administering a 401k plan can range from 0.5 to 4.5%, depending on the size of the program. Most small businesses end up paying 1.5 to 2% more than larger corporations due to their limited bargaining power. While an administrative fee is fair for recordkeeping, legal services, trustee services, customer support, and educational materials, you shouldn’t have to pay AUM fees or nickel-and-dime fees for transactions, per-participant, or loan servicing.
  • You are offered a limited choice. It may sound “convenient” to work with a 401k provider who already has a broker of choice they work with, but for many employers, this spells high costs and limited investment options. What if the broker focuses on funds with commissions, sales loads, or 12b-1 fees? What if the broker doesn’t offer enough diversity?It’s better to have the freedom to shop around. That way, if you’re dissatisfied with the broker, you can acquire a new one, without having to find a new plan provider as well.
  • There is no employee engagement assistance. Employees who understand their contributions, costs, and investments are empowered to maximize their benefits and savings. Auto-enrollment makes a 401k easy, but it can be difficult for employees to understand how much they’re contributing, what the employer match is, how to access their 401k account, how to change contributions or investments, and how to best take advantage of the plan.
  • You don’t like the support. Some 401k providers put more resources into acquiring customers than toward providing good user experience. The main landing page may look slick, but there is clunky, outdated software for the employer/employee portal. You may receive personalized customer care at first, but your questions go unanswered once you’ve been set up in the plan.Lack of attention to detail can result in employees who aren’t maximizing their benefits or who aren’t satisfied with the amount of money coming out of their paychecks. As confused employees bring up their concerns, you may need to make adjustments – only to find delays in administrative requests, which is not good for you or your workers.

So, to recap: NO, all 401k providers are NOT the same! Ubiquity has been administering small business 401k plans since 1999. We’ve built our service around many small business pain points to outcompete other plan providers on all fronts. Contact us to learn more.

How to Recession-Proof Your 401k

Dylan Telerski / 7 May 2020 / 401k Resources

Manage your retirement plan through market volatility

The 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 401k loan to help them through the crisis. Whether you’re actively involved with your plan or not, the coronavirus downturn represents a good opportunity to recession-proof your 401k.

Focus on what you can control.

What we know over 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. Leave it on autopilot and don’t look at the numbers. 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. If retirement is still five or more years into the future, you can hold off and expect 10 percent annual returns when the market perks back up 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 look at what assets you currently own and rebalance. If you’re overinvested in stocks, add some bonds. If you have invested too heavily in the market, add cash to a money market fund temporarily until it’s a better moment to invest in high-return stocks.

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

Look for opportunity.

Where some see a market wipe-out, others see opportunity. Many investors are actually upping 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 without you realizing it is missing. This strategy makes sense, particularly 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 2020, contribution limits have increased to $19,500, with an additional $6,500 allowed for those over 50. Take this chance 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. You needn’t rest on your laurels during a recession. Rather, making small, thoughtful adjustments is the best way to right the ship and keep sailing on. Contact Ubiquity to learn more about how to maximize 401k plans during the pandemic.

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© 2020 Ubiquity Retirement + Savings
Privacy Policy
44 Montgomery Street, Suite 3060
San Francisco, CA 94104
Support: 855.401.4357

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