Category: Financial Advisors

Why Advisors Always Thank Me This Time of Year

Jason Gross, AIF ®, CRPS / 16 Sep 2022 / Financial Advisors

Guest post by Jason Gross, National Sales & Development Director 

One of my financial advisor clients stopped to deliver a heartfelt thank you at the end of our initial consultation. Another partner sent me a good old-fashioned, handwritten note. That tends to happen to me at this time of year.  

As some of you know, I joined Ubiquity when it was a 10-person startup called The Online 401(k). And since I started working here, late summer/early autumn has always been the most fun because it’s when my clients are reminded how partnering with me has made their lives easier and less stressful.  

So, what’s going on, you ask? Well, it’s Safe Harbor time. That means for small-to-medium size businesses, this is the time of year when the deadline to sign up for a Safe Harbor 401(k) plan rapidly approaches. What’s the big deal? If you are a small-to-medium size business and you want to: 

• Save money on your taxes 
• Avoid the IRS reducing your 401k savings 
• Reward your employees (even if you’re the only participant) 

…you’ve got less than three weeks left to act before you are out of luck and have to postpone till next year.   

What’s a Safe Harbor 401(k) Plan? 

Safe Harbor is the table stakes that make small business 401k a viable solution for owners to save for retirement.  It is a declared employer contribution eliminating most of the means testing that can come with retirement plans. Typically, an employer will contribute between 3-6% of each employee’s salary into the retirement plan to encourage all employees to save. The most common form of a Safe Harbor contribution is a match, meaning the employer is only responsible for contributing when the employee does so too.  

Two Common Safe Harbor Formulas 

1. A dollar-for-dollar match on employee contributions up to 4% of their annual income, or 
2. A dollar-for-dollar match up to 3%, plus 50 cents to the dollar on the next 2% of the employee’s salary 

Most of my clients chose option 1 for its simplicity of explanation and administration. Do you have a favorite? Let me know in the comments below.  

Another choice is what’s called a non-elective contribution. And that’s when a plan sponsor decides that they want to make a Safe Harbor contribution to the employee’s account, regardless of whether or not the employee makes their own contribution.   This lowers the overall cost to 3% of pay but must go to all employees regardless of their participation. 

Why I Recommend Checking Out a Safe Harbor Plan 

Why would you want to include a provision for a Safe Harbor match to begin with? Doesn’t it sound like the business owner is just giving money away?  

It does, but here’s the deal: everyone benefits from a Safe Harbor: the employee, the small business owner, and the financial advisor. I’ll start off with the employee. I think the advantages here are obvious.  

It’s essentially free money that the employer is depositing into their retirement account.  

It can incentivize employees to increase their savings rate. Let’s say I’m an employee and have a 401(k) plan. I’m initially inclined to contribute only 2% of my salary to my 401(k). But if I know that my employer will match up to 4%, it’s much more likely that I’ll feel compelled to elevate my own contribution amount, so I’m not leaving any money on the table. 

These employer contributions are immediately vested for the employee. This means that as an employee, I’m always entitled to my employer’s contributions immediately – I don’t have to be employed for a set amount of time before it belongs to me.  

Safe Harbor Works Hard for Employers 

The advantages for the employer can be substantial.  

First and foremost, a Safe Harbor provision ensures exemption from most annual compliance testing that’s required for all other 401k plans. Meaning you get around risking your savings to a means test that favors rank and file employees! 

This testing is essentially a government-mandated review of the plan to ensure that the 401(k) plan itself isn’t overly advantageous to highly compensated employees at the company.  

The second key advantage for the employer is that any contributions made on behalf of employees can be deducted from corporate taxes. Depending on how many employees you have, this can add up to quite a large deduction. 

And third, if the employer is also a participant in the plan, they can reduce their own personal tax liability with their own pretax contributions, they get to match those funds from their Safe Harbor match, and they get to use this match for their own account to write off on their corporate taxes.  

Advisors Love Safe Harbor Too 

One of the folks I mentioned at the beginning is an advisor, he is one of those who reached out to thank me. Here’s why my advisors love it: 

1. More peace of mind because it saves precious time and resources. Whether it’s coordinating back and forth with a small business owner or a highly compensated employee as to what’s going to be happening with their money, a Safe Harbor provision helps cut through all that. 
2. More employees will have an added incentive to save…which all Advisors appreciate! As those savings accumulate, the interest will also accumulate, ultimately boosting total plan assets for the advisor and their bottom line. 

No Matter What, a 401(k) Plan Supports Small Business Owners 

But even without a Safe Harbor provision, a Ubiquity Retirement + Savings 401(k) enables small business owners to do so many things at the same time. The top 5 reasons I hear all the time from them are: 

1. Follow state and national retirement plan requirements 
2. Save a lot in personal and business taxes while lowering their taxable income 
3. Save time and avoid stress by integrating payroll and automating plan administration 
4. Offer a competitive benefit to employees – one that is the second-most desirable benefit behind healthcare. 
5. Receive Secure Act Tax credits for establishing a new retirement plan for employees

Important Deadlines 

I’d be remiss if I didn’t make sure you knew there are a few different deadlines to bear in mind: 

• For new 401(k) plans with a Safe Harbor match provision, to avoid discrimination testing next year, owners need to set up that Safe Harbor match plan and distribute the Safe Harbor notice (which Ubiquity provides) to employees no later than October 1.  
• Since we at Ubiquity primarily deal with new 401(k) plans, we tend to get a major influx of new clients close to the Safe Harbor deadline. For that reason, we strongly recommend that your client sets up a plan with us no later than September 15.  
• For existing 401(k) plans that are moving to Ubiquity that might want to add or change their Safe Harbor provision. Get talking with our team no later than late August or early September. This is not just to account for the Safe Harbor notices, but also because it can take time to move assets from one provider to another.  
• Finally, if the 401(k) plan is already with Ubiquity and the small business owner wants to add a Safe Harbor provision, it must be set up by November 1 to take effect for January 1. A Safe Harbor non-elective provision can still be added for 2022 if you add the contribution by 12/1.

Where Can I Find a Safe Harbor 401(k)?  

Not that I’m biased or anything, but I work at Ubiquity, and Safe Harbor 401(k) plans are in our blood. We’ve served over 100,000 participants and have helped them save over $3 billion. Reach out to me anytime and I’d be happy to review your unique situation to help you decide if a Safe Harbor 401(k) will make you feel as happy and relaxed as those clients I mentioned. Connect with me on LinkedIn and let me know what your thoughts on Safe Harbor are – and let me know what else you’d like me to write about! 

Selling 401(k) Plans to Your Business Owner Clients

Siân Killingsworth / 20 May 2022 / 401(k) Plan Information, Financial Advisors

As a financial advisor, you maintain a laser focus on helping your clients build and grow wealth.

Offering your clients an outsourced retirement plan through a trusted 401(k) provider can help you avoid taking on new work and additional risk while maximizing your client’s 401(k) contributions, reducing their tax liability and taking advantage of the SECURE Act business tax credits.

But how can you get busy clients to pay attention to one more thing?

A comprehensive email campaign can be your key to opening those doors. And we don’t mean just one email – below, we’re giving you a series of emails that follow one another with thoughtful questions, valuable answers, and compelling calls to action. This is what gets your clients to take a look. Use these templates and personalize them for your own book of business.

• Email 1: High-level introduction. Why are you reaching out to them?

Hi [First Name],

I’m pleased to let you know that I am now able to offer retirement plans for small businesses like yours. Now it’s easy to give your employees the retirement plan options they want without the cost, risk, and administrative burden of a traditional 401(k).

Improve employee satisfaction, retention, and recruitment while helping your team save for the future.

I’d love to set up a brief call to share how a 401(k) plan can help your small business. [Insert your contact info here.]

Best,

[Your Name]

• Email 2: Expand on value & differentiate

Hey [First Name]!

In my work as an advisor, I specialize in [list 1–2 differentiators here. Be specific and concise – the goal is no more than two brief sentences.]

However, I am adding a new offering that is specially designed for small businesses like yours: a small business 401(k) plan through Ubiquity Retirement + Savings®. They have helped thousands of small business owners and employees save over $3 billion over the past 20 years.

Did you know that you can use tax credits to fund the program? I’d like to show you how that works. Just click my calendar to schedule some time that’s convenient for you. [link to your calendar].

Best,
[Your Name]

• Email 3: Reminder

Hi [First Name],

I’ll keep this brief. I know your small business could benefit from offering a retirement plan. When you set this up, the tax credits alone may pay for the program.

And as a small business owner, you can put away up to $61,000 for your own retirement this year (or $67,500 if you are age 50 or older).

Want to hear more? Just hit “reply” and let me know.

Thanks,
[Your Name]

• Email 4: Offer Personalized Support

Hi [First Name],

I’ve partnered with Ubiquity Retirement + Savings® to bring retirement options to small business owners like you.

Ubiquity’s experienced sales team provides one-on-one, personalized coaching. We walk through the process with you, unraveling complexities and delivering advice based on best practices, for a customized, turnkey retirement plan that meets your goals and saves you time.

Are you interested in a brief conversation about your plan? About 20 minutes will do it – just grab some time when it’s convenient for you: [link to your calendar]

Thanks,
[Your Name]

• Email 5: Final outreach/Meeting request

Hi [First Name], I know you’re busy.

I’d like to show you how you can retain and reward your employees while qualifying for small business tax credits with an affordable retirement plan.

Can we connect for 20 minutes? [link to your calendar]

Best regards,
[Your Name]

Finalize and Scale

Once you have personalized and perfected the emails to your satisfaction, you can start sending them to your clients in batches. Start small, in groups of perhaps 10, so you can get a sense of response volume.

Be mindful of timing. Some periods will naturally be busier than others, such as tax season, so you don’t want to waste an opportunity by reaching out when your clients won’t have time.

If you’d like to learn more about our retirement plans, please visit the Ubiquity website or contact us today at 855.401.4357, Option 4.