Question 1

Whats the defeiniton of a 401(k)?

Accepted Answer

A 401(k) plan enables businesses to meet retirement planning and saving goals while taking advantage of business and personal tax benefits.

Question 2

Im self employed. How can a retirement between 401(k) help me??

Accepted Answer

A solo 401(k) plan, is designed to provide all the benefits of a big 401(k) plan, including maximum tax savings for self-employed individuals with no full-time employees other than the business owner and a spouse, if applicable.

Question 3

What are the differences between 401(k) and Roth IRA retirement plans?

Accepted Answer

The major differences between a traditional pre-tax 401(k) and a post-tax Roth IRA are around contribution maximums, taxes, and investment options.

Question 4

Im a small business owner. Why should I offer my employees a 401(k)?

Accepted Answer

Saving in a 401(k) provides several benefits to business owners and their employees, as well as those who are self-employed. In addition to providing a more financially secure future upon retirement, there are many tax benefits.

Question 5

Whats a Safe Harbor Plan?

Accepted Answer

Each year, a 401(k) plan needs to pass specific tests designed to keep it from becoming a plan that unfairly benefits the company’s high-earning employees. If the 401(k) fails these tests, the business owner can move to a Safe Harbor 401(k) plan, which allows the plan to bypass these tests in exchange for additional contributions from the business owner.

Question 6

Whats the difference between 401(k) pre-tax contributions and Roth contributions?

Accepted Answer

The main difference between traditional and Roth 401(k) is how contributions are made. Traditional 401(k)s are funded with pre-tax deductions while Roth 401(k)s fund with post-tax contributions.

Question 7

How can a 401(k)-retirement plan help small businesses?

Accepted Answer

Saving in a 401(k) provides several benefits to business owners and their employees, as well as those who are self-employed. In addition to providing a more financially secure future upon retirement, there are many tax benefits.

Question 8

Can I use my 401(k) early?

Accepted Answer

Yes, you always have the right to withdraw some or all contributions and their earnings from your 401(k) and every withdrawal will be subject to income taxes. Any taxes or penalties you might owe on that withdrawal will depend primarily on your age.

Question 9

What to do with an old 401(k)?

Accepted Answer

Leave the account where it is. This is usually an option if your balance is above a certain level, typically $5,000. Roll the account balance directly into your new employer’s plan. Roll the account over to an IRA. Take a cash distribution.

Question 10

Traditional vs Safe Harbor 401(k)

Accepted Answer

A Safe Harbor 401(k) plan provides a minimum level of contributions to all employees, freeing owners and highly compensated employees to receive larger profit-sharing payments.

A Safe Harbor 401(k) is easier and less expensive to administer than a traditional 401(k), but the cash needed to fund employer contributions will likely be higher overall.

Traditional vs Safe Harbor 401(k) Dylan of Ubiquity Retirement + Savings (http://www.myubiquity.com/) discusses the differences between a Traditional 401(k) and a Safe Harbor 401(k).

Question 11

Terminations

Accepted Answer

If you wish to terminate your account, contact us via email or phone, and we will email you the termination form to complete. Note: If you will be shutting down your Single 401(k) plan, you will be required to liquidate your 401(k) account at your custodian and file a final Form 5500EZ to report that the plan has been terminated. If you would like for us to complete the Form 5500EZ for you, please make a note of it on your termination form. The fee for us to complete the Form 5500EZ is $195.

Question 12

What is a 401(k) plan year?

Accepted Answer

A plan year is the 12 month period that a 401(k) operates on. However this does not have to follow the calendar year, for example, it can be from May 1- April 30 instead of the usual January 1 – December 31.

Question 13

What is an Elective Deferral Contributions?

Accepted Answer

Elective Deferrals are amounts contributed to a plan by the employer at the employee’s election and, except to the extent they are designated Roth contributions, are excludable from the employee’s gross income.v

Question 14

What is a Defined Contribution Plan?

Accepted Answer

A defined contribution plan is retirement plan that’s typically tax-deferred, like a 401(k) in which employees contribute a fixed amount or a percentage of their paychecks in an account that is intended to fund their retirements.

Question 15

What Are Distributions?

Accepted Answer

Distribution is the word the IRS and the financial industry use to talk about withdrawing money from an employer-sponsored retirement plan or any other tax-deferred retirement plan, like an IRA. It’s important to note that regular income taxes will still apply.

Question 16

What Are Required Minimum Distributions?

Accepted Answer

Your required minimum distribution also called an ‘RMD’, is the minimum amount you must withdraw from your account each year.You generally have to start taking withdrawals from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account when you reach age 72.

Question 17

What is an IRA?

Accepted Answer

An Individual Retirement Account (IRA) is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis. There are 3 main types of IRAs: Traditional IRA, Roth IRA, and Rollover IRA. Each IRA has a different set of advantages.

Question 18

How do I set up and manage my The Single(k)®  plan?

Accepted Answer

Sign up — Enroll in our The Single(k)®  plan via the enrollment link on the website.

Question 19

How does The Single(k)®  work?

Accepted Answer

The The Single(k)® retirement plan combines the convenience of 401(k) payroll deductions with the flexibility of a profit-sharing plan. With Single(k), you can set aside pre-tax or Roth (after-tax) money and also make a profit-sharing contribution if you so choose, allowing you to save up to $58,000 in 2021 ($64,000 in 2021 if you are age 50 or older).  You won’t pay taxes on your pre-tax savings or their earnings until you withdraw the money at retirement.

Question 20

What is a Single(k)?

Accepted Answer

The Single(k)® is a flexible, easy and cost-effective way for a business owner like you to maximize your retirement savings. With tax-deferred savings of up to $58,000 for 2021 ($64,000 if you are age 50 or older), The Single(k)® offers all the savings potential of a typical 401(k) plan, but it’s designed specifically for owner-only businesses or those with part-time employees. This includes sole proprietorships, closely held family businesses and corporations.

Question 21

How much can I save in Single(k)?

Accepted Answer

You can save up to $19,500 per year in individual contributions — either pre-tax or after-tax (Roth) contributions, or both ($26,000 for those age 50 or older). Although it’s not required, you can make a profit-sharing contribution for a total contribution of up to $58,000 per individual (or $64,000 for those age 50 or older) depending on the type of company you have.

Question 22

Does the “catch-up” contribution apply to me?

Accepted Answer

Catch-up contributions are an increased amount you can save in a retirement plan if you are age 50 or older. If you turned 50 or older in 2021, you can contribute an additional $6,500.

Question 23

What is a contribution increase?

Accepted Answer

Work retirement plans are usually set up so your contribution is taken as a percentage of your paycheck. For example, if you make $60,000 and elected to contribute 6% to your 401(k) plan, your contributions will add up to $3,600 per year. A contribution increase would mean you decide to contribute a larger percentage of your income.

Question 24

How long until my account is set up and ready to be funded?

Accepted Answer

Once you have enrolled in our The Single(k)® plan, your account with us is active. You will then open an account at the custodian of your choice. This is where your The Single(k)® assets will be held and where you make your contributions.The account set up time varies by custodian.

Question 25

How do I get started?

Accepted Answer

Set up and fund your The Single(k)® plan in three steps.

Question 26

Do I have any recordkeeping or reporting obligations with Single(k)?

Accepted Answer

With The Single(k)® you are responsible for keeping track of money going in and out of your 401(k) plan to ensure that limits are not exceeded and for government reporting purposes. You are also responsible for any government reporting (Form 1099-R and Form 5500EZ). We can help you with your reporting (for a $195 fee) or your personal accountant can assist you.

Question 27

How much may I contribute to my Roth account?

Accepted Answer

The combined amount you may contribute to a retirement plan is limited to $19,500 for 2020 ($26,000 if you are age 50 or older).  Your individual contributions can be pre-tax, after-tax Roth contributions or a combination of both.

Question 28

Can I make both pre-tax contributions and Roth (after-tax) in the same year?

Accepted Answer

Yes! Your contributions can be pre-tax, after-tax Roth contributions or a combination of both in the same year. In 2020, you can make up to $19,500 in individual contributions ($26,000 for those age 50 or older).

Question 29

What is a Roth 401(k)?

Accepted Answer

A Roth 401(k) is a hybrid between a Roth IRA and a 401(k) plan. In a Roth 401(k), earnings on after-tax contributions grow tax-free, just like a Roth IRA. However, the contribution limits in a Roth 401(k) are significantly higher than a Roth IRA — $19,500 ($26,000 if age 50 or older) in 2020, compared to $6,000 for a Roth IRA.

FAQs about 401(k)