Questions about retirement options and 401(k)s are common, and smart accountants need to have answers ready. Here’s how to lead your small business clients in the right direction.

Why should I invest in a 401(k) for my small business?

There are two important reasons to consider a 401(k) for your business.

1. It is one of the best tools for recruiting and retaining good employees. A few years ago, the country went through “The Great Resignation.” What we learned from that is that the current generation of employees want more than just a 9-5 job. They want to do work that makes a difference and with a company that cares about them, personally. As a small business owner, you show you care about your employees by taking care of them. That means, providing them with benefits, most importantly, retirement benefits. The feeling of financial security helps employees worry less and engage more at work.
2. Huge tax incentives may cover most or all of the expenses for the first three years. The government has rolled out several big credits that employers considering a new 401(k) plan should know about. They include auto-enrollment credit, administrative expense credit and employer matching credits. These credits are intended to help small companies offer good retirement benefits, and are available to businesses with 100 or fewer employees.

What are the state retirement mandates I’ve been hearing about?

About half of all employers in the US live in states where offering retirement is no longer optional—it’s mandatory (or will be soon). That puts a lot of stress on employers to figure out their responsibilities in becoming a plan sponsor. It can be overwhelming to be faced with researching options, trying to understand responsibilities, and executing all of the tasks related to sponsoring a plan.

401GO actually began in response to this same overwhelm. CEO Dan Beck, when looking for a retirement plan for employees of another company he owned, experienced what so many other small business owners experienced when starting a 401(k). He discovered that navigating the responsibilities and cost of starting a retirement plan for his company was difficult and frustrating, and that there were no options aimed at helping small companies.

Thus, 401GO was born and we have been helping small businesses by taking that stress away.  401GO steps in and performs almost all of the compliance related to sponsoring a 401(k), relieving the burdens of the sponsor so they can focus on running their business.

I want to start a 401(k) but how do I get started?

That’s an easy question and one I love to answer.  Simply send them my way and we will take care of them from start to finish.  I work with some of the most talented people on the planet and they have worked with thousands of people in companies starting new small business 401(k) plans. Our Plan Consultants can answer questions and walk someone through a plan setup in about 15 minutes.

Accountants can have an easy answer for their clients by partnering with 401GO, and learning what we have to offer compared to others. Then you’ll be a hero to your clients by giving them not only a quick solution to their problem, but a good one too. They’ll be thrilled at your expertise and you’ll have another happy customer.

I want to move my current plan to another provider.  How do I do that?

Tell your client to WAIT before taking any further action.  You cannot simply shut down a plan and start a new one.  If you do, you will be restricted from opening the new plan for 1 year…and that is a bummer.  So, send them my way so we can help walk them through this process.

401GO has a great process for transitioning a small business 401(k) plan from an old provider. We do it with minimal disruption to employees, and we even have a team of experts in place to help. 

Prepare Your Answers

Accounts should be ready for these questions, and have some good answers prepared. To learn more about how a partnership with 401GO can benefit you and your clients, contact us. 

The post Small Business 401(k) Questions and How Accountants Can Answer Them appeared first on Fast and Affordable 401k for growing businesses.

Must You Offer Employees a 401(k)?

The short answer is no, at this point, there are no federal laws requiring employers of any size to offer a 401(k) plan to employees. However, there are some states that require businesses to either offer a retirement plan to their employees or use a state-sponsored program. While a 401(k) is the most popular plan type, other retirement plan types are also available.

Most of the state-sponsored programs are Roth IRAs (Individual Retirement Accounts), not 401(k)s, and although both are retirement savings vehicles, there’s a world of difference between them. Let’s take a look at each.

What Is an IRA and How Does It Work?

You might think you know the answer to that question, especially if you have one, but you might be wrong. An IRA is a personal retirement account (remember: the “I” is for “Individual”), previously used more often by those who had no access at work to a 401(k). An IRA is a private nest egg, and only the account owner makes contributions.

What Is a 401(k) and How Does It Work?

A 401(k), a popular retirement vehicle that over time has largely replaced pensions, is available only through employers. The IRS sets lots of rules about which employees companies can and cannot bar from participating in the 401(k) plan. Generally speaking, full-time employees are allowed to participate in a 401(k) plan if their company offers it. According to a CNBC survey, about 40% of people do not avail themselves of this benefit, but that is employees’ choice to make.

401(k) vs. IRA

Why is the 401(k) considered the gold standard of retirement accounts? Because employees can save so much more in them. The maximum employees can save in a 401(k) in 2024 is $23,000, while the IRA max is a paltry $7,000. Additionally, many employers offer matching funds, contributing a percentage on the dollar of whatever the employee contributes. No one gets matching funds with an IRA.

That being said, some employees have their own IRA even while participating in a company-offered 401(k). Not everyone has an extra $30K to sock away every year, but there are other ways of managing to fund two types of accounts. Employees’ first priority is often to contribute a percentage that maximizes the employer match. For instance, if the employee earns $100K and the employer offers a match up to 6%, the employee should prioritize saving at least $6,000 to get the full amount of matching funds. After that, any extra money could be put in either the 401(k) or the IRA. 

Why bother opening an IRA? If the employer doesn’t offer a Roth option with their 401(k) plan, employees might want to open a Roth IRA so that they have some retirement savings they can eventually withdraw tax-free. Additionally, many 401(k) plans do not offer as diverse a selection of funds in which to invest as an IRA does, if investors are paying attention to that type of thing. 

So to recap, 401(k): Good, IRA: Not Bad.

Where Are Retirement Accounts Mandated?

Today, many states are mandating that employers offer retirement accounts to employees. There is even a House bill that is seeking to make retirement accounts mandates federal. But, this would mandate the use of any type of retirement plan, not 401(k)s specifically. This is important because there are many retirement vehicles available to small businesses, so it still preserves the freedom of choice.

The truth is that about half of U.S. workers have no access to a 401(k) plan at work, and many of these workplaces are small businesses. This shortfall was the catalyst for the birth of government mandates — an attempt to get more U.S. workers to save more for retirement.

One issue standing in the way of small businesses offering 401(k)s has been that these plans were historically expensive and time-consuming to operate, making them impossibly unaffordable to small-business owners. Now, 401GO provides easy setup and affordable management of 401(k) plans, making them an excellent — and allowable — alternative to state-sponsored IRA plans. A 401GO 401(k) is better because state IRAs are nothing more than regular IRAs that employees get through work. They’re better than nothing because they are easy to get and encourage employees to save, but at the same time they cause problems, because in most states these IRAs are not only offered — employees are automatically enrolled in them. If they don’t read the fine print and don’t realize they have an IRA until they notice money missing in their paychecks, it’s hard to get this money back, causing a myriad of additional problems.

While most companies that offer 401(k)s do the same, automatically enrolling employees in the plan at a 3% contribution rate, the enrollment and opt-out processes are much better when using 401GO. 

Where Are Retirement Accounts Mandated?

California, Colorado, Connecticut, Illinois, Maine, Maryland, Oregon, and Virginia have retirement plan mandates, while Delaware, Hawaii, Minnesota, Nevada, New Jersey, New York and Vermont have passed legislation to mandate retirement plan offerings. Washington, New Mexico, Missouri and Massachusetts offer voluntary plans with no mandates. Other states have votes coming up on the matter, and still others are considering legislation.

Even if you live in a state where the mandate has passed and is in effect, it can be difficult to know if the mandate applies to you. In some instances, the mandate applies to small businesses with 5 or more employees. Elsewhere the number may be lower. It’s important to keep an eye on the law and watch for any changes that might occur. If you have a financial advisor or a good accountant, this person might take care of this task for you.

Even though 401(k) plans are not mandatory, it’s still important for business owners to be aware of the laws in their state. Offering a good, affordable 401(k) from 401GO now could save you a lot of headaches in the long run.

The post Is Offering a 401(k) Mandatory? appeared first on Fast and Affordable 401k for growing businesses.

Why Partner with 401GO?

As an accountant, you like having small businesses as clients, and you want to do your best by them. Outside of filing their tax returns, you may handle a variety of other tasks for them as well, including creating profit-and-loss statements and balance sheets, conducting audits and preparing and filing reports. But one other important task you can undertake to serve your small-business clients is to hook them up with 401GO. 401GO is one of the leading technological solutions helping small-business owners who want to offer their employees a 401(k) retirement plan.

As it stands, millions of Americans — many who work for small businesses — are unable to take advantage of a 401(k) plan because one simply isn’t offered at their place of employment. And while some small-business owners legitimately can’t afford to offer this benefit, for the vast majority, the stumbling block is the investment of time and money it takes to get the company 401(k) plan up and running. 

That’s the pain point that 401GO has solved with our proprietary fintech solution. We make 401(k) setup for small businesses easy, and owners can do it infinitely faster and cheaper than they could with a big bank or other 401(k) provider. Plus, we never charge a setup fee.

As a 401(k) provider, we work directly with small-business owners to get them started with a 401(k) retirement plan, and we also work with financial advisors who help them to manage the plans. As helpful as financial advisors are with respect to small-business 401(k) plans, the truth is that some companies are too new or too small to have a financial advisor they can turn to for advice and assistance. These owners may rely on their accountant or bookkeeper to provide the advice they need for finding a 401(k) company to partner with. Below, we go over some distinct advantages our fintech solutions can provide small-business owners looking for a 401(k) provider.

An Alternative to Auto IRAs

The so-called “auto IRAs” — government mandates that require qualifying employers to enroll their employees in a city or state-administered retirement program or provide one themselves — are a game-changer for small-business owners operating in those municipalities. Many small-business owners are facing deadlines to comply with these mandates, and may be worried and even scared about their role and how to fulfill it.

As an accountant, you can explain to your clients that 401GO’s fintech solutions offer a superior alternative to state-run IRA plans. With 401GO, small-business owners have more options and choices of available 401(k) retirement plans for them and their employees. Additionally, our 401(k) company uses our proprietary technology to get your clients’ retirement plan set up in minutes, versus weeks with a traditional 401(k) provider. Learning this will be a huge relief to small-business owners who were dreading the approaching deadline, fearing they would never have time to get their retirement plan off the ground.

Help with Tax Burden

Small-business owners (and even big-business owners) count on their accountants to know the best ways to legally reduce their tax burden. Sometimes spending money helps a company save money, and starting a small-business 401(k) plan can be one way to do that.

A small-business 401(k) can be a vehicle for profit sharing, which is 100% tax deductible for the business, including contributions to employee accounts as well as the costs of starting up, operating and maintaining the small-business 401(k) plan. It can be a cheaper and smarter way to undertake profit sharing, and it means the employees pay less in taxes as well. The beauty of profit sharing is that owners can change the amount from year to year based on how well the company has done — they aren’t locked into a specific contribution.

Additional tax benefits can be realized through the establishment of a 401(k) retirement plan, including for the rank-and-file employees, highly compensated employees, the employers and the business itself.

The Bottom Line

Depending on who you ask and what type of job it is, hiring and training a new employee can cost anywhere from $1,000 to $20,000, so it is in an employer’s best interest to put effort into retaining top talent. One way to do that is to offer coveted benefits like a good 401(k) retirement plan. And the best 401(k) company for small businesses is 401GO. When your clients are looking for the best and easiest way to start a 401(k) for small businesses, tell them to contact 401GO. Our fintech solutions put us at the front of the pack.

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