Dan asked me to imagine a roofing company with employees that work on top of buildings 50 hours a week. If that company has an incentive to offer those workers a retirement plan with company-provided matching contributions, it may be the only avenue those workers have to produce a down payment for a home, or a cushion at the end of their working career. 

That message resonates with me. 

Finally! Retirement for Blue Collar Workers

Since joining the 401GO team about two years ago, I’ve worked with many different businesses, including a lot of dentists, medical clinics and tech startups. But more surprising are the number of home builders, HVAC, plumbing and electrical contractors, roofers, concrete and maintenance companies, etc., we’ve helped. Many of these owners previously believed a retirement plan would be out of reach for them, either because they’re too expensive or complicated. Many of them have small teams, and staff that feel like family.

I’m genuinely happy for the chiropractor who is able to offer their team a new 401(k) plan, but I get even more excited when workers with labor intensive jobs discover that they have access to this benefit. This is especially important to workers in construction related fields because their ability to effectively practice their trades often begins to diminish sooner than office workers – making retirement savings even more important to their family’s security. 

One client in Idaho told me with a smile that he expects to be the only home builder within miles that offers a retirement benefit like this. It’s something he’s proud of and it does indeed make me feel good about my work. 

Why Should Construction Trades Use 401(k)s

I ask small business owners what made them start shopping for a retirement plan, and I get four answers pretty consistently.

1. Their CPA encouraged them to reduce their tax liability.
2. They live in a state that has retirement mandates.
3. It gives them a hiring advantage over their competitors.
4. They want to do more to help their employees.

The tax credits that are available to small businesses today have put a good retirement benefit within reach. Tax credits even help offset the cost of matching contributions, so they can provide a 401(k) at little or no cost for the first few years.

Retirement Benefits for Your Small Business

This is why I love my job. I speak with business owners and administrators every day and help them see the potential in a good retirement plan, not only for themselves, but for their employees. 

If you and your employees need a way to prepare for your golden years, I hope you’ll give us a call. The convenience and ease of a 401GO plan can put real retirement goals within reach.

The post 401(k) Plans Are Making a Big Impact for Construction Workers appeared first on Fast and Affordable 401k for growing businesses.

1.       A Long and Arduous Setup Process

One of the most off-putting aspects of selecting a 401(k) plan administrator and setting it up is the time it takes. According to ADP, one of the country’s largest payroll processors, it takes 30-45 days to set up a 401(k), and 60-65 days to switch plan administrators. This is just their estimation, however; it can sometimes take even longer.

ERISA laws mandate that any company sponsoring a 401(k) plan select a plan administrator. Traditionally, these have been investment firm giants like T. Rowe Price and Charles Schwab. As you can imagine, if you choose one of these firms as your plan administrator, you will likely not be one of their most important customers. That’s not to say they won’t treat you fairly, just that how busy a plan administrator is can be a factor in how long you have to wait to get your plan set up.

At 401GO, we have mastered the art of the quick setup. You can start your 401(k) plan in as little as 15 minutes. How do we do it? Our system was designed to understand the needs of small companies. It will ask some questions about your business, your employees and your preferences, and it will use these to suggest the best plan design.

The difference is conceptual. Small companies and big corporations have different needs. The big guys have their big plan providers, and you have 401GO.

2.       Tracking Eligibility and Sending Employee Notifications

If you thought setting up the plan was a headache, that’s nothing compared to the ongoing administration. Small-business owners must make employees aware of who is eligible to participate, and then ensure that deductions are made each pay period and that the contributions are deposited correctly and in a timely manner.

Most businesses have 15 days to deposit your contribution into your account, seven days if there are fewer than 100 plan participants. Failure to do so can result in fines and penalties, and even imprisonment. It’s easy for HR or your accountant to make a mistake, and usually penalties are less severe for honest mistakes, but it’s still nerve-racking to think about.

When you work with 401GO, you don’t have to worry about tracking eligibility, making correct and timely contributions or sending employee notifications — we do it all for you. We’re the set-it-and-forget-it of 401(k) plan administrators.

3.       Filing Required Annual IRS Forms

The most important IRS form required for small businesses that sponsor 401(k) plans is Form 5500. Form 5500 requests information that shows that small businesses are following ERISA laws. This includes demonstrating the plan’s qualifications and operations, as well as its financial condition and what investments have been made. We take care of this for you because we have all this information right at our fingertips, and we are well-versed in filing Form 5500.

You probably know that mistakes made on any IRS forms can lead to unpleasantness, but mistakes made by small businesses are a much bigger problem than mistakes made by individuals.

Additionally, wage and tax statements may be necessary as well as Form 990 and Form 945. We take care of all of these.

4.       Managing Loans and Distribution Requests

So much of managing a 401(k) is about payroll deductions and account deposits that some small-business owners forget about distribution, thinking of it as far down the road. And it can be, but the goal is for everyone to get there. How are distribution requests handled? Suffice it to say that we handle them — you don’t even have to think about them. As your employees reach retirement age and are ready to draw on the funds they spent so many years accruing, we’re here to take care of that.

If any of your employees need loans, we can handle that as well. It’s not unusual for investors to look to their 401(k) to help finance major expenses like a home down payment, college tuition or some type of emergency. It’s best to let a 401(k) grow without it being disturbed, but it’s not always possible. And when your employees need a loan, we’re there to manage it for them.

5.       How to Deal with Problems

We make it sound easy to become a 401(k) plan sponsor, and that’s because it is. But only because we work so hard to make it so. We have many collective years of experience in the finance and tech industries, and that’s how we were able to conceive of a better way to start a 401(k), and to make it happen for small-business owners across the country.

But that doesn’t mean you won’t ever have questions or concerns about your 401(k) plan and how it operates. And we’re here to answer those questions for you. We are known for our responsive, attentive customer service, and our clients both rely on us and trust us to provide timely answers and solutions. Get started with your 401(k) plan with 401GO today.

The post Top 5 Things You Won’t Worry About with a 401(k) from 401GO appeared first on Fast and Affordable 401k for growing businesses.

1.       Create the Job Description Carefully

How many times have you read a seriously nebulous job description — one that made you scratch your head and wonder what the job even entailed? Don’t let that be you. If you do, you will undoubtedly get unqualified candidates, and that means hours of time spent weeding through resumes that aren’t good matches for the job.

Before you even start to write the job description, make sure that you give enough thought to exactly what you want your new employee to do. After all, it’s hard to describe something if you don’t understand it yourself. Make some notes — not necessarily for publication — about how the position could change over time, with more responsibilities being added.

2.       Don’t Rely Solely on Websites — Use Your Personal Network

Chances are, you are looking to hire someone locally. Even though many people work from home now, most employers still want to meet employees in the flesh and see them in the office from time to time. For that reason, it’s easy to use your own business and social networks to look for a new hire. Post about your search for a new employee on Facebook, LinkedIn, Instagram and any other social media sites you use. Someone you know might know someone who’s looking for work.

Hiring someone this way is arguably better than hiring a seemingly better-qualified candidate you don’t know. That’s because with a complete stranger, you may find out later that they embellished their qualifications, they get along poorly with others, they call in sick a lot or they have weird, annoying habits such as taking all their calls on speaker, telling everyone in the office about the latest TV show they are watching or burning the microwave popcorn every day.

With someone you know peripherally, it’s harder to keep secrets — and harder to ghost the employer when they decide they don’t like the job or get a better offer.

3.       Do Your Due Diligence

Regardless of whether you know a job candidate personally, you know them through some degree of separation or they are a complete stranger to you, there is no excuse for not checking out their story. Are they really who they say they are? Have they really earned the degrees they said they did? Do they have the experience they say they have? If you don’t think this is important, just take a look at what happened with Rep. George Santos (if that is indeed his name). His election wasn’t just a debacle, it was a public disgrace. Even if your bad hires aren’t public disgraces, they can still be expensive, disappointing and detrimental to business.

Before you hire anyone, call their previous employers to make sure they really worked there and performed the duties they claim to have performed. Do a criminal background check to help determine if they are trustworthy or what the odds are that they will abandon their position to return to jail if they are on probation. Make sure their story checks out.

4.       Offer Employee Benefits

Small businesses are notorious for skimping on benefits. They’re new, they’re small, they need the extra cash to grow their business. We’re not saying it’s not understandable; we’re saying it’s not desirable. Given a choice, an employee will go with the employer that offers them more, whether that’s more compensation, more vacation time, more flexibility or more of something else they want.

Sponsoring a 401(k) plan for your employees is one way to attract (and keep) top talent. People of every age have concerns about being able to afford retirement. If you can help employees assuage these concerns by offering a 401(k) plan, you’ll be ahead of the competition that doesn’t.

The major stumbling block for small businesses and 401(k) plans has been the hassle and expense of setting up and launching the program. 401GO has addressed these pain points and made sponsoring a 401(k) plan fast, easy and cost-efficient. While most 401(k) plans take weeks to get up and running, you can start yours with us in as little as 15 minutes. We also provide payroll integration, so once you set your plan up, you hardly ever have to think about it again.

Fees are lower as well. Our fintech solutions make it possible for you to operate your plan for as little as $9 per employee per month — significantly less than with large banks and investment firms.

If you’re ready to be the kind of small business that attracts the kind of employees you want, contact 401GO today. We can help you set up a 401(k) plan your employees will value.

The post 4 Ideas for Hiring Good Employees appeared first on Fast and Affordable 401k for growing businesses.

Let’s take a look at how it works and what options you have as a small-business owner who wants to help their employees save more for a secure retirement and strengthen your business’s standing at the same time.

401(k) Plan Sponsor Options

Even if you aren’t a savvy financier, you are likely aware of the difference between traditional and Roth 401(k) plans. With a traditional 401(k) plan, employees (and business owners) make pre-tax contributions to their retirement accounts, putting off paying taxes on these earnings until they begin drawing on them after retirement. With a Roth 401(k), contributions are made after payroll taxes are taken out, meaning no taxes will be paid on these funds upon withdrawal. This second option is often more appealing to the youngest workers, who are likely to be in a higher tax bracket upon retirement, and thus stand to lose more to Uncle Sam. Regardless, there are pros and cons to each option for employees of every age.

Whether you handle your own payroll or you outsource this task to another company, it’s easy to get up and running with 401GO, and once you do, your job is done! 401GO provides seamless payroll integration, so once you finish setting up your 401(k) plan, you never have to think about it again. Our technology syncs with ADP, Rippling and all the leading payroll providers. Additionally, we offer True360 Integration for small-business owners who use smaller payroll platforms, and we provide the same great service for them.

Employers Can Save on Their Personal Taxes

Once you enroll with a 401(k) plan provider, you will be able to make contributions to your own personal 401(k) account as well. Even if you have an IRA, a 401(k) offers benefits you can’t get with an individual retirement account, not the least of which is the ability to contribute much more each year. Additionally, if you’re over 50, you can make catchup contributions so you can feather your nest a little more thickly as you glide toward retirement.

As the business owner, you have the ability to make the call about whether you offer a traditional 401(k), a Roth 401(k) or both (or a SEP or SIMPLE IRA), and you can choose the one(s) that suits your personal situation best. Prefer to make pre-tax contributions? Choose traditional. Want to pay your taxes now? Then a Roth is for you.

With a traditional 401(k), employers usually have to be careful about how much they are contributing to their personal 401(k) accounts in relation to how much their employees are contributing. The IRS has rules (surprise!) about the ratios in order to prevent employers and highly compensated employees from contributing large amounts to their personal accounts if no company matches are being made to other workers’ accounts. Some employers can get around this issue by sponsoring a Safe Harbor 401(k) instead. With this type of plan, businesses don’t have to submit to yearly government testing and audits to ensure fairness and equity, but they are required to make matching contributions to employee accounts.

Saving Tax Money on Employer Contributions

Not only can you save tax money on your own personal 401(k) account, but your matching contributions to employee accounts are tax-deductible as well. Although there is a limit to the total matching funds you can contribute and deduct on your taxes, some of the excess may be carried over to the next year.

Many small-business owners are thrilled to learn about these benefits, because they just lengthen the list of reasons to offer employees a 401(k) plan. You know that as your company grows and becomes more profitable, one of the best ways to secure and retain top talent is by offering better benefits than the next guy, and that includes a 401(k) plan, whether you make matching contributions or not.

If you’re on the fence about matching because you aren’t sure you can afford it, consider the tax deduction we mentioned above, plus the savings you get if you go with a Safe Harbor plan, meaning you won’t have to pay an auditor to conduct the tests others are required to undergo.

Other options include a SEP (Simplified Employee Pension) and SIMPLE IRAs. With either option, your contributions to your employees’ accounts are tax-deductible as with other types of retirement savings vehicles, but with a SIMPLE IRA, you must contribute equally to employees’ accounts and yours — no one can get a different percentage. With a SEP, employers are not required to contribute to workers’ accounts and employees can’t contribute to their own accounts either, but with a SIMPLE IRA, they can.

These types of retirement savings plan have had some popularity with small-business owners looking to avoid the administrative hassles that accompany opening and managing a 401(k), but 401GO has made many of these concerns moot. You can now become a sponsor for your company’s 401(k) plan in 15 minutes and never do another page of paperwork again (unless you want to make changes).

If you need some time to mull these options over or to consult with your financial advisor, give yourself a deadline for doing so — don’t put off this important move that will make such a difference in your life and the lives of your employees.

The post How a 401(k) Helps with Payroll Taxes appeared first on Fast and Affordable 401k for growing businesses.

What Is a Safe Harbor 401(k) Plan?

This may not surprise you, but the IRS has a long list of complicated rules that apply to businesses operating 401(k) programs, and the testing that ensures compliance doesn’t come cheap. Sometimes these regulations are so onerous that they act as a deterrent for businesses interested in starting a 401(k) plan. Small businesses are often treated the same as large companies, but with an unfair disadvantage of fewer employees to balance out a plan. However, in the case of 401(k) plans, small businesses have an alternative: Safe Harbor plans.

A Safe Harbor plan has different rules and affords participating companies certain exemptions that can make this type of plan easier to manage for a small business.

How Is a Safe Harbor Plan Different from a Traditional 401(k)?

When 401(k) plans began replacing pension plans in the 1980s, the burden of funding retirement was shifted from the employer to the employee. While employers still have the role of managing the 401(k) plan, they no longer have to worry about funding a pension plan that hundreds or thousands of employees were counting on in their retirement. Instead, employees now bear the risk of market corrections, inflation and other issues that can impact the purchasing power of their retirement savings.

As a way to help protect employees — especially those at the bottom of the workplace hierarchy — the IRS instituted rules that businesses must follow in order to limit an employer’s ability to funnel most of the benefits to highly compensated employees. In order to ensure these rules are being followed, employers offering a traditional 401(k) plan must conduct yearly nondiscrimination tests. If a business fails this test, it may be required to make restitution, such as contributing more to affected low-level employees’ accounts.

But even those businesses that pass the test must set aside funds to pay for it, and these costs can be prohibitively expensive to small businesses. That’s why Safe Harbor plans are so attractive to small businesses — they are exempt from nondiscrimination tests.

Why Choose a Safe Harbor Plan?

So why wouldn’t every business set up a Safe Harbor plan, you ask? There are many reasons, but one of the main ones is that with a Safe Harbor 401(k) plan, employees are required to be vested right away, rather than over a period of years. Many businesses rely on their vesting schedule to discourage employees from hopping among competitors in the same field, quickly jumping ship for a slightly higher salary or more flexible work schedule. If an employee is close to being vested, they are more likely to stick with a company even when a competitor offers them an attractive package. When you choose a Safe Harbor plan, you have to be comfortable with the employee owning your contributions from the moment you make them.

Additionally, a Safe Harbor plan may end up costing some business owners more than a traditional 401(k). This can happen in the case of employers who want to offer their employees a 401(k) plan, but can’t afford (or don’t want) to make matching contributions on their behalf. If you choose a Safe Harbor plan, you will save by not having to conduct expensive tests, but you will be required to make some contributions on behalf of your employees. You may pay less with a traditional 401(k) that doesn’t require you to make employer contributions.

Safe Harbor plans are essentially broken down into four types:

• Non-elective: With a non-elective plan, employers contribute 3% to all eligible employees’ 401(k) plans, regardless of whether the employee contributes anything themselves.
• Basic: With this plan, employers must only contribute to the accounts of employees who elect to also contribute themselves. Employers must provide a 100% match for employee contributions up to 3% and 50% for the next 2%.
• Enhanced: With an enhanced Safe Harbor plan, the 100% match increases to 4% and can be applied through 6%.
• QACA: With QACA Safe Harbor plan, the first 1% of income an employee contributes is matched at 100%, and the next 5% is matched at 50%. This type of plan requires automatic enrollment, but allows employees to opt out.

The type of Safe Harbor plan you choose for your company will depend on your finances and your preferences for human resource management strategies.

Is a Safe Harbor Plan Right for Your Company?

Safe Harbor plans are a way for small-business owners and all highly compensated employees at the company to be able to contribute to their retirement funds without the worry of passing nondiscrimination testing, but it’s not the only way. If you believe that a Safe Harbor plan would be too expensive for your company, one option is to make 3% employee contributions to traditional 401(k) plans automatic. Although employees have the ability to opt out of this arrangement, doing so is an extra step many will not bother to take. And the more employees you have in the plan, the greater the chance you will pass nondiscrimination testing, because the benefits are spread around more evenly.

It’s not guaranteed, however, and it’s important to weigh all your options and consult with your financial advisor before making a decision about going with a traditional 401(k) or a Safe Harbor plan. Once you’re ready to embark on a retirement saving program at your small business, it’s quick and easy with 401GO.

The post Why Safe Harbor 401(k) Plans Are so Popular with Small Businesses appeared first on Fast and Affordable 401k for growing businesses.

This makes 401(k)s a win-win for businesses of any size, allowing employers to enjoy the many advantages of offering a retirement plan while their employees can save and build a secure retirement nest egg. 

And for many employees, that’s one of their essential financial goals—saving enough money to retire on time and live their ideal lifestyle. And when it comes to setting themselves up for retirement, 401(k)s are a great option.

Here are seven benefits of a 401(k) plan for employees:

Benefit 1: It’s easier to save with payroll deductions.

401(k)s are a powerful savings tool for employees because they reduce friction in the employee’s path.

And the results are staggering. Employees are 15 times more likely to save for retirement if they have access to a payroll deduction savings plan like a 401(k). Instead of getting paid and taking an extra step to transfer funds to their investment accounts, employees save first and get paid second with payroll deductions. This method of automatic investing can make all the difference in preparing for retirement.

Benefit 2: There are unique tax advantages.

401(k) accounts benefit from a series of unique tax advantages.

At a high level, most employers offer two savings options within a 401(k)—Traditional and Roth.

First, Traditional and Roth have one powerful tax advantage in common—you don’t have to pay taxes on the funds inside your account while they’re growing and invested. This means you don’t pay tax on any dividends, interest, or capital gains within your 401(k), as long as you don’t withdraw the funds. 

Next, there are some key differences to consider.

Traditional 401(k)s, also known as “pre-tax,” allow employees to contribute money to their 401(k) before income taxes are taken out. This can be valuable as employees can contribute more to their 401(k) than they would have if taxes had been taken out. 

For example, if you pay 20% in income taxes and contribute $100 to your Traditional 401(k), that tax advantage saved you $20 in taxes, and that $20 went right into your 401(k), invested for retirement. So, the higher your tax rate, the greater the benefit of contributing money pre-tax. 

But, like most things, there’s a catch.

With pre-tax contributions, you end up paying the taxes when you withdraw the money during retirement. But, for many, this is still a good trade-off because they can stay in a lower tax bracket during retirement than they can during their high-income years while working. 

Next are Roth 401(k)s.

Roth 401(k)s are the opposite of Traditional. So you pay the taxes now, contribute the “after-tax” funds to your 401(k), but pay no income taxes on the distributions during retirement. This is a decision to pass up the tax advantages today in exchange for the tax advantages in the future. Generally, this is best for younger employees in a lower tax bracket who believe they’ll be in a higher bracket during retirement. 

Whichever way employees decide to go, there are significant tax advantages to saving in a 401(k).

Benefit 3: You can enjoy higher contribution limits.

Next, 401(k)s have much higher contribution limits than other retirement plans like IRAs.

Contribution limits adjust to inflation, so be sure to check the IRS website for the most updated figures, but employees can contribute the following to their 401(k) account:

• $22,500 in 2023 ($20,500 in 2022)

In addition, employees age 50 or older have an additional “catch-up contribution” limit of:

• $7,500 in 2023 ($6,500 in 2022)

But, limits don’t stop there, as there’s a higher annual limit which includes employer matching and nonelective employer contributions in addition to the employee deferral and catch-up. That limit is the lesser of:

• 100% of the employee’s compensation, or
• $66,000 for 2023 ($73,500 including catch-up contributions); $61,000 for 2022 ($67,500 including catch-up contributions)

This can be a powerful benefit for employees, allowing them to save significant amounts in their 401(k) each year to prepare for retirement.

Benefit 4: You might increase your compensation with matching contributions.

Another key benefit of a 401(k) is employer matching contributions.

Employers aren’t required to match contributions, but many do an added benefit for their employees. Matching schedules vary, but a typical match structure is a 100% match for the first 3%, then a 50% match for the next 3%. That means if an employee contributes 6% to their 401(k), their employer will contribute 4.5%. This takes an employee’s overall contribution to 10.5%, taking advantage of powerful matching contributions to increase their savings.

Benefit 5: Compound interest provides a powerful force for saving.

Compound interest is said to be one of the most powerful financial forces.

And fortunately, employees can benefit from the power of compounding in their 401(k) as long as they can stay invested in the market. Essentially, compounding is earning interest on your earned interest. And the longer you let compounding work, the more powerful the effects on your portfolio.

Benefit 6: Investment fees are lower and options are fewer than other investment vehicles.

Next, there are some unique investment advantages for employees.

First, employees can benefit from lower investment fees within their 401(k). That’s because many investment companies offer different share classes for their funds depending on the situation. So, as a single investor, you may only have access to the “investor share class,” which typically comes with a higher investment fee. Alternatively, with a 401(k), your employer may access the “institutional share class,” which usually comes with a lower investment fee.

And while the difference in fees may seem small, the effect will compound over time, resulting in significant cost savings for even a small fee differential.

Next, employees can benefit from fewer investment options.

This may seem like a drawback, but for many, it means better outcomes. That’s because more options don’t always mean better decisions, and often, more options result in inaction, commonly known as the paradox of choice.

Alternatively, your employer will likely offer between 8 and 12 investment options within your 401(k). And typically, the options provided will have enough diversity to build a solid retirement portfolio and grow your wealth over the long run. 

Benefit 7: Your account is portable.

Lastly, employees can take their 401(k) with them if they leave an employer—also known as “plan portability.”

In other words, employees own their 401(k) and can feel confident saving for retirement without worrying about forfeiting their funds if they leave their current employer. That said, there are a couple of things to understand:

1. First, employer matching contributions may not be yours to keep—yet. 

Depending on the specifics of your 401(k) plan, your employer matching contributions may be subject to a vesting schedule. This means you may not own the amounts your employer contributes immediately. For some, this means they have to work at their job for 1 to 3 years before they can keep their employer match. But, not all employers have a vesting schedule, so it doesn’t apply in every situation. But remember, anything you contribute to your account is always 100% yours, no matter how long you’ve been with your employer.

2. And second, if you withdraw the funds instead of “rolling them over,” you will pay taxes and an early withdrawal penalty.

One common mistake employees make when changing jobs is withdrawing their 401(k) instead of rolling it over. This results in a taxable distribution and can create a 10% early withdrawal penalty for those under 59.5. So, when leaving your employer, remember that it’s usually better to roll the funds directly from your 401(k) to your new 401(k) or other retirement plan.

Your Partner for Retirement Benefits

At 401GO, we provide small business 401(k) plans powered by an easy-to-use platform. Our streamlined approach allows you to get up and running in just minutes with simple and affordable pricing to fit your unique business.

Talk to us about the many ways a 401(k) can benefit you and your employees.

The post 7 Benefits of a 401(k) Plan for Employees appeared first on Fast and Affordable 401k for growing businesses.