A lot of people are familiar with 401(k)s, even though the name could not possibly be less catchy or memorable (if you didn’t know, it’s named for a tax code). Fewer people are familiar with 403(b)s, which are essentially retirement vehicles for those working for nonprofits, such as teachers, the military and other government workers. A 403(b) is very much like a 401(k), but there are some differences that are worth knowing if you work for a nonprofit, such as what the contribution limits are.

Contribution Limits for 403(b)s & the 15-Year Rule

In 2024, the contribution limit for a 403(b) is $23,000, which is the same as a 401(k) for this year. However, some workers are eligible to contribute to both a 401(k) and a 403(b). This is often because a worker moves from a job with a 401(k) to one with a 403(b), or vice versa. In these instances, total contributions for the year still cannot exceed $23,000. The exception is if you are 50 or over, and then you can make a catchup contribution of an extra $7,500, whether you have a 401(k) or a 403(b).

With a 403(b), however, some participants get yet another exception that’s an advantage you don’t get with a 401(k), and that’s possible eligibility for the 15-year catchup rule, which allows workers who are behind on their retirement savings to contribute an extra $3,000 to their accounts — even those under 50 years old. With this added $3,000, you are allowed to contribute a total of $26,000 to your 403(b) account for the year. You have to qualify for this exception first, however.

The first caveat is that you can only make this catchup contribution if your employer allows it, and many K-12 school districts do not. The second is that participation is limited to those who have not contributed more than an average of $5,000 per year to their 403(b) accounts. For instance, if you worked for your employer for 15 years and put nothing in most years, but $20,000 for four years, the total you have saved is $80,000. And $80,000 divided by 15 is greater than $5,000 per year, so you would not be eligible for this catchup contribution.

How Does 15 Figure into the Rule?

It’s called the 15-year catchup rule because in order to be eligible to make this extra contribution, you must have worked not only for a nonprofit, but also for the same employer for 15 years. So, you can’t work at one school district for 10 years and a different school district for five and make a 15-year catchup contribution. However, these 15 years with the same employer do not have to be consecutive. So if you left your job and returned at some point and still have a total of 15 years with that employer, you are eligible for the catchup contribution.

A second reason the 15-year rule is so named is because the maximum (lifetime) amount you can contribute under this rule is $15,000. So if you contribute $3,000 extra this year, you can only do it for four more years until you max out your 15-year catchup contributions.

This figure is not inclusive of the employer matching contributions — if you receive these. Employer contributions may vary, but total individual contributions plus your employer’s contributions are capped at $69,000. Additionally, this number cannot be larger than an employee’s salary. If your salary is lower than $69,000, contributions are capped at whatever that number is.

Traditional & Roth 403(b) Accounts

Many workers are attracted to a Roth retirement account, whether it is a 403(b), 401(k) or IRA. The reason for this is because Roth retirement accounts require contributions be made post-tax rather than pre-tax. For many years, this was not an option. Only pre-tax dollars could be contributed to retirement accounts, and taxes would be paid only upon withdrawal, in retirement. It can feel good to save money this way because you get to keep more of your paycheck each pay period. But what you save now in taxes, you’ll have to pay later. It sounds like simply a choice between when to pay your taxes, but it’s actually a little more than that.

Many younger workers are in a lower tax bracket. Right now, the largest group of U.S. taxpayers — about three-quarters of the population — is in the 15% federal tax bracket. The 10% and 20% brackets have about the same number of people in them, but many fewer Americans are in these groups — less than 15% each. So if you retire when you are in a 25% tax bracket, but you paid taxes on your retirement savings years ago when you were in a 10% or 15% bracket, you save money.

If your employer doesn’t offer a Roth 403(b) option, you can open your own Roth IRA. Roth IRAs have a contribution limit of $7,000 in 2024, but they can still be a handy little savings vehicle for your retirement. When you’re deciding whether to get one, take into consideration how much you’re putting into your 403(b) and what the employer match is (if any). If you’re contributing 10% to your 403(b) and your employer contributes 50% up to 6% of your salary, you may want to lower your contribution rate in order to reallocate some of your available retirement savings funds into a Roth IRA.

You probably don’t want to do this, however, if you have to dip below that 6% rate. That’s because if your employer contributes 50% up to 6% and if you’re only contributing 3%, 4% or 5% so that you can put money into an IRA, you’re losing those employer matching funds. And that’s free money.

401GO and 403(b) Accounts

Here at 401GO, we support nonprofits that want to sponsor an ERISA 403(b) plan for their employees. Nonprofits often have less choice when it comes to which plan administrator to choose because this decision often lies with a government entity or a board of directors. However, these entities are highly motivated to save money — a definite priority with nonprofits — and that’s why so many of them choose 401GO. Our fees are lower and our processes are simpler — all in an effort to make it easier for workers to save for retirement. Financial representatives of nonprofits interested in sponsoring a low-cost, easy-to-use 403(b) plan should contact us today.

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What Is an ERISA Bond?

You likely have heard of ERISA — the Employee Retirement Income Security Act of 1974. This act was passed by Congress to regulate the establishment and management of retirement savings plans. Safeguarding money is always a good idea, but retirement funds in particular are critically important because they often act as a safety net for participants, providing needed care and coverage in later years, when many people are too old or frail to be able to work enough to make up for shortfalls.

ERISA bonds are like a type of insurance that protects employers from liability for fraud or mismanagement that could result in a complete devastation of the plan. ERISA bonds cover losses related to theft, embezzlement and other types of fraud. What if the human resources company you pay to deduct contributions to the plan each pay period neglects to deposit the money into the accounts? Worse, what if the money is gone — stolen by your financial advisor, CPA or other trusted account manager?

If the number of news reports regarding stealing out of 401(k)s is to be trusted, it is not infrequently the employers themselves who are stealing from employees’ 401(k) plans. ERISA bonds help protect employees’ funds from unscrupulous employers in these instances (but they don’t help keep the employer out of jail).

What an ERISA Bond Doesn’t Cover

When you think about insurance that protects investments, it sounds pretty good. By definition, investments are risky, and that’s what makes them valuable. But ERISA bonds don’t protect the investments themselves — as long as they were made legally and correctly. Contributions may still be invested in funds that ultimately lose money. Whether the decision to invest in that fund was made by the employees themselves or a third party is immaterial.

Additionally, like any investment, market fluctuations or other factors could turn a good investment into a bad one. The stock market frequently suffers losses, and if employees are near retirement, they may suffer while waiting for their accounts to regain their value.

Separately, a particular investment could be doing well and then suddenly bottom out. Maybe a company’s factory was in the path of a tornado, or a ship full of inventory sunk in a storm at sea.

The bottom line is your ERISA bond does not cover these types of losses.

Do You Really Need an ERISA Bond?

You may know for sure that you aren’t going to steal from your employees, and you may not have a financial advisor, accountant, external HR provider or anyone else involved in your company’s finances, and for this reason, you may think you don’t need an ERISA bond.

The government, however, doesn’t give you the opportunity to take this gamble. You are required to have an ERISA bond unless your company is exempt, and it probably isn’t. Basically, only religious institutions and the government are exempt from ERISA bonds.

Proof of having secured an ERISA bond is required when your company files Form 5500 each year. You might expect that the penalty for failing to secure adequate coverage would be steep fines or worse, but surprisingly, the law provides no penalty for failing to fulfill this requirement. It’s unusual to be sure, but most companies comply with the requirement regardless, since failure to provide proof of coverage is a red flag that could easily trigger a Department of Labor audit, which may reveal more costly violations than absence of an ERISA bond.

Also problematic (although less so) is an ERISA bond that provides insufficient coverage. Your ERISA bond must be equal to at least 10% of the plan’s total assets. As you can imagine, the value of the plan’s assets can change over time, so the amount of your bond can change as well. That’s why you must perform an evaluation on a yearly basis when you’re filing Form 5500.

Where to Get an ERISA Bond

Here at 401GO, we include ERISA bonding as part of the package with our two bigger retirement plans. With our smaller plan, GO-Starter, companies must purchase their bond separately, either through us or through another approved source.

You can’t get an ERISA bond from just any insurance company — it must be one that has been approved by the Treasury Department. The Treasury maintains a list of approved sureties that is available to the public.

The True Cost of ERISA Bonding

Don’t let the cost of an ERISA bond scare you away from sponsoring a 401(k) plan at your small business. A brand-new plan would not have any assets and thus would require little money for bonding. Additionally, this cost is often bundled into the startup costs of a plan. Small businesses are allowed to deduct up to 100% of the startup costs for a 401(k) plan, so your initial layout is even less than you think.

Here at 401GO, we help small businesses start 401(k) plans safely and correctly — so everyone benefits. Contact us today with questions you have about starting a retirement plan at your company.

The post Understanding ERISA Bonds for 401(k) Plans appeared first on Fast and Affordable 401k for growing businesses.

We’re here to help explain what a solo-k is, how you can benefit and what the contribution limits are for this retirement plan.

What Is a Solo-k?

The benefits of owning your own business are many — you make all the decisions, you work whatever hours you want to work, you choose who you want to work with and when. It sounds like a dream — until you consider the drawbacks, one of which is that you get boxed out of joining a 401(k) plan and reaping the benefits of employer contributions. But all is not lost.

While you may be familiar with a traditional 401(k), the solo-k is a plan that is specifically for sole proprietors, independent contractors, freelancers — any small business that has no employees.

Contribution Limits

You are likely aware that you are free to open an individual retirement account — an IRA or a Roth IRA, depending on whether you want to contribute post- or pre-tax dollars. But in many ways, this type of retirement vehicle falls short of providing the benefits of a solo-k. How?

The amount you’re allowed to contribute to an IRA in 2023 is puny: $6,500, or $7,500 if you’re 50 or above. With a solo-k, you can contribute a whopping $66,000 to your solo-k, plus another $7,500 if you’re 50 or older. This is because the rules that govern a solo-k allow you to make contributions as both the employee and the employer. The employee limit is $22,500 for 2023, plus $7,500 if you’re 50 or over. As the employer, you can contribute 25% more of your income (similar to a match), up to the limit. (The rules for calculating what your compensation is are pretty specific, so you may want to have your accountant go over the numbers to ensure you are following the law correctly.)

You can choose from between a traditional solo-k or a Roth solo-k, depending on whether you want to pay taxes on the money you contribute now or when you withdraw it in retirement. There are different reasons to make this decision, but one common reason investors choose a Roth retirement plan is because they expect to be in a larger tax bracket when they retire, so paying the taxes earlier means they save money. If you’re older, this may not be a consideration.

The Spouse Exception

We mentioned earlier that the IRS rules for a solo-k say you must have no employees in order to be eligible to open this type of account, but there is an exception for a spouse who works for you. If your spouse helps you with your business and you pay them compensation for their work, they are also eligible for a solo-k. They may open their own solo-k, or contribute to one that you hold jointly.

This is a great benefit, because by adding your spouse, the two of you may double your contributions to $132,000, or $147,000 if you are both over 50. You can only do this, however, if the spouse earns enough money. They would be allowed to contribute 100% of their salary, and you could contribute the extra 25% as their employer, but if they only earn, say, $50,000, you could not simply chip in to make up the rest.

This type of scenario works best with a couple who earns a lot of money and wants to quickly feather their retirement nest. After all, the reason the extra catch-up amount is allowed for investors over 50 is because they have far fewer years to allow their money to grow before retirement, which is not the case with younger workers.

It’s important, however, to remember when you and your spouse are making these contributions that the limits apply to the individual, which means if either of you contributes to a 401(k) plan at another job, or to an IRA, this money is counted toward the $66,000 total.

A Penny Saved

While it’s true that not everyone has the means to divert in excess of $100K from their bank account to their retirement account, if you find yourself in the position to be able to do this, it’s important to know that the option is available and what the rules are surrounding it. You may decide to sell your home or another large asset, you may inherit money or even win the lottery(!), allowing you to save 100% of what you earn for the year.

A 401(k) account is typically expected to grow 5%-8% per year. When you consider the interest is compounded, the more you put in — and the earlier you put it in — the faster and bigger your nest egg grows.

Ready to open your solo-k? Do it today, with 401GO.

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401(k) Plans for Small-Business Owners

When 401(k) plans began replacing pensions in earnest, it was standard to see them only at larger companies — the types of businesses that had the time and money to get a retirement plan off the ground and running. For the most part, small businesses were essentially unable to get into this exclusive club. But now that small-business owners can work with companies such as 401GO, they have the opportunity to quickly and easily start their own 401(k) for employees to participate in.

And whereas it once took weeks of completing paperwork and slogging through other time-consuming steps to get your retirement plan off the ground, with 401GO, you can get going on your 401(k) in a matter of minutes. Our streamlined process makes becoming a 401(k) plan provider easy, fast and affordable for small-business owners.

403(b) Plans for Nonprofits

As attractive as a 401(k) plan with 401GO is for small-business owners, you may instead want to consider a 403(b) plan. 

Plan participation in a 403(b) is limited to nonprofit businesses. To qualify as a nonprofit, a company must use any profits it makes to improve the company, rather than to enrich its owners and operators. The legal requirements of becoming a tax-exempt 501(c)(3) company are many and technical, but generally speaking, nonprofits perform some type of service for the community. Common nonprofits include charities, churches, educational institutions and more.

What makes a 403(b) plan different from a 401(k)? When 403(b) plans were first offered, participants could only invest in annuities. The reason for this is that most of these plans were offered by insurance companies. 403(b) plans were considered not ideal, because they were known to be expensive, with high fees going to pay insurance brokers’ commissions.

While 403(b) plans are no longer limited to annuity sales (although participants can still invest in annuities), the good news is that 401GO can provide your nonprofit with a 403(b) plan at no extra cost to you over that of a traditional 401(k) plan.

Additionally, now employees can invest in mutual funds through a 403(b) plan, bringing them more in line with 401(k) plans. However, with a 403(b), participants’ ability to invest in stocks and bonds is still limited.

Why Choose a 403(b)?

Just because you are eligible to offer a 403(b) plan to your employees doesn’t necessarily mean it’s a better choice for your small business than a 401(k). There is a lot to consider.

When you look into the advantages and disadvantages of participating in a 403(b), the research is often geared toward the participant rather than the plan sponsor. One specific advantage you would have as a sponsor of a 403(b) plan is exemption from some ERISA (Employee Retirement Income Security Act) laws. These may include regulations around vesting, fees, reporting and more. While ERISA laws are valuable and important in protecting plan participants, the laws fill more than 700 pages, making compliance too onerous and expensive for many small-business owners. Thus, in order to make retirement planning accessible to employees of nonprofits, many are ruled exempt from some of the rules that would be overly burdensome for a small business.

As the owner of a small nonprofit, the savings you can realize not only from working with 401GO, but also in your exemption from ERISA oversight rules and audits, can mean the difference between making a retirement plan an affordable reality at your company and having to forego this valuable benefit.

There are some important aspects of a 403(b) that small nonprofit owners should be aware of, however. The ERISA exemption often doesn’t apply if you provide employer matching contributions to the plan. Additionally, if an employee files a complaint about how you are managing your 403(b) plan, this could trigger an audit, which could cost thousands of dollars. This is the tradeoff for being exempt from some ERISA laws — there must be a vehicle for identifying and correcting mismanagement of funds.

Consider a Safe Harbor 401(k)

403(b) plans have long been considered easy to manage when compared to a traditional 401(k), but the truth is that they are similar to a Safe Harbor 401(k). In fact, many nonprofit businesses prefer a Safe Harbor 401(k) to a 403(b).

401(k) plans offer a lot of plan design flexibility, and the new generation of fintech platforms makes them surprisingly easy to set up and administer. They are exempt from annual testing, and have the same contribution limits as a 403(b). 

Employees seem to prefer 401(k) plans, which boast better participation rates and higher savings rates than 403(b)s. 

Which Option Is Right for You?

If you’re wondering whether a 401(k) or a 403(b) would be a better choice for your small nonprofit company, talk to your financial advisor. They can go over all the specifics with you, such as whether you would want to use the 403(b) to contribute to your own retirement fund, whether it would make sense for you to offer employees both a 403(b) and a 401(k), what type of vesting schedule would work best for your company, how or if limited investment choices would impact plan participants and other issues.

When you’re ready to get started on your company’s 403(b), call the team here at 401GO. We can help you and your employees prepare for the future.

The post 401(k) vs. 403(b) — Which Is Right for Your Company? appeared first on Fast and Affordable 401k for growing businesses.

There are two main types: traditional 401(k)s and Roth 401(k)s. Each has its unique advantages, similarities, and differences. 

Differences Between Traditional and Roth 401(k)s

1. Timing of tax benefits 

With a traditional 401(k), you get the tax benefits up front when you make your contributions. This comes in the form of a deduction from your taxable income. Alternatively, with a Roth 401(k), you get the tax benefits later when you withdraw your money during retirement. So, no deduction up front, but you never pay taxes on the money again.

2. Tax treatment of your contributions 

A traditional 401(k) allows you to make contributions on a pre-tax basis. This means that the money you contribute to your 401(k) is not subject to income tax when you contribute. Instead, the money is taxed when you withdraw it during retirement. So, for example, if you earn $60,000 annually and contribute $6,000 to your traditional 401(k), you’ll only pay income taxes on $54,000.

With a Roth 401(k), you make contributions with after-tax dollars. This means you pay taxes on the money you contribute up front, but you can withdraw your contributions and any earnings tax-free during retirement. So, for example, if you earn $60,000 annually and contribute $6,000, you still pay income taxes on the entire $60,000, but you won’t pay any taxes in retirement when you distribute the $6,000 and its earnings.

3. Employer matching contributions 

Many employers choose to offer employees a company match to incentivize saving for the future using the 401(k) plan. Both traditional and Roth contributions are eligible for employer matching. Just recently a law was passed (SECURE 2.0) that allows employees to decide whether they want employer contributions to be pre-tax or Roth. Previously matching contributions were always made pre-tax.

This is important to note if you ever choose to roll over your funds to a new employer or Individual Retirement Account (IRA) because you’ll need to keep the pre-tax and after-tax funds separate during the rollover process. 

Similarities Between Traditional and Roth 401(k)s

Despite their differences, traditional and Roth 401(k)s have many similarities.

• Employers can match contributions. An employer match is normally made pre-tax, but employees can decide if they want that to be Roth now. Employee contributions are eligible for employer matching, whether they are traditional or Roth.

• Contributions are capped. The IRS has annual contribution limits for traditional and Roth 401(k)s. The limits are the same for both and are $22,500 for 2023 or up to $30,000 for employees aged 50 and over.

• No income limits. While Roth IRAs and deductible IRA contributions can be limited by income, traditional and Roth 401(k)s have no income restrictions. This can make them a valuable account type for even the highest income earners.

• You can use both. If your employer offers a traditional and Roth 401(k) option, you can use either one or both. This can be a great way to diversify your income sources for retirement by having pre-tax and after-tax funds. However, remember that both accounts count towards the same annual contribution limit. For example, if you are under age 50 in 2023 and contribute $15,000 to your traditional 401(k), you can only contribute another $7,500 to your Roth 401(k) for a total of $22,500.

• They’re employer-sponsored. Unfortunately, if your employer doesn’t offer a traditional or Roth 401(k), you can’t open one independently.

• Investments grow tax-free. One key benefit of both account types is that your investments grow tax-free. That means as long as the investments are inside the account, growing and compounding for the future, you won’t pay any taxes on the gains, dividends, or interest along the way.  

• Penalty-free withdrawals after age 59.5. Both accounts allow for penalty-free withdrawals once you reach age 59.5. There are also penalty exceptions for death, disability, and hardship. 

Advantages of Traditional and Roth 401(k)s

Lastly, consider the advantages of each when deciding whether to contribute to a traditional or Roth 401(k).

Traditional 401(k) Advantages

The key advantage of a traditional 401(k) is that your contributions are pre-tax (deducted from your taxable income.)

This is often used by high earners who believe their tax bracket today is higher than their future tax bracket in retirement. By contributing to a traditional 401(k), high earners can get a tax deduction at a higher tax rate and then withdraw the funds at a lower tax rate during retirement. 

For example, if you are in your peak earning years, you could pay 32% or more in federal income taxes. So, if you contribute $20,000 to your traditional 401(k), you save $6,400 in federal income taxes ($20,000 X .32 = $6,400.) But, your income in retirement may be much lower, putting you in the 22% tax bracket. This means that the same $20,000 distributed in retirement would only create a tax bill of $4,400 ($20,000 X .22 = $4,400). 

Roth 401(k) Advantages

Alternatively, a Roth 401(k) is funded with after-tax dollars, but the distributions are tax-free during retirement.

This is often used by savers in a low tax bracket today who anticipate a higher tax bracket during retirement. By contributing to a Roth 401(k) in a low tax bracket, you essentially lock in your low tax rate and never pay taxes on the money again.

Ultimately, deciding which type of 401(k) to use depends on a number of factors, and there is no one-size-fits-all approach. Instead, consider speaking with a trusted financial advisor to better understand which is suitable for you and your unique situation. 

401GO Offers Roth and Traditional 401(k)s

At 401GO, we provide small business 401(k) plans powered by an easy-to-use platform. Both Roth and traditional plans are available, and most employers offer both options to their teams. Many small businesses opt to use a safe harbor 401(k) plan, which allows for both Roth and traditional contributions.

If your company is considering starting a new 401(k) plan, or transferring an existing plan to a new provider, please contact us. We would be happy to answer your questions.

The post Understanding Roth and Traditional 401(k) Contributions appeared first on Fast and Affordable 401k for growing businesses.

Fortunately, as technology and automation have progressed, the costs of operating a 401(k) have dropped significantly. But, not all 401(k) providers have embraced technology, so you may be paying more for your 401(k) than you have to. In addition, every 401(k) provider offers different features and plan options, so you may find your provider doesn’t offer the popular small business 401(k) features you’re hoping for.

In addition to cost and features, some other reasons to consider changing 401(k) providers are:

• Employee engagement: If your employees aren’t participating in the plan, it may be time to switch things up. Consider asking your employees for feedback about the current plan. For example, is the signup process clunky or difficult, or is the website challenging to use? Or maybe your employees would benefit from an auto-enrollment feature that your provider can’t offer? 

• Investment performance: If you aren’t happy with the investment performance or investment options your 401(k) provider offers, it may be time to shop around.

• Customer and Administrative Support: Customer and administrative support vary widely by provider. Make sure you’re working with a provider that is ready and willing to answer you and your employee’s questions as needed.

If one or more of these stick out to you as a reason to change 401(k) providers, then it may be time to see what’s out there. And fortunately, a switch may not be as challenging as you think.

At a high level, switching 401(k) providers involves a hand-off between your old provider and your new provider—not a brand-new plan altogether. This is known as a 401(k) plan conversion, and the entire process can take anywhere from 2 to 3 months. 

Step 1: Transfer assets from the old provider to the new provider.

Once you’ve decided to switch providers, you can start by transferring assets from the old provider to the new one.

This is known as an “asset transfer” and includes a transfer of assets and information. Your plan information will be included in the transfer and will contain critical items like participant balances, any 401(k) loan information, and other documentation. Fortunately, once you notify your old provider of the desired switch, they will be able to work with your new provider to transfer the assets and information.

The transfer process takes the most time of any of these steps. Some providers are slow to complete transfers, and notifications must be sent to employees before their funds can be moved.

One detail to consider during a switch is that your old provider may charge you a one-time termination fee as part of the offboarding process. Check with your provider for details as fee schedules vary, and be sure to weigh the costs of fees versus the possible benefits of lower ongoing fees with your new provider.

Step 2: Review and amend your plan document as needed. 

Your 401(k) has a plan document containing necessary information regarding your plan’s details.

You can think of it as an instruction manual that outlines the specifics like company match, vesting schedule, employee eligibility, etc. You can review and amend your plan document with your new provider during this process. This is a chance to update things as needed and change how your 401(k) plan functions if desired. But, if cost savings are the main driver for switching providers, you may keep your plan document the same and simply restate the plan document with your new provider.

Step 3: Choose your investments.

Next, it’s time to select your investments with your new provider.

Every 401(k) provider will have access to different investment types and fund lineups. So, as part of the switching process, you will work with your new provider to select an investment lineup for you and your employees. Keep in mind a good investment lineup will contain low-cost funds that span a variety of asset classes and sectors to offer broad diversification at a low price. 

In addition, if you have an automatic enrollment feature in your plan, you’ll need to select a default investment option. Typically, a Target-Date Retirement Fund based on the employee’s age is a great option.

But, if you find investments confusing and scary, do not worry—your new 401(k) provider will help you understand the basics of what to consider and ensure you have a good balance of funds to offer your employees.

Step 4: Freeze changes during the transition period.

While switching providers, you will need to freeze changes in your 401(k) plan. 

This is known as a blackout period and can last as long as two months. Employees cannot change their contribution amounts or investment lineup, withdraw, or request 401(k) loans during this time. In other words, employees can’t touch their 401(k) while assets are transferred to your new provider. 

401GO uses a cash conversion process to ease the transition for employees. This will allow them to create new 401GO accounts and begin contributions immediately. It will take time to move existing assets into the new accounts, and much of this process will depend on the efficiency of the old provider. Initially, accounts will only show the newest contributions, but once the transfer is complete, accounts will be updated with accurate information right away.

This can feel like a hassle for your employees, but it’s a critical step to ensure everything transfers over seamlessly and accurately to your new provider. 

Step 5: Enroll your employees in the new plan.

Finally, once the transition is complete, you’ll have the opportunity to enroll your employees in the new plan.

This can be an excellent opportunity to showcase the updated features, investments, and benefits of your new 401(k) provider through a presentation or series of seminars. And fortunately, many 401(k) providers will have ready-made materials you can share with your employees about their new plan. Keep in mind there will likely be many questions about the new plan during this initial phase, but once employees get comfortable with the new provider, it should be smooth sailing.

In the end, while switching 401(k) providers can feel like a big task, it may be well worth the effort in terms of ongoing cost savings, updated features, and better technology.

We’re an alternative to your current provider.

If you’re interested in a 401(k) provider that offers low costs, great tech and support, and a thoughtful and diversified investment lineup, then 401GO is here to help. 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.

You can learn more on our website or contact us for a free demo.

The post How to Switch Your 401(k) Provider in 5 Simple Steps appeared first on Fast and Affordable 401k for growing businesses.