Retirement Plans – Beyond 401(k)

Plan Design Expertise

Most people generically call all company-sponsored retirement plans “401(k) plans.” What they don’t realize is that 401(k) is simply a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. There are different levels or layers of tax-qualified plans available for businesses, and a 401(k) plan is in the bottom tier.

Simply put it is an “employee benefit plan” offering relatively low contribution limits for highly-compensated individuals. However, because it provides a social good in the eyes of the federal and state governments, simply offering some additional employer contributions can greatly increase how much employers can contribute for themselves and/or select employees.

This means that business owners can contribute anywhere from five to six figures into their own accounts and for employed family members on a pre-tax basis by making modest contributions into the accounts of their employees. (Amounts needed to contribute to employees will vary as will the maximum allowable contribution for employers.) When the company’s employee demographic does not support a desirable outcome for owners and select employees, see our page titled “Executive Compensation Plans” for discriminatory programs with substantially higher contribution allowances.

Recent Plan Compliance Issues – [Warning for Existing Retirement Plan Sponsors]

Starting in 2012, the “fiduciary responsibility” of plan sponsors started coming under intense scrutiny as new standards were formed. Standards for selecting investment options, procedures for ongoing monitoring, documenting the reasonableness of fees, maintaining sufficient bonding for the plan, and offering regular plan education are all stipulations that plan sponsors are responsible for.

Updating your existing plan with a knowledgeable advisor can get you back within the boundaries of these new compliance standards. If years have gone by with no updates, it’s quite possible that we can also help to lower the fees under scrutiny while offering a suitable fund line-up from well-known investment providers. We work to educate existing plan sponsors and their staff to make sure they are actively fulfilling, delegating, or outsourcing the fiduciary obligations inherent in offering a qualified retirement plan to employees.