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Posted on May 30, 2019

Launching A 401(k) Program For Your Employees? Follow These 12 Tips To Make It A Success

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Many business owners started as employees on payroll for larger corporations. Because of this, they likely understand the importance of providing benefits like 401(k) programs for their own workers.

However, as the person in charge of deciding on benefits for your team, you might feel intimidated about the financial and administrative aspects of managing a retirement savings plan. To help with the process, Forbes Finance Council members share advice for business owners who are considering a 401(k) program for their employees.

1. Know Your Objective

Determine your overall objective before acting. Are you trying to provide a benefit for employees or for yourself? If it’s for your employees, do a survey to see whether or not there would be enough participation to justify the cost. If it’s for you, the employer, explore other qualified or even nonqualified plans and compare the cost and the benefits. – Simon SingerThe Advisor Consulting Group

2. Outsource Your 401(k) Program

Rather than an in-house administration of the plan, it is best to leave the work to a professional and accredited firm. There are numerous regulations and plans related to establishing a 401(k) plan. Administering a 401(k) in-house may save some money in the short term, but over time it can be an unnecessary distraction from the company’s core business. – Atish DavdaEquityZen

3. Leverage Safe Harbor And Profit-Sharing 401(k) Plan Features

A 401(k) is a fantastic tool. I often encourage business owners to utilize the safe-harbor features and profit-sharing features available on a 401(k) plan. Employing these features allows you to care for your employees, but it also helps you, the business owner, maximize your retirement as well. The safe-harbor profit-sharing plan allows your advisors an additional layer of tax planning. – Justin GoodbreadHeritage Investors

4. Ask For Help From Advisors

Your 401(k) program depends on the size of your business. There are so many different utilities: traditional, Roth and safe harbor, just to name a few. Each comes with its own unique set of requirements and benefits. Business owners should lean on different advisors to pick the best plan and leverage a human resources information system (HRIS) to help drive it. Sal RehmetullahFattmerchant

5. Educate Yourself Before You Start Looking At Plans

Learn the basics of 401(k)s—such as industry terminology, fee structures, fund options and third-party administrator responsibilities—before you talk to providers. Always ask in-depth questions and get quotes from multiple providers. 401(k) plans are expensive, and there is always room for negotiation. – Suresh DakshinaChargeback Gurus

6. Set Expectations Early About Matching

Don’t feel like the business is under any obligation to match employee contributions at any level right away. A 401(k) is a great benefit to offer employees, and any contributions by the company just make it that much better. Many young companies don’t have the same financial capabilities as older or larger companies, and that is okay. When you can contribute, start low and work your way up. – Jeff PittaSenior Market Advisors

7. Offer Financial Advice To Help Employees Make The Most Of Their 401(k)s

A 401(k) can go a long way for the reputation of your company. Use the 401(k) to begin creating a dynamic company culture of financial intelligence. Talk about the power of it and give them tips on what you’ve learned. Your employees will develop a new sense of confidence that they have control of their own life and they will owe it all to you, the employer who actually invested in their people. – Faith KeithLeverage Retirement

8. Compare The Fees To The Overall Value

With the decline of pensions, 401(k) employee benefits are a great tool for employers to use to attract and retain employee loyalty. It’s also nondiscriminatory, signifying equality among executives and lower hierarchy cohorts. Depending on how many participants there are and the amount of contributions, the fees, which are considered a business expense and tax write-off, will most times outweigh the value. – Sina AzariPresent Financial Partners

9. Understand 401(k) Fees

There are different fees associated with a 401(k) that fall on the employers to pay—some benefit the employee, but they never know it. Thankfully, with the rise of technology, these fees are substantially lower now, but for small employers, it might make more financial sense to offer a bonus or invest in financial education for employees than pay that money to 401(k) fees. – Vlad RuszVlad Corp. USA

10. Be Aware Of Your Fiduciary Obligations

Competitive 401(k) plans are key to attracting and retaining the best talent. Smart business owners partner with third-party experts to ensure they are meeting their fiduciary obligations over investment selection and cost control. New platforms like Guideline are driving down costs, making it imperative that business owners shop their plan every two years to see if better deals are out there. – Erik ChristmanOxford Financial Partners

11. Set Up A Vested Contribution System

If you want to do a 401(k) plan for employees, make sure you set it up as a “true-up” type of contribution so your match is based on the time an employee puts money into the 401(k). This way they don’t max out contributions right away and then quit. A “true-up” account will assure your employee stays on staff to fully maximize contributions. Also, don’t pay management fees.- David EhrenbergEarly Growth Financial Services

12. Be As Generous As You Can

Make sure that your 401(k) is attractive to potential employees. Be generous with your company matching. The bigger companies that you will compete with will all have a standard 401(k). This will allow you to stand out to prospective new hires. – Kirk BadiiBadii Group Private Wealth Management

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