A 401(k) generally has a stigma of being too expensive and too time-consuming for small businesses in particular. The reality is that it doesn’t have to be. It can be simplified and it can be affordable. It’s that perspective that we hope to change at 401GO. Simple and affordable 401(k) plans shouldn’t be out of reach or a byword for complicated.
Step One: Decide to Offer a 401(k)
If a company hasn’t thought about sponsoring a 401(k) plan or some retirement plan for its employees, we would encourage a switch in thought. Saving for retirement and preparing for the future may seem a distant goal, but it would be even farther out of reach if there is no plan in place. The first step is to decide to have a 401(k) plan. I would suggest that this is something that is included in your discussion of other benefits, and not tossed in at the last second as an add-on for employees. Look at it as a crucial benefit that you wouldn’t want your employees to go without.
Why? Because it is every bit as important as any other benefits offered.
401(k) plans can be simplified and made easy through technology and automation. We cut out the difficult portion through the plan design offering to make it easy and understandable. Now, if you can simplify a 401(k) plan, what do you do about cost?
Well, the reality is that if you have 10 employees or less, you can essentially sponsor a 401(k) plan for free. Free? Yes, free! “Free.99.”
Step Two: Look at Your Plan Costs Carefully
Here is how it works:
Setup a plan through 401GO with *auto-enrollment
401GO helps with all the difficult stuff after you get it set up.
You pay $9 per participating employee each month (no other costs outside of that)
At the end of the year you claim two tax credits for your 401(k) plan.
First, there is a startup tax credit for new 401(k) plans in which the limit is the greater of (1) $500 or (2) the lesser of (a) $250 multiplied by the number of non-Highly Compensated Employees (non-HCEs) eligible for plan participation or (b) $5,000. This credit cannot exceed 50% of eligible startup costs (administration fees paid to 401GO). This is for the first three years of your plan’s existence.
Second, you can claim a tax credit of $500 for having an auto-enrollment on your plan for each year you have it up to three years.
So, let’s recap. If you have 10 employees and ALL 10 of those employees are participating, then your total cost for the year is roughly $1,000 through 401GO. You cut that in half with the setup cost tax credit, so you are left with around $500. Now you add in the auto-enrollment tax credit $500 and BAM! You now have the most affordable 401(k) plan ever along with the technology and automation of an amazing provider like 401GO.
Win. Win. Win.
For more information on the free 401(k) plan, please contact us. We’ll help answer any questions you may have.