America is facing a retirement crisis. According to the National Institute on Retirement Security, the average working household has a median retirement account balance of $3,000, and the savings gap is estimated to be between $6.8 and $14 trillion (The Retirement Savings Crisis: Is it worse that we think?) Many of those who are saving for the golden years are woefully behind where they need to be. To make matters worse, there are currently more than 40 million Americans who do not even have a retirement plan offered to them in the workplace. According to the U.S. Small Business Administration many of those without a workplace option, the majority of them work for small businesses and businesses with less than 100 employees.
There are a number of myths surrounding corporate retirement plans, but the process is really not very complicated. The first step is to consider your options. Depending on the situation, there are five basic plan types to choose from:
- 401(k) Plan
- Individual 401(k)
- SIMPLE IRA
- SEP IRA
- Defined Benefit Plan
In our experience, the traditional 401(k) plan is the most common choices for business owners.
For a new 401(k) plan there are a few items you need to understand regarding the start-up phase. To start, your company will become what is known as the “plan sponsor,” meaning you are offering the plan for your employees benefit. Typically, as the plan sponsor, you would choose a plan administrator to take care of the day-to-day administration of the plan, as well as the investments, and a financial advisor. In the start-up phase there will be decisions that need to be made regarding plan features and investment choices. During this time the payroll provider would need to be contacted to allow them to get involved in setting up distribution of the payroll deductions to the plan administrator. The plan administrator and financial advisor should be active in this entire process.
Once the plan documents are reviewed and signed, an enrollment meeting would be held with the employees discussing the new benefit available to them. The financial advisor and/or the plan administrator would run the enrollment meeting, answering any questions employees have and assisting in the enrollment process, with each employee enrolled in the plan responsible for deciding how their contributions are invested. The plan administrator would enter all the information onto their system in short order. At this point the plan is ready to go live.
After the plan is up and running your plan administrator will provide you access to online tools that assist in managing the plan. Your financial advisor would be there to provide ongoing participant education and help you, the plan sponsor, with plan reviews.
Please contact us at 610-437-5650 for a complimentary 30-minute consultation to discuss retirement plan options for your company or review your current plan. Check out or Comprehensive Services page to learn more about our services for both business owners and individuals.
Magellan Financial, Inc. does not act as a fiduciary and is not engaged in rendering legal, accounting or tax advice. If legal or tax assistance is required, the services of a competent professional should be sought.