At first glance, the retirement industry may seem like a vast ocean of limitless options and possibilities. Especially if it’s the first ever company-sponsored retirement plan you’re implementing for your business. We get it. As a business owner, you want to choose the best retirement plan not only for your employees and for yourself (and without breaking the bank), but you also want one that will work with your business as it grows and changes.

So, you have a few questions about sponsoring a retirement plan. Luckily for you, here at Leading Retirement Solutions, we get all kinds of questions and “what if” scenarios. Because we’ve helped thousands of business owners find the right plan design to meet their specific needs, we have heard almost every question you can think of. And to get you started, we put together answers for 5 of the most common questions we hear from business owners about company-sponsored retirement plans.

1) What type of retirement plan should my business put in place?

This is (almost) always the first question we hear from business owners wanting to implement their very first plan. And if you do your research you’ll find there are many different opinions. However, we generally recommend a 401(k) Plan for smaller businesses looking to set up a plan for the first time. The reason is that they simply offer more flexibility than SEP or SIMPLE IRA plans. And flexibility in a retirement plan is very important for a growing business.

Nonetheless, you may hear or read that a SEP or SIMPLE IRA plans are cheaper and easier to maintain because they are exempt from certain IRS and Department of Labor filing requirements. Although this may be true and what initially attracts business owners to these plans, they offer very little flexibility and smaller contribution options that are often important to business owners and available via a 401(k) Plan.

However, we make our recommendations based on the ultimate goals of the owner and their business, as there are many variables at play and each business is unique in their needs. So even though we generally recommend a 401k plan, depending on your goals, it may or may not be the right plan for your business.

2) Should my payroll provider and my 401(k) provider work together?

Yes. In our opinion, your payroll provider and 401(k) provider should work together. But it is also our experience that many business owners have become exceedingly frustrated that theirs do not, causing many unneeded complications and headaches. If you are interviewing or currently have a payroll and 401k provider that do not or will not work together, we recommend you find ones that will. This will greatly reduce your stress in maintaining your company-sponsored retirement plan.

3) Can I get help with the investments in my 401(k) Plan?

Yes. An investment advisor can greatly assist you and your employees in setting up your investments to match your risk tolerance and achieve your savings goals. However, not all investment advisors are the same. In fact, we wrote an article on how to choose an investment advisor for your retirement plan, that will help guide you through the process of selecting the right advisor for your company-sponsored retirement plan.

In a nutshell, you want to know if their advice is free from bias, if they are working in an open architecture platform or proprietary platform, are all their services and costs fully disclosed, and if they have experience advising on company-sponsored retirement plans versus individual wealth accounts (and there is a difference).

As retirement plan administrators we regularly conduct investment advisor searches all across the country for our clients. We like to make sure that your advisor is the best fit for your company.

See 5 Great Tax Breaks for Businesses with a Retirement Plan
4) Can I use my 401(k) or IRA monies to make an alternative investment?

Yes. Your company-sponsored retirement plan can include multiple types of investment opportunities above and beyond traditional mutual funds. For example, your retirement plan can also have access to:

  • Shares/ownership in your business
  • Membership interest in other ventures
  • Real estate
  • Agriculture and maritime rights
  • Other types of loans and liens
  • Assets such as equipment or livestock
5) What happens if I receive a letter from the IRS or the Department of Labor?

The reality is at some point you may receive a letter from the IRS regarding your company’s retirement plan (e.g. 401(k) Plan). Don’t worry. You have fundamental rights when interacting with the IRS. Below are the steps you should take when you receive a letter from the IRS or DOL, or you can read a more comprehensive article about it here.

Steps to take

  1. Read the entire letter carefully
  2. Compare it with your retirement plan tax/information return
  3. Respond if you disagree
  4. Reply if you agree
  5. Contact the IRS if necessary
  6. Keep the letter

When in doubt, take a deep breath, pick up the phone, and call Leading Retirement Solutions. We understand that audits and investigations can be scary. That is why we regularly assist clients with IRS audits and DOL investigations. Our experienced team will manage the process of responding to them for you, from start to finish.

If you have any further questions regarding a company-sponsored retirement plan, feel free to reach out to us. We’d be more than happy to answer your questions.

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